Committee Transcripts: Standing Committee on Finance and Economic Affairs - 2001-Feb-15 - Pre-Budget Consultations

Pre-Budget Consultations
2001-02-15_F022.htm    HTML

PRE-BUDGET CONSULTATIONS

TD BANK FINANCIAL GROUP

ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES

ONTARIO COALITION FOR BETTER CHILD CARE

FARMERS OF ONTARIO COALITION

ONTARIO SEWER AND WATERMAIN CONSTRUCTION ASSOCIATION

GLAXOSMITHKLINE

ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS

RETAIL COUNCIL OF CANADA

ONTARIO SECONDARY SCHOOL TEACHERS' FEDERATION

COUNCIL OF ONTARIO UNIVERSITIES

ONTARIO PHARMACISTS' ASSOCIATION

CONTENTS

Thursday 15 February 2001

Pre-budget consultations

TD Bank Financial Group
Mr Don Drummond

Ontario Association of Interval and Transition Houses
Ms Eileen Morrow

Ontario Coalition for Better Child Care
Ms Mary-Anne Bédard
Ms Susan Sperling

Farmers of Ontario Coalition
Mr Jack Wilkinson
Mr Ken Porteous
Mr Bob Down
Mr Ron Bonnett

Ontario Sewer and Watermain Construction Association
Mr Sam Morra
Mr Ted Cooper

GlaxoSmithKline
Mr Stephen Dibert
Mr Ryan Clarke

Ontario Confederation of University Faculty Associations
Dr Henry Jacek

Retail Council of Canada
Mr Peter Woolford

Ontario Secondary School Teachers' Federation
Mr Earl Manners

Council of Ontario Universities
Dr Mordechai Rozanski
Dr Ian Clark

Ontario Pharmacists' Association
Ms Barbara Stuart
Mr Sal Cimino
Ms Ruth Mallon

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)
Mr David Young (Willowdale PC)

Substitutions / Membres remplaçants

Mr Raminder Gill (Bramalea-Gore-Malton-Springdale PC)
Mr John O'Toole (Durham PC)

Also taking part / Autres participants et participantes

Mrs Marie Bountrogianni (Hamilton Mountain L)

Clerk / Greffière

Ms Susan Sourial

Staff / Personnel

Mr David Rampersad and Ms Elaine Campbell,
research officers,
Research and Information Services

The committee met at 1000 in room 151.

PRE-BUDGET CONSULTATIONS

The Chair (Mr Marcel Beaubien): Good morning, everyone. It is shortly after 10 o'clock, so I will bring the meeting to order. Any comments from anyone this morning, from any of the members?

Mr Gerry Phillips (Scarborough-Agincourt): Mr Chair, if I might make a request of the research staff, last year they prepared for us a document outlining the relative tax levels in Ontario and selected US states. I found that useful and I wonder if I might request them to do that again.

The Chair: That sounds like a fair request to me.

Mr Phillips: This is dated February 15, 2000, so I thought on the first anniversary of it we might just-

The Chair: You're very consistent.

Mr David Rampersad: Any states in particular?

Mr Phillips: Last year's seemed fine to me. I think they had New York, Michigan, Ohio and Illinois, actually, and I think you had Indiana, Minnesota and Pennsylvania. But if it was easy to do last year, the same comparison would be helpful from our perspective.

Mr Rampersad: OK.

Mr Phillips: Thank you.

TD BANK FINANCIAL GROUP

The Chair: Anything else? If not, our first presenter this morning is a representative from the Toronto Dominion Bank. On behalf of the committee, welcome. Could you please state your name for the record, and you have one hour for your presentation this morning.

Mr Don Drummond: Don Drummond. I'll try to, at most, use half of that for the presentation and leave time for questions.

There are two documents before you. The one with a little green banner on the top is a set of charts. That's what I would like to go through in my presentation. There are a few things in the presentation. There's a chart where there's a lot of information beneath the surface. For example, when I come to the economic and fiscal projections that require a lot of assumptions, we don't have the time to go through all of that, so you also have before you a pretty thorough narrative going through these charts. But I think I won't have time to go through all that, so I'll leave that for the reference of the committee and just go through the charts.

To start with, just to declare the biases from my own experience, I've been with the TD Bank since June 2000, and prior to that I spent 23 years at the federal Department of Finance, so you might notice a few biases creeping up from that. I like to think of that experience as having been there when the federal government got rid of the deficit and turned to surpluses, but I'll give you a warning: I was also there during the huge deficits, so there's a little caveat perhaps to the advice I might give to the committee. Hopefully that won't drown out what some logical positions are.

The Chair: Balance.

Mr Drummond: Yes. If I could just then turn to the first page of the chart package, there are three things I would like to do. I would like to present an economic forecast for Ontario and use that economic forecast to present a status quo fiscal projection, status quo in the sense of embedding the policies that are already legislated, and then address the economic challenges I think need to be addressed in the 2001 budget.

Before getting into that, I wanted to speak a little bit on the budget planning framework. As one of my central recommendations in the case of Ontario, and I would recommend this to the other provinces, I think you need to look at a longer-term horizon in budget planning. If the budget plan this year follows the pattern from previous years, the economic forecast will be extended just through 2002, and the fiscal through fiscal year 2002-03, but simultaneously the budget will address decisions on taxation and potentially many areas of spending that have much longer-term consequences than that. For example, the 30% and 20% personal income tax commitments done in the past and the reference to lowering the corporate income tax rate last year by 2005 have fiscal consequences and consequences to the economy going much beyond the fiscal framework. To have a better degree of comfort as to how these can be encompassed within that fiscal framework, I think we'd need to look at a little bit longer-term horizon.

I know this is something I had pictured at the federal level for many years before it was finally accepted and there was a great deal of nervousness about it. There are some things that can be addressed. Obviously, the longer you go out, the greater the degree of risk, but there are some things that can be done to address that. Ontario does have a contingency reserve set aside. It's $1 billion. That's 1.6% of revenues. That could be increased over time to reflect the growing riskiness of the forecast going forward. Scenarios could potentially be presented. You could have one with a lower growth, one with a mid-range growth and one with a higher growth to sort of bracket the results.

What I'm going to do today is present the projections through 2004-05. I would note a point that the federal Auditor General has been on for quite a few years right now, urging all governments to not only look into the mid part of the decade but to not forget that a lot of things are going to change post-2011 when the baby boom generation starts to retire. I wouldn't suggest forecasts out through that time period, but I think it's probably a useful exercise to look at some of the pressures that are coming in that longer-term environment.

If I could turn to the second page, then, it simply makes the point that Ontario has an incredibly open economy. You can see that the dimension of that openness has been changing at a very rapid pace with the exports to other countries. In fact, the relative importance of exports within Canada has declined somewhat. Those exports to other countries are increasingly going to the United States. In fact, 94% of the external exports are now going to the United States. That's been a wonderful thing when the US economy has been in a boom; it won't necessarily be a wonderful thing in 2001, particularly the first half of the year, as the US economy slows down.

Obviously, with that export openness to the United States, what happens to the United States economy is going to be a key driver of the appropriate set of economic assumptions for Ontario.

On the top of page 3-this is the TD Bank's forecast for the United States-we think the first half of 2001 will be pretty bleak, in fact only 1% growth in the first quarter, so even a little bit weaker than the 1.4% that they managed to eke out in the fourth quarter; a little bit better, 1.9%, in the second quarter of the year. But together it presents a picture of a pretty dismal first half. We think it will strengthen by the second half of the year. We've already had 100 basis points of interest rate relief from the Federal Reserve Board. We think there will be another 75. The oil and natural gas prices are down a little bit. The exchange rate appreciation has reversed course somewhat in the United States. So a lot of the things that caused the weakness are coming down. Then, critically, it's based upon the hope that some of the excess inventories, particularly in the auto situation, will have been addressed by the end of the first half of the year so growth can get going at a stronger pace. That gives us an annual growth rate, you can see on the bottom chart, of 2.4%, and then returning to much more robust growth rates for 2002 and beyond.

At the top of page 4, one of the particular features of this US business cycle that is going to affect Ontario is going to be on the auto side. There are a lot of numbers in this chart at the top. The one I would draw your attention to, though, is that on the first panel, the sales of light vehicles, we expect that sales of light vehicles in the United States will come down 7.5% in the year 2001. With that-because our production is not just Canadian production, it's in a North American context, with every second vehicle produced in Ontario being produced for export-we think the production of light vehicles will be cut back by 7% in Canada in 2001, and 97% of light vehicle assembly is in Ontario. If you count in the inputs, the paint and the chrome and the rubber and the plastic and steel and aluminum and everything that goes into a car, and some of the after-market, the leasing and whatnot, you could easily get auto production, writ large, being as much as 10.5% of Ontario's economy. So you can see that this production cutback we're anticipating can knock almost a full percentage point off Ontario's growth rate.

With that context, we're expecting growth in Ontario to be 2.3% in 2001, and that's within the Canadian economy growing at about 2.7%, so that's really less than half the growth rates that we've had in the recent past, again with the presumption that these inventory cycles, particularly the auto cycle, have been dealt with in the first half of the year and return to much more robust growth than that.

The third-quarter national account statistics from Ontario were released this week and the third quarter was a little bit stronger than was imbedded in this forecast, so that 2.3%, if I was up to date, could easily be 2.4% or 2.5%. But the key point is that it will be a remarkably slower rate of growth than in the recent past, particularly not very robust in the first half of the year, probably to the point of not much net employment gain in the first half of the year, and the unemployment rate is sitting around 6% through 2001 and into 2002.

On page 5 there are a lot of numbers, and I'll just draw your attention to a couple. I thought if I was going to recommend that the fiscal formula actually go up to 2004, I should demonstrate that it can be done. One of the very first things I would point out is it's very difficult to do, and in some cases it strengthens the argument that we should go out there, because if somebody like myself who does have access to a fair bit of the information has such difficulty doing a four-year framework, it really shows that the citizens aren't very aware of where the medium-term fiscal consequences are-certain things like, I didn't know how to factor in the reduction of the corporate income tax rate to 8%; there's no schedule for that. I'm not even quite sure where we are on the remaining 20% of the personal income tax cut. So on a lot of these things we had to make assumptions.

Assuming here that we've put in the remainder of the personal income tax cuts over two years, we just straight-lined the corporate income tax reductions down to 8% by 2004 and assumed that health spending would grow at about 6% a year and the rest of the spending would grow at 3% a year, and we've come up with these numbers.

1010

If you can go about halfway down that first chart, I guess the key line there is the underlying budget balance. For the current fiscal year you can see that number of $1.4 billion that was just released this week in the third-quarter update. We expect the number to be very similar to that next year: weaker growth and revenues, but the public debt charges should come down. But if we're taking off the reserve, we have to keep in mind that for planning purposes, that presents only somewhat less than $500 million that could be allocated. The year after that has a somewhat weaker profile, less than a $1-billion surplus, so there's actually a deficit after taking off the contingency reserve. The surplus is about the size of the contingency reserve the year after that, then growing somewhat larger than that.

I don't think a recession is in the cards; that's not our most likely. This is really just a little bit for fun, looking at the sensitivity of the forecast with different economic assumptions. In the bottom panel we assumed that instead of 2.3% growth this year and 3.3% next year, we only had 1.3% and 1.5%, so this is equivalent to a very mild recession in the mid-part of this year and a fairly sluggish recovery. That basically eliminates that $1.461 billion surplus in 2001-02 and brings it to a mere $79 million-let's just call it even. So in fact a deficit on a planning basis once we took off the reserve and then fairly large deficits beyond that.

I warn you that these are very much illustrative; I really don't have the information necessary to make these very precise. But it does suggest, assuming a pretty reasonable economic scenario-it's not as robust in recent years, but I would say that after this year it's consistent with the potential growth rate of the economy-that these surpluses for planning purposes and what could be allocated to tax relief and higher spending are not very large coming in the future years. The corollary of that is if there is to be further tax relief, it does suggest that there will probably have to be a further tightening in government spending beyond what I've assumed here.

I'll just for one moment, as a tangent, address a bit of a caveat that's sometimes raised, and that's the notion that tax reductions pay for themselves. That's not what is embedded in this forecast. I don't believe that would be the case in most instances. That's not to argue against tax relief-you do them for other reasons-but if you look at it, on average, Ontario taxes 15 cents of every dollar of economic activity. So you could flip that around, that if tax relief was to pay for itself, each dollar of tax relief would have to generate more than $6 of economic activity. I find that would be quite large. You could see that, as well, to get the tax relief to pay for itself you'd have to be assuming the real economic growth to continue at the 5% pace, where we have a more conservative assumption in the 3% range.

Just turning to page 6, it's hard, looking at the economic environment right now, not to be singularly focused on the short term, with all the bleak news coming out, but I really think the budget planning has to look at a broader term. Two things here for a snapshot: Canada, although we've have good growth in the last couple of years, has not done very well in the last couple of decades. If you look at that top chart, I'm looking at real gross domestic product, so output per person. As you can see throughout the entire 1990s, in both Canada and Ontario it only grew 13%, only a average of 1.3% a year-far below the US rate.

On a more telling basis, I think a more important statistic, if we look at what disposable income is available to individuals-what's left over after they pay their income tax, Canada pension plan and employment insurance contributions etc-and look at that on a real basis per capita, you can see in the Canadian case, to the penny we're sitting today right exactly where we were at the beginning of 1990. So we went through a decade in the country with no progress on that standard of living measure, and in fact in Ontario it's still slightly below where it was, although with the tax relief and the forecast it should come above that level. But that's not a very impressive record over a 10-year period.

In that context, my pitch is that as you look to budget planning you shouldn't be so focused on the short term, but really the decisions should largely be around, "Will this bolster Ontario's growth on a longer-term basis?"

Looking at the challenges, really, going through the debt, the tax and the spending side, I'm one who advocates to continue to make considerable progress on the debt. As you can see from the chart at the top, if you look at that black line running through it, the debt-to-GDP ratio is coming down quite strongly. I think that's very much to be applauded. At the bottom you can see that sort of puts Ontario's debt-to-GDP ratio about in the middle of the pack for the provinces.

Probably the most telling statistic is on the top of page 8. Ontario allocates about 15 cents of every revenue dollar to paying interest on the public debt. That, I think, really shows the key benefit to getting that ratio down further. That's 15 cents that could be going to more productive uses and it's basically going to pay for past consumption, whereas it could go for programs that the citizens would value or lower tax relief. So I think it is important to keep in mind to continue to bring that debt burden down rather sharply.

On the tax burden side, just on the debt side, there's been great news in Ontario in the last couple of years. On the basis of the plans that are already in place, together with the forecast I presented, if I look at a very broad definition of the debt burden, just taking Ontario's own source revenues relative to Ontario's gross domestic product, you can see that it will come down in a couple of years to about the burden that prevailed in the early 1990s. So considerable progress has been made there.

There are a couple of areas in the tax area that do concern me, though. Turning to personal income tax-just before I come to Ontario, let me look at a more global picture of Canada-we have about the heaviest reliance on personal income taxes in the world. You can see that we're number one here in the G7, but it's not the category we'd like to be number one in. If we look back, the last year we have comparable statistics is 1998, and personal income tax accounted for 14% of our gross domestic product-way above everybody else. I've extrapolated that to 2003 on the basis of the federal and provincial commitments already, including Ontario, and you can see that although we are moving in the right direction, at 12.5% we would still be the highest. I presented this in the most unfair way possible to those other countries because all those other countries have plans to cut their taxes as well. So as we're moving down, they, and particularly the United States, are moving further away from us.

The other feature-and Canada recognizes this-is that we tend to have high marginal tax rates. In Ontario the top marginal tax rate is just a little bit above 46%. I'm sure you're aware that in certain income ranges, say between $20,000 and $40,000, families could easily be facing marginal tax rates of 70%. The other feature is that our top marginal tax rate kicks in at relatively low income levels. Unfortunately the most comparable data go all the way back to 1996, but you can see at that point our top marginal tax rate kicked in at C$60,000, whereas in the United States, $371,000; in France, $262,000 etc; so high marginal tax rates and kicking in at a fairly low level.

One of the things I presume will almost immediately have to be addressed in the next Ontario budget is the change in the tax thresholds that were introduced by the federal level in October. The top marginal tax rate at the federal level won't start until $100,000 now whereas Ontario in the budget proposals in 2000 would have had the top marginal tax rate starting at $60,000. I presume that will get addressed. I would recommend that it be addressed.

Premier Harris gave a speech recently and referred to the need to continue to work away at getting down the personal income tax burden and particularly referred to the competition from the United States in the context of President Bush's plan. This compares the top marginal tax rates in Ontario and a few of the other provinces with the United States with and without that Bush plan in place. You can see that at 46.2%, the top combined tax rate faced by an Ontario citizen is on the high side vis-à-vis those competitors in the United States, and in particular quite a bit higher than the Alberta rate of 39.5% once they've gone to their flat-tax scheme.

At the bottom you can really see, to the degree that you can call it a culprit, the factor for that marginal tax rate being somewhat higher than those other jurisdictions really comes down to the Ontario high-income surtaxes. Of that 46.4% top marginal tax rate, about six percentage points of that are accounted for by the surtaxes. In other words, without that, Ontario would have a top marginal tax rate that would be in the range of most of the US states even after Bush's tax reduction and it would be in the range of where Alberta is.

On the corporate income tax side I think it's a much happier story and it's a very encouraging story. My pitch to Ontario and other jurisdictions like Alberta is to point out to you what seems to be a very well kept secret so far. I can't tell you the number of business organizations I've spoken to in Canada and particularly in the United States that are not aware of the corporate tax reduction plans of those governments or even of the federal governments. Once the federal government has lowered its federal corporate tax rate to 21% and Ontario and Alberta are down to 8%, businesses operating in those two provinces will face the lowest corporate income taxes anywhere in North America. This is not just a question of trying to match the United States or be competitive within Canada; these will be the lowest tax jurisdictions in North America. You can see on this chart that the combined federal and provincial rate in Ontario will be below the federal rate alone in the United States. So even if you take a state like Texas that has no state tax, the corporate income tax rate will be below here. I think the key thing here is to really nail down that schedule to getting to 2005. Alberta's trying to do it by 2004. I would think, as a minimum, Ontario would want to look at that.

1020

I must say on the federal side, when we first put out a fairly vague time reference for getting the rate down to 21%, we thought that would largely satisfy the business community, but as I travelled around, particularly in the United States, I noticed there was a fair degree of skepticism. They really wanted to see it in legislation, when it was going to go there, so that might have some relevance on the Ontario side.

Turning to page 12 then, although Ontario will be very competitive on the corporate income tax side, I think one of the very weak points we have in the Canadian tax structure is on capital taxes. It's beyond a shadow of a doubt that the strength of the US economy in recent years has come because of their capital accumulation, particularly in the information processing sectors of that economy, a much faster growth rate than we've had in Canada. I think it is very unproductive that in Canada we very heavily and directly tax one of our prime sources of growth.

You can see in the little panel on the right-hand side that most provinces, including Ontario, do have fairly hefty general rates on capital taxes. They haven't perhaps seemed to have been all that onerous in the last couple of years because, of course, they are fixed taxes and as profits have been rising corporate income taxes may have seemed to have been more important. But I think these are going to be very punitive to businesses this year, in particular as profits decline.

If we're really playing the game of trying to be competitive with the United States, you can see in that little panel in the middle of the page that we have over triple the reliance relative to profits of capital taxes. You can see at the bottom that basically capital taxes in Canada hardly existed until about 10 years ago, but you can see now that they've become quite significant players on the provincial scene with an estimate that Ontario probably raises more than $1 billion from these. To my mind it's $1 billion that has quite a negative effect on economic growth.

I only addressed the Ontario sales tax-really, who knows if there's any basis for them, but musings about perhaps cutting the Ontario sales tax rate. If I come back to my context, if the budget test in my terms is what it would do to bolster longer-term growth, I don't think this would be a very solid case. Again, it would be an element that would be a more stimulating assumption in the short-term than longer-term growth. I do think there's an element, though, of the Ontario sales tax that could be reformed for the better of the economy, and that is to recognize that a very large portion and probably about a third of the revenues come from intermediate products. Most directly that means again that continually it may seem that capital accumulation is really the basis for growth in modern economies. That increases the price of machinery and equipment about 3.6%. I'm just taking that estimate from the Ontario Fair Tax Commission. It also cuts into the profit margin of exporters, 0.2% to 0.6%. One of the current examples where you see the damaging effect of this intermediate product taxation is on the Ontario tax on the so-called custom software, where it's virtually impossible to establish the value of it and it ends up with double taxation across the provinces. But this software is really at the heart of the growth of many of the corporations.

At the bottom, this was from some work that was done by the Department of Finance and reported by the OECD a couple of years ago. It was trying to answer the question: for every dollar of taxation, what is the output loss from inefficiencies that raises in the economy? As you can see, by far the most damaging tax from an output perspective is corporate income tax, followed by personal income tax, and the least damaging is a broad-based sales tax. Now Ontario doesn't have that type of broad-based sales tax, but I think that the relative ordering of that is probably quite important.

Let me move on to just a couple of elements on the spending side. Just to point out first what we all know is that the growth in Canada has been led by the so-called high-technology sector, particularly in Ontario. It's been accounting for anywhere between a quarter and a third of Ontario's growth rates in the last four years, even though it is still fairly small. It's 10.8% of Ontario's economy. But along with that has come an insatiable appetite for knowledge workers, and of course it's not just restricted to high technology. High technology really runs through all sectors including my own bank.

One thing that I think is quite telling as we compare ourselves to the United States, over the last 20 years the United States has been increasing its per capita funding on a real basis to post-secondary education whereas Canada has been cutting back. In fact, if we look over that 20-year period, there's a 50% differential that's arisen. It may well be one of the elements why the United States has been doing better. You can see-it's a bit of a wiggly line-that in both Canada and Ontario, as a percentage of the total budgets, the post-secondary education budgets have been coming down just at the same time as we're entering this knowledge-based economy. We see a similar pattern on infrastructure coming down. We saw a larger reverse than 1999-2000, and perhaps with the plans that will stay up. But on the spending side, that's another element that would meet that test of supporting longer-term growth.

My final comment before turning it over to questions is that I think we need to recognize that the regulatory side of government probably has as much impact on economies as the spending and taxation side. I'll just give one example of that. Despite this overwhelming trade we have with the United States, on goods we're 12 times more likely in Canada to trade within Canada than outside; on services we're 25 to 30 times more likely to trade within Canada; yet, as we've been trying our best to establish free trade regimes outside the country, we don't have a free trade regime within Canada. I know this is not solely in the domain of Ontario, but I think this is a crying shame in the modern economy. We need to build the economies of scale to succeed outside the country, and we won't do that until we get free trade inside. So my pitch would be for Ontario to continue to play a strong leadership role on that front.

Just in concluding, there are two aspects where I worry a little bit that some of the things I say might get misinterpreted. I seem to be saying, "Do more debt pay-down, do more tax relief and increase strategic investments," and at the same time I say, "Looking forward, there don't seem to be many resources available." So I seem to have failed the budget constraint test. But I remind you, implicit in what I'm saying-and Premier Harris seemed to acknowledge that when he spoke earlier this month-if you want to have all of those three elements, of course you're going to have to keep a very tight rein on all the other elements of spending. I'm not pretending in any way that it's going to be easy to accomplish everything that I've recommended here.

The other element I'm a little bit worried about is it might seem I'm inordinately concerned with things like capital taxes and corporate income taxes and the top marginal tax rate, but my main concern here is to make sure that the overall economic pie grows in Ontario, because I think that's the best bet: to make sure that everybody is left with a better standard of living.

I will stop there and turn it to you.

The Chair: Thank you very much. We have 10 minutes per caucus, and I'll start with the government side.

Mr John O'Toole (Durham): Thank you very much, Mr Drummond, for a very profound oversight-overview, rather. That wasn't a deliberate slip; it was an error on my part. We also won't hold it against you that you had some implication with the federal government not doing enough fast enough. That's our line on that.

Just for clarification on a couple of things, you were talking about increasing the contingency fund. I'll just go through the slides one at a time. We just moved the contingency fund back into the revenue side. It'll probably represent the surplus this year. A quick comment on that, if you may. You're saying in rough times we should build our contingency fund and you're recommending $1 billion. Is that sufficient, in light of the volatility there?

Mr Drummond: I think in the context of the shorter-term forecast-again, I'll display my biases. It was I who came up with the proposal for the contingency reserve at the federal level, which I guess led to some of these other adoptions. What I had in mind was 1% of revenues and 1% of program spending. That combined, each one of those being $1.5 billion, led us to the $3 billion. Now, proportionally, Ontario is somewhat less than that, if you want me to give a proportion. Yours lines up to 0.8% of revenues and 0.8% of spending. So you might want to consider, particularly in this context, something a little bit higher.

The specific comment I made, though, in my pitch to look at a longer-term horizon was we need to recognize that the further out you go, the risk will be larger. If you have a growth rate bias, if the economy, instead of growing at 3%, only grows at 2.5%, then your errors are going to get progressively larger and larger over time. So I thought you might, in that context, want to ramp the $1 billion up, so it might be $2 billion or $3 billion by the end. Then, if indeed you're making tax relief commitments for 2004, you would have a much greater degree of confidence that those can be accomplished.

It's probably a bit more of a quibble, whether the $1 billion should be $1 billion or $1.5 billion in the short term, but my recommendation for an increase in it was in that context of a longer-term horizon.

Mr O'Toole: Often they criticize governments for having slush funds. You're suggesting that these are more cushions than slush funds, to deal with both contingencies and forecast problems as well in the GDP.

1030

Mr Drummond: I think, again, in designing at the federal level to address that very thing, knowing it was going to come, was why we established a very tight relationship. If it's not needed, it'll go to debt relief.

Mr O'Toole: That's right.

Mr Drummond: You have to demonstrate it was, and Ontario has done that. So I'm not so sure you're vulnerable to that charge, given that record.

Mr O'Toole: Looking on page 4, if I could quickly go through to get a better grasp of it, you're showing in 2001, if I'm reading the chart at the bottom of page 4 correctly, Ontario growing slower than the Canadian economy. That's 2001. Is that a fiscal year or is that an annualized year?

Mr Drummond: In Canada, for 2001 on an annual average basis we have 2.7% growth and 2.3% for Ontario. There's really only one reason behind that, and it's that we have knocked almost a percentage point off Ontario's growth because of the production cutback in the auto sector, which is indicated on the light vehicle assembly as 97% in Ontario. But if you look at it broadly, to encompass the aftermarket and all of the inputs, you still get about 65% of the auto industry being concentrated in Ontario.

Mr O'Toole: Is that more aggressive than our own forecasts? We're not showing as great an impact for the other reasons. The technology sector, you mentioned, is rather robust and growing. We might have made the argument on day one that it's stronger than perhaps relative to Canada. Is there any offsetting effect? I'm saying that Ontario, showing a lower growth rate in 2001 to the rest of Canada, is somewhat a juxtaposition to what I see our government saying.

Mr Drummond: I'm not sure what the government's own forecast is. The only reference is that the Minister of Finance referred to 2.8%. That was taking an average of private sector forecasts. I'm not sure it encompassed ours, however, at 2.3%.

But as I indicated, 2.3% to 2.8% sounds like a big difference. Of course, in referring to this 2.8%, he had the benefit of knowing what the third-quarter numbers were for 2000. Because that increases the starting point, my 2.3% could easily be 2.4% or 2.5%.

Mr O'Toole: I have just one last quick question, if someone else has a question. On page 11, you're talking about corporate income tax and the ability to be competitive and actually moving that down to match or exceed Alberta. If you look at it from a policy perspective-we hear it in other areas; I hope this makes sense to you as an economist-really, it's shifting the tax burden. At the end of the day, if you're pulling it off somewhere, you have to get it from somewhere, unless you have real growth; that sort of takes care of it. We're not looking at that aggressive growth. But if you're shifting the tax revenue from the corporate side, and I'm sure Mr Christopherson will make the point, is that going to affect at a policy level services like health and education, or is it going to be shifted to some other kind of personal income tax or some other kind of tax? Where is the revenue going to come from if you're going to lose, and what's the forecast here that you're working with?

Mr Drummond: You're absolutely right. The phenomenon that's going on right now is that corporate income taxes are being arbitraged away around the world. There will be a day, and I don't think it'll be that much into the future, when there will not be a corporate income tax.

Mr O'Toole: Where is that revenue going to come from? Is it going to come from consumption or real growth?

Mr Drummond: On the spectrum, with the so-called phenomenon, the globalization and particularly the mobility of capital, it's going to have to go from the most mobile factors of production of capital down to the least. So I think you'll see a greater reliance not particularly on personal income tax but much more on the consumption side and probably things like property taxes.

Mr O'Toole: That's what the argument is municipally, moving the tax rates from commercial-industrial to residential, basically.

Mr Drummond: The interesting thing is that we always compare ourselves to the US as the benchmark, but we have to realize the United States very soon is going to be the highest corporate income tax regime in the world. In all of their debate, they are not talking about addressing the corporate income tax, so theirs isn't going to go down.

Mr O'Toole: Then you talk about the capital tax, which you criticized and I sort of support, because that's growing infrastructure and the ability to become competitive and productive.

Mr Drummond: That's right.

Mr O'Toole: In the general policy sense, where would you tend to move the tax load to? Just to consumption?

Mr Drummond: I'll demonstrate to you one of the reasons why maybe the federal government didn't want me working for them any more. My recommendation was always to increase the GST and use every cent of it to buy down personal and corporate income taxes, because I think it is the least harmful tax. I would not recommend that Ontario, with its present retail sales tax, necessarily increase the general rate, because I don't think it's a very good structure for the economy, with its heavy reliance on tax-

Mr O'Toole: But the argument from David Christopherson then becomes that the GST or consumption tax affects the person who spends most of their dollars in consumption.

Mr Drummond: Yes.

Mr O'Toole: They pay a higher rate or a higher load.

Mr Drummond: You do have to worry about the income distribution. There's no doubt we have a progressive personal income tax. At best, you have a neutral and perhaps regressive consumption, and you have to worry about maybe low-income credits to offset that. I think it can be done, though.

Again, we compare ourselves to the United States and we look like we have a relatively heavy reliance on sales taxes versus the US, but we're about the lowest in the world and they are the absolute lowest. I think over time you're going to see a greater reliance on sales and property types of taxes, perhaps payroll taxes as well, and certainly less on the corporate and probably progressively less on the personal tax side as well.

Mr Raminder Gill (Bramalea-Gore-Malton-Springdale): First of all, thank you for being here. One of the things you mentioned, and we've heard it before, is free trade within the provinces. How do you see that as being relaxed, removed or eliminated?

Mr Drummond: With a great deal of pain. We have an agreement right now, but basically anybody can apply a veto to it. So if you as the province are the violator, you can say, "We don't want to go along with the solution," and that's the end of it.

We have a citizen complaint process, but you can only succeed if you're willing to put up several millions of dollars in legal fees and persist with it for several years. So surprise, surprise, nobody bothers with it. No one seems to be willing to cede any of their jurisdictional control in the thing. It really almost comes down to one of the difficulties is getting our constitutional arrangement. It almost needs a body that's willing to impose some rules on that. Obviously, there's no willingness to have somebody like the federal government do that, so I'm not that optimistic. My hope is that people will realize how ironic it is that, as we establish-I put the quote in there from the director of the internal trade agreement. We have freer trade rules going outside of Canada than we do within Canada. I just hope somebody will realize this is so counterproductive.

Mr Gill: The irony is that right now today we are in China drumming up more business and free trade, but we are not willing to talk. All the premiers are there, where they could be-

Mr Drummond: They won't trade with each other. Right in the clause on our internal agreement is that you're allowed to do some things as long as they don't unduly establish obstacles to trading across Canada. Why is that in there? Why is it "unduly"? I must admit, we've been at this in this country for an awfully long time and I'm not that optimistic.

The Chair: I'm sorry, we've run out of time. Mr Phillips.

Mr Phillips: Thank you very much for your presentation. I have just a comment on one of your recommendations, to take a longer-term outlook.

To the members in the government, I think it's obscene that we have virtually no forecast provided by the Ministry of Finance. You can say, "That's too bad," but we have no revenue forecasts, we have an economic forecast out eight months, 10 months, that's it, and no 2002 economic forecast.

The Chair will remember that we tried to get the Minister of Finance to come here to debate tax policy. The issue Mr Drummond is talking about is, what should be our tax policy? Where should we be looking at revenue: corporate, personal or consumption taxes? The minister wouldn't come. One hour a year we get the minister and two hours a year the staff.

I think at some stage this committee has to look at its role. There is a legitimate role here for us to debate the key issues. Believe me, the Ministry of Finance has got all this stuff but refuses to give us any of it. That's my rant. It has nothing to do with Mr Drummond, other than his recommendation. But if we want this committee to play a significant role-and it has gone on, probably, with three different governments, each successive government giving us less information. Under the NDP, we used to get three-year forecasts on revenue and economic outlook. That has slowly dried up. I think it's tragic. They've put a blindfold on us and asked us to find our way. The government members can reflect on that. I know you've got your marching orders, that we won't get it.

Having said all of that-Mr Drummond has and another bank economist has promised to give us similar data-I'd like to just chat a little bit. Here's what I think. I think without question there is an economic downturn, as we all acknowledge, and it has a profound impact on our revenues. We are being asked to preserve the quality of our health care system, but we are also being asked to agree to commit to some things that will have a profound impact on our revenue.

1040

That's where I go to page 5, because I think the committee should be looking at this or something similar. What I take from this, Mr Drummond, is that you've got two cases here. One is that if we recover to a fairly significant economic recovery, 3.3% real GDP growth-2.3% this year and then going back up to 3.3%, 3% and 3%, which by most standards is good economic growth-we still are faced with a deficit position next fiscal year, 2002-03, not the one that's coming up but the following. If we are into a downturn that isn't even a recession but is a significant downturn-1.3% or 1.5% growth-we're looking at substantial deficits. I repeat, in my opinion the Ministry of Finance should be giving us these numbers. I take my hat off to the TD Bank, which has gone out on a limb a bit here. You used your own modelling to at least give us one view of it.

Have I interpreted those numbers correctly, though? If we are into very slow growth-1.3% to 1.5%-are we looking at a fairly significant deficit position quite quickly, like the upcoming fiscal year, and a very significant one the following year, and even with a pretty good recovery are we looking at a deficit position, assuming we provide a contingency reserve?

Mr Drummond: First let me say I feel somewhat nervous about presenting these fiscal numbers. I thought long and hard about whether it was even worthwhile to do it but ended up with the conclusion that these are the best I could do, and if there are problems with them it's because sufficient information has not been provided. So it's a bit of a cop-out, but basically it's not my fault. That's what the information we've put together provides. But I wouldn't want to say I would consider these are accurate, even to within $1 billion. It's sort of like polls that are accurate 19% to 20% of the time within 4%.

Two clarifications on what you said: On the base case scenario that we'd be in a deficit by 2002, that's true, after you take off the $1-billion contingency reserve. But before that there would be a small surplus, though. That's relevant, in the sense of a planning case. If you're standing here in the 2001 budget, you don't want to start eating into your contingency reserve. What you have available on a planning basis, yes, would be a deficit.

On the mild recession scenario-as you indicated, it's not really a recession. Actually it is, in a technical sense. The technical definition of a recession, of course, is two negative quarters. I do have two negative quarters within that 1.3% annual number, but it would be a mild recession. This is nothing approaching what Ontario faced in the early 1990s. But there are also good reasons why I didn't simulate that. We do have an inventory hangover in the auto sector, but we don't have any of the imbalances we had in the early 1990s. So I think it's realistic to put in a fairly mild scenario. But you're absolutely right: before the reserve, it would basically leave you with a balanced budget in the coming fiscal year and then very large deficits even before subtracting the reserve of almost $3 billion beyond that.

Mr Phillips: Have you made some assumptions on further tax cuts?

Mr Drummond: No, this is the best I could do with purely status quo. I guess one of the other difficulties I had was that I was not quite sure-and I couldn't get the answer to this-where we are vis-à-vis the 20%. I assume that half of it has been done and half is still to come, and I assume that would be done over the next two years. I assume we would straight-line the corporate income tax rate from 15.5% to 8% and get to 8% by 2004, even though I know the commitment last year was to 2005. So I'm making a lot of guesses here, but above that I haven't put any additional tax changes in.

Mr Phillips: But those two are built in.

Mr Drummond: Those are built in, yes, and that's obviously one of the reasons, if you look at the budgetary revenue, that the growth rates at 3.2%, 2.1%, 3.9% and 4.6% are all less than the growth in nominal income, because I'm factoring in the tax relief that's already been put on the table.

Mr Phillips: Amazingly, when we asked the minister and the staff where we are on the 20% cut, they couldn't give us an answer.

Mr Drummond: I asked as well, in doing this exercise, and I sort of read between the lines of the answer, and that's why I came up with this half. But I'm not so confident about that.

Mr Phillips: This is very helpful, and I appreciate your caution on the use of these numbers. But in my opinion, the ministry can do these numbers, and they just won't give them to us. I really believe that before the government implements the tax cuts, they owe Ontario these numbers. If these numbers hold true, by law the government has to cut spending, and it will come-because the bulk of our budget is health care. I'm just saying we should demand that the ministry provide this. I've tried that for two or three years, Mr Chair, and I don't hold out great hope. But someday our committee may want to examine how we can make ourselves more effective. I would hope we will look at your recommendation on long-term planning.

On the job front, on job creation, we've had very strong job creation over the last four years. How should we look at job creation over the next two to three years? I'm not an economist, but I've looked at employment growth and GDP growth over the last 10 years. Maybe it's a coincidence, but there tends to be a relationship. Job growth looks like it has grown an average of about 60% of GDP growth. By the way, I've never seen job growth occur at a rate faster than GDP. Can this committee use a benchmark of any sort for projecting job growth?

Mr Drummond: Yes. The benchmarks all get out of whack when you go into a cyclical change. The output tends to spurt way ahead of employment on the cyclical upswing and vice-versa. But if you're growing at a steady rate, it really comes down to productivity. Employment growth plus productivity growth equals output growth.

Mr Phillips: Yes.

Mr Drummond: And in Canada and Ontario in the last couple of years we've been having about a 1.5% per year increase in productivity. So whatever your projected growth rate in GDP, subtract 1.5% and that suggests the percentage growth in employment over that time period.

Now, the United States has been having quite a bit faster productivity growth. They've been in the 2% to 2.5% range. Prior to what hit us starting in the fourth quarter-our slowdown in our machinery, equipment and investment boom-it looked to me like we were about to kick into that higher-productivity phase. You have to be really careful as you describe that, because the first-round impact of that, of course, may well be slower employment growth. Instead of taking GDP minus 1.5%, it might be GDP minus 2. But where it does show up to the benefit of everybody is stronger real wage gains, because ultimately real wage can only be driven by productivity. That's why I showed in those pictures the dismal economic growth we've had in Canada and Ontario over a 10-year period, which has shown up in no real wage growth. Looking forward, almost in an optimistic sense, you might actually get a larger gap between output and employment but much faster growth in wages per employee.

The Chair: Thank you very much, Mr Phillips. Mr Christopherson?

Mr David Christopherson (Hamilton West): Thank you very much for your presentation. I will follow up on a couple of things Mr O'Toole suggested I might, but I'll frame them my way rather than John's way.

I guess the first question will be sort of the large question of recommending that there be further tax reductions and quicker debt relief, yet still strategic investments, as you call them. Of course what is strategic at this time would be open for debate. But with a downturn in the foreseeable future, where do we get the revenue to do all those things, bearing in mind that yesterday we had Mr Stanford here from the CAW, who pointed out that the health care system in Canada is not only a benefit to Ontarians, because of its universal accessibility to health care, but it provides us with a $6-an-hour advantage competitively and is one of the cornerstones of building the auto industry here in Ontario. How do we do all of that with less dollars than we've had in previous years in terms of surpluses?

1050

Mr Drummond: There are really only two ways out of that, neither one of them very pretty. I'm never pretending that they're easy.

On the revenue side, the only scope to generate increased revenues and use that to bring down the personal and potentially the capital tax side is on the sales tax side, in my view, whether that's an increase in the overall rate, which I wouldn't recommend, or base broadening. I won't say harmonization with the GST. I think there are a lot of things that would be good, but there are a lot of things you can do that still fall short of that. To the degree that there's every opportunity, I would say keep ramping up the tobacco taxes. We saw Martin musing about that. To the degree that we think we've got a hold on the smuggling, that can be used to bring down revenues. But that's really the only source within the revenue pie.

The only other way out of this box-and everybody will have a different ranking-is that we really need to rank all the spending by priority, and what's not a high priority will have to be curtailed very sharply, because there's a rough period coming up.

Mr Christopherson: You can appreciate that one of the concerns we have is that when we sit here in relative comfort and say that it's never easy, what it means is that if we follow the kinds of priorities that Mike Harris has chosen for the people of Ontario, the losers are not just paper dollar losers; they are families. We've had delegations come in and talk to us about the fact that the United Nations has taken us to task that we haven't done enough about child poverty, that our rates are way out of whack in terms of child poverty given the relative wealth we have in Ontario.

It's difficult for some of us to accept that that's just the way it's got to be given the impact on individuals and families, and for a government that says they care about families, you've got to wonder how they square that circle. The whole notion that it's just the way it is, that we have to leave people out there when we have choices, is very hard to accept, particularly when we've seen so much benefit and money go to those who are already very comfortable. For most of them, if they take a hit, it is a paper hit, as opposed to wondering where you're going to find enough money to give the baby milk.

Mr Drummond: I think we're looking at the same objective. My objective in framing these recommendations is to make sure all Ontarians are better off, and particularly that the people who are living in poverty or near poverty end up better off. My point is, there are two ways you can look at going about that.

One of the ways is programs that directly support that, and I think that's a very valid way of looking at it. My other one was, let's look at a broader context. One of the reasons why people are having difficulties with income in Ontario and Canada right now is that we basically haven't grown as a country in the last 10 years. That's not just taking income away from higher-income individuals; it's taking away income from everybody. I think the litmus test for elements of the budget is what it's going to do for longer-term growth. I'm not saying that necessarily trickles down and benefits everybody, but there is no way you can increase the lot of everybody if the whole pie is not expanding at a reasonable rate. The pie in Canada hasn't been growing at all in the last 10 to 15 years. In fact, if you look at what the IMF categorized as advanced economies, out of 46 of them, we've had the third-lowest growth per capita in the last 15 years. I think our starting point has got to be to turn that around.

Mr Christopherson: But if we take a look at what's happened in the last few years, we've followed that course and we've had growth. We've had phenomenal growth, record levels of growth, yet more and more people are being left behind. I'm sorry, but once we move from the stark economics-and I very much appreciate and respect that's where you are and very much appreciate your coming in and sharing with us what you know. But in the transition from that to what happens out there in people's homes and in our neighbourhoods, that takes us into the political arena, and it's the choices this government has made that give an awful lot of us a lot of difficulty, because it has left so many folks behind. You've got people who were hurting before and they're hurting more than ever, and others are doing very well. Our numbers look good, but the number of people who are getting left behind-and I know a lot of the presentations we're about to hear are from women or families headed up by single parents, women, with 40% of the people on social assistance being kids. At some point, we can't accept that the stark numbers alone are going to drive all our decisions about society.

If I can, you mentioned taking a broader view. Again referring to Mr Stanford's presentation yesterday, he pointed out that as a result of the income redistribution that we have, if you include taxes, transfer payments to individuals, and then all public spending, such as on fire services, police, all of that, if you take a look at all those things, he pointed out to us yesterday that in figures from StatsCan, in terms of the relationship between the top 20% of income earners and the bottom 20% of income earners, when you start out at raw income, just gross dollars, the ratio is 27 to 1. By the time we conclude all of the transfers and, as I say, all of the public spending, and count that as public goods, it reduces it so that we're at 4 to 1.

Now, it would seem to me that in the broader view, those kinds of income redistribution mechanisms are what make this the greatest country in the world to live in, because there is a lot of wealth. By virtue of the systems and tax measures we have, we're able to redistribute that so that everybody gets a share of it. The filthy rich are still filthy rich; they may be just slightly less filthy rich than they would have been otherwise. But for someone else, it means the difference between whether or not they've got a roof over their head.

I say all of that because I'm really concerned about your suggestion that you foresee that we're going to rely more on consumption and property taxes. Yes, John, I'm going to raise that as a real issue, because there's no inherent fairness in that. If you pay property taxes, it's based on the land and the value of the building: no relationship to the amount of income you have. So the higher your income, the less, as a percentage of your income, it costs to take care of a fundamental, basic need, which is housing. As soon as we start moving away from the progressive income tax and more to consumption and property tax, we're losing that progressiveness, and that ratio that I mentioned being at 4 to 1 is going to start increasing again.

We already know that Canada has one of the widest and one of the most rapidly growing gaps of income between those who have and those who don't. To me, when we talk about going down that road, that's not Canada any more; that's not Ontario. That's not why the United Nations says this is the best place in the world to live, not because we give our richest people the biggest tax benefits, but because we find a way to use that wealth to still allow a whole class of very rich people, some of the richest in the world, also to provide some benefit for the rest of the people, the majority of the folks. Surely there has got to be an acceptance that that's just not good enough. It wasn't for Canadian leaders and Ontario leaders before now; why should it be now?

Mr Drummond: I think there are a lot of difficulties that come with this trend of moving away from the so-called taxation of highly mobile factors like corporate and, to a lesser degree, the personal income tax, but I just don't see as a realistic model that we can buck that trend. We will not have the corporations in Canada and the jobs that come along with that and the income that comes along with that if we're totally out of sync with everybody else. We can talk about the implications of that and the shame that comes with that, but it is extraordinarily easy for multinational corporations to book their profits where they want and to book their losses where they want. They will book their losses in the high-tax jurisdictions and they'll book their profits in the low-tax jurisdictions. That's what's been happening in Canada for a number of years right now. On an inside-Canada scale, we're already seeing that that's what is happening within Canada: the low-tax jurisdictions are attracting the taxes, and the higher-taxed jurisdictions are attracting the expenses.

So whether we like it or not, I think that revenue source over time is going to dry up. Then we're going to have to deal with a lot of the problems you had. I'm not pretending they're easy, but I don't see how we can sustain and have job growth and increase this economic pie, which I think ultimately is critical to addressing the needs that you talk about, if we have a 5% to 10% higher corporate tax regime or top personal income tax rates that are 10% or 15% above where they're going to be in the rest of the world.

Mr Christopherson: That's fair enough.

The Chair: With that, Mr Christopherson, we've run out of time.

Mr Drummond, on behalf of the committee, thank you very much for your presentation this morning.

I have to apologize to the committee, but we will have to take a 15-minute recess because work has to be performed on the wall here and apparently it's going to be fairly noisy. So we'll recess until 11:15 this morning.

The committee recessed from 1100 to 1118.

ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES

The Chair: If I can get your attention, we'll bring the meeting back to order. I would like to apologize for the inconvenience to the presenters.

Our next presenters are representatives from the Ontario Association of Interval and Transition Houses. Could you come forward and state your names for the record, please.

Ms Eileen Morrow: Actually, there's only one of me. My name is Eileen Morrow and I'm the co-ordinator of the Ontario Association of Interval and Transition Houses, which is a 66-member coalition of first-stage shelters across the province primarily for abused women and their children.

I've distributed a brief and I'm just going to read a shorter version of essentially the same thing for you. Thank you very much for giving us the opportunity to come here today and speak with you again; we've been here many years.

I'm just going to talk a little bit about the concerns of abused women. Many of the concerns of abused women are related to decisions on budget resource allocations by government and by priorities set during budget deliberations. While it is true that not everything can be solved with money, it is also true that serious social problems cannot be solved without it.

You may be horrified by the crimes of violence against women. You may hear the statistics and be shocked by these numbers: 29% of women in Ontario experience criminal violence from an intimate partner; 75% of stalking victims are women, most stalked by previous partners; 31% of women who escape to emergency women's shelters in Canada stay in Ontario shelters; intimate partners murder an average of 40 women a year in Ontario.

But in the real lives of women and children, crime stories and statistics tell only a very small part of a very complex story. As women attempt to move from violent control to freedom, they encounter situations and systems affected by the public policy decisions made here. Whether they find support or rejection when they escape is to a large extent, then, up to you.

Here are a few of the points women and children pass on their way to safety and freedom where you can help.

Women need to break the silence. Still today, too many women do not find the support they need to end the violence in their lives. A 1993 Statistics Canada survey found that almost one quarter of women told no one about the violence. We must provide more support for the local neighbourhood women's groups and women's centres, educational outreach, and outreach to women in rural and remote communities that give women a safe place to disclose abuse. We must provide information to women who are newcomers to Canada and information to diverse groups of women working at local community levels to break the isolation, which is the bedrock of violence. You can help by allocating resources for these points of entry for women breaking their silence.

Women need to get free of violence. When women do find the courage to tell, clearly the delivery of community-based services-from crisis lines to emergency shelters for women to community counselling programs and other local support services-is critical for women seeking the information, support and advocacy both they and their children need to start addressing abusive relationships. Over 80% of abused women have found women's shelters and counselling services to be the most supportive community response to their situation.

But these services remain under pressure since the funding cuts of 1995. Between 1995 and 1998, demand for OAITH women's shelter services increased from 11% to 30% in different programs. Some 84% of shelters report that access to many other local services has also decreased, making it harder for shelters to address women's needs. You can take action to ensure that underfunded, overwhelmed women's shelters and other community support programs are able to address rising demands.

Women need to live beyond crisis. To leave violence, women and children must have basic social supports from which they can rebuild their lives and make their own independent choices. You can help by providing adequate basic supports.

The first and most important is social assistance. We know from our experience in shelters that a large percentage of women and children on welfare in Ontario are there as a means to escape violence. Canadian research has not quantified this experience, but studies from similar US communities indicate that abused women may represent the majority of women who receive social assistance.

I have included within my written brief results from one study indicating 65% of women using social assistance had experienced criminal acts of violence and another reporting that over 57% of women in one workfare program had experienced physical violence by an intimate partner. Can it be much different here in Canada?

In 1996, two thirds of OAITH shelters reported that they knew of women who were remaining with or returning to abusive situations because they could not survive after the 21.6% cut in social assistance. The Ontario Social Safety Network now calculates that inflation has further eroded welfare benefits, resulting in a cut equivalent to almost 30%. So things are even worse for women leaving in 2001.

You have the power to change that situation. I ask you today to do that by recommending an increase in social assistance rates. Women and children have a right to adequate financial assistance to escape violence.

Women need housing. If it is dangerous to live in your home and you must flee, you are essentially homeless. Accessible, affordable and adequate housing is critical to women's safety and independence.

Shelters in OAITH have reported to us that lack of housing is forcing women to return to abusers, or that abused women and their children are forced to live in the worst housing in town because they are on welfare or cannot afford safe, adequate market rental housing.

Although there still exists a special priority list for subsidized housing for abuse victims in Ontario, many shelters are now reporting that the eligibility for placement on the list is tightening to the point where many deserving women and children are rejected.

Women need legal aid and equal access to justice. When women leave abusive situations, they use legal systems, especially family law, to access their right to safety, to protect their children from abusive parenting and to access their fair share of property and assets.

Compared to criminal legal aid funding, funding for family law legal aid, where most women go, is low, resulting in systemic discrimination against women in Ontario's legal aid system. Tightened eligibility requirements and limits to the number of hours legal aid will pay for women's legal matters continues to jeopardize women's equal access to justice in Ontario. Women who need language or other interpretation services are disadvantaged when hours are limited, resulting in even greater inequality among women.

You can provide equal access with strong financial support for family law legal aid and allocation of sufficient funds to address all legal matters for women and children escaping violence. This kind of support is only one of the many recommendations not yet implemented from the 1998 inquest into the death of Arlene May.

Women need to create new lives. If women are to rebuild new lives free of violence, we must ensure that women can survive economically and share equally in the benefits of the Canadian prosperity we so often hear boasted about by elected officials. There are resource initiatives and economic policy directions that you can take here to ensure that women and children have a chance to enjoy their fair share, including provision of adequate, affordable child care for women leaving abusive situations; employment and training resources to allow abused women to upgrade and train so they can adequately support their children alone. You can provide workplace standards that recognize that women must not be under pressure to endure harassment, unequal pay, long, irregular working hours or working conditions that prevent them from providing adequate time and resources to their families.

Finally, we must all be dedicated to ending violence against women. We are not just about mourning women after they are dead, nor are we concerned only about responding to continuing violence against women; we want to end violence against women. This should be your goal as well.

A conservative estimate of the financial costs of violence against women in Canada is over $4 billion. The human costs are much higher and far-reaching. It is long past time for us to be putting greater efforts into education and prevention actions that would eliminate violence against women in the future.

Initiatives must focus not only on education efforts with children in schools, although these are obviously essential, but also within the public at large so that we all have the knowledge and commitment to change the culture of violence against women.

Perhaps most important, violence against women will not end without recognition by public policy-makers like you that violence against women is a result of women's social, economic and political inequality and that, to end it, those inequalities must be challenged and eliminated. You can make that happen by providing the political support and resources to grassroots, anti-violence educators, advocates and activists who are ultimately at the heart of virtually every progressive step taken in Canada to end this pervasive violation of women's human and equality rights.

I have outlined only a few of the supports needed. They require the resources and the political will that you deliberate about on this committee. Here are just a few suggestions for action that you can recommend in your upcoming report:

(1) You can implement the suggestions of the cross-sectoral violence against women strategy group, which has provided a list of 37 measures for addressing violence against women in Ontario, now endorsed by 165 groups from across the province. These measures include initiatives in three important areas: community-based services, legal reforms and services, and economic survival and workplace safety. All MPPs of the Ontario Legislature received the full text of these measures in the fall session and the cross-sectoral group has called for all-party support for them. A summary of the measures is attached to this brief.

The measures were developed by groups of women across the province from all sectors after the murders of women in the summer, many of whom were very high profile in the media. I'd like you to know that since then, at least seven more women have been murdered in Ontario and more will die this year. These measures have not been implemented, but they are still needed.

(2) Provide adequate provincial resources for safe, affordable low-income housing and subsidized housing.

1130

(3) Provide sufficient resources in Ontario so that safe, affordable, accessible and non-profit child care is available for every child and family that needs it.

(4) Provide increased funding resources for education, prevention and public advocacy, and equality rights work on behalf of women and children.

These and other initiatives would go a long way to supporting the women and children you are charged with representing in the House. We look forward to seeing more than our organization's name listed in the report of the committee this year. We look forward to seeing these and other progressive recommendations that will help save the lives-mentally, emotionally and physically-of women and children in your constituencies. Thank you.

The Chair: Thank you very much. We have approximately five minutes per caucus and I'll start with the official opposition.

Mr Phillips: Thank you very much. Can you help us a little bit with one of your key recommendations, which is housing at a time when a women is ready to leave a shelter? I gather then the staff is looking for a place where that person can go. I know I get a lot of people in my constituency office who are having a real problem finding housing now. We heard yesterday and the day before from the house building organization that there's virtually no new rental accommodation being built and zero in the way of social assistance housing being built. How big a problem is this now in terms of your staff and how do they actually cope with it? How do they actually find a place for someone to go?

Ms Morrow: It's a huge, huge problem, more so in some communities than others. I'm hearing from shelters across the province that financial assistance and housing are the two biggest problems women face when they leave abusive relationships. Women can wait, even if they're on the special priority list, which is getting more and more difficult for abused women to get on. Even if you're on the priority list, which theoretically moves you to the top of the subsidized housing list, it can take up to five months for you to get a unit. If you don't happen to get on that list, it can take up to five years for you to get subsidized housing.

Most abused women when they leave abusive situations, even if they come from a situation where the family had income, don't have access and control over the finances and it will take them sometimes years to get their share of the assets. That means a lot of women end up on social assistance temporarily after they leave abusive situations and they will be there when they look for housing. So, it's very difficult.

The government of Ontario has supported in the downloading the continuation of the special priority list for abuse victims but I have to tell you that I'm hearing from all over the province that the restrictions on that list are getting so tight that in effect what's happening municipally is that women are being rejected from the list. At this point, we're getting to a stage where if you haven't made a report to the police, you're not abused. As you know, only a quarter of women ever call police. My feeling is that eventually we'll see a point where you'll have to have a conviction and then it will be the police who decide who's abused and who isn't abused.

Women are being asked for more and more levels of verification from community agencies, so you have to be involved with all kinds of community agencies in order to get priority listing housing because you have to have all these different people verify that you are in fact an abused woman in order to get the housing. It didn't used to be like that. It's getting much more difficult and staff in shelters, quite frankly, not just in housing but in other services, are having to spend more time, even though the demand is greater, getting the same level of services for women than they used to get several years back. It is getting more difficult and the demand is rising while the funding is falling.

Mr Phillips: When a person who has an abusive situation phones for help, are all of them accommodated instantly somewhere and is there always space in traditional shelters or are you using any backup systems?

Ms Morrow: There's certainly not always space in an emergency shelter for women, no. In some communities like Ottawa and Toronto and larger centres, shelters are almost always at capacity. So although women are leaving, obviously, and moving on as fast as we can move them on, we also then always have women who are needing space. What shelters traditionally do is bring the woman to the shelter or try and find some other place for the woman in another shelter, sometimes moving her out of the community into another community temporarily, which is quite disruptive because then she has to move everything somewhere else and then come back again. Some women, quite frankly, are sitting in hotels or in motels. I understand that in Toronto the municipal government at one point was stating that there were 400 abused women in motels waiting for some kind of housing. So not all abused women are getting the services they would get from a shelter.

Mr Christopherson: Eileen, welcome again. The last few years I'm not sure if you've been listened to, but certainly those who have been around for a while-

Ms Morrow: We'll keep coming back until we are listened to.

Mr Christopherson: That's good, because it's the only way. You're probably at least the second, maybe the third or fourth, who has reminded everybody about what happened with the cuts to social assistance and the fact that it was 21.6% when the government proudly announced that they were cutting the income of the poorest of the poor. That's now risen with inflation to 30%, and you've made that point here.

If I can make an observation, one thing about this committee is that it gives you a really good cross-section of how different people view what's going on in Ontario. We get some folks who roll in here and everything amounts to, again, more of what the Harris government has already done, which means more for those who already have at the end of the day. Yet your group comes forward and we have housing advocates and anti-poverty advocates come in and start pointing out that when you take away the shine and the headlines, there's a lot of pain going on in this province at a time of enormous growth. Heading into a recession, it's terrifying to think that now they've got an excuse, at least some kind of an excuse, to say, "We can't afford this right now."

Our worry all along during the boom years has been that if you're not going to make these investments and spend the money on these things when we have the money, the ability to make that public argument when there isn't money, when the services are really needed, becomes more difficult. Yet that's exactly where we are today.

Also, I want to remind the members of the government, because they'll probably talk to you about it-I'll tell you what they do. They either divert and talk about something that sort of runs parallel to what your issues are or they'll micro. They'll go into one little aspect of something that you've raised and hope they can eat up the time in there. What I'd like to see them talk about is the fact that this government made a huge deal about saying, "We'll listen to coroners' inquests," and they do, as long as it gives them an excuse to do their extreme right wing, hard-line, law-and-order stuff that plays so well for them. But here you've got the Arlene May inquest and they've done virtually nothing-I understand they've started some things, but virtually nothing-on the key recommendations.

The emergency recommendations that were brought forward I see are now up to 165 community groups-165 groups focusing on 37 issues. Let me say very directly to this government, if that was 165 business groups, this stuff would already be done. That's the reality.

There's one chance to break this-and I know my time is just about up. I didn't have a lot of questions. I know what's going on; you know what's going on. It's up to convincing these folks. The only chance we have of breaking that, and this is an opportunity the government backbenchers have, is that you can include exactly what Eileen has asked. Put in your report, because you'll carry the majority report-we'll probably end up having two dissenting reports. You've got an opportunity, in whatever way you want to word it to cover your political ass with your colleagues in caucus, to say something needs to be done here. They expect me to say it. They expect Gerry Phillips to say it. What matters is if you folks say it. If you actually go on the record and say, "I sat there and listened to what's going on in the province, and something has to be done," you know what? Something may get done, even if it's because they have to deal with the political squeak that you've created. The oil will be something that appears in the budget. There's a chance to do that.

So if there's time for you to comment on what I've said, I would appreciate that, Eileen. If not, then I would urge you to do what you can to extract some kind of commitment from these individual people, who I think personally care, to put that caring into action where it can do some good. Either that or say that you don't think this is important. Tell Eileen to her face that these issues are not important and it's more important for you to make sure there's another corporate tax cut. One of the two, but don't just ride it out. Don't make this process so irrelevant that it's just a public relations exercise.

1140

The Chair: You've got time for a quick comment if you wish. If not, I'll go on to the other side.

Ms Morrow: I absolutely would plead with you to say something in your report, please. I've been here many years in a row and I read the report of the committee when it's finished. I have to say that it is kind of discouraging to come here and find nothing in the report except a list of the people who attended. It makes you think that in fact what you had to say wasn't relevant to the government's priorities and that the people who do deliberate pre-budget don't have any interest in the issues that we're raising. We would like to see that interest reflected somewhere in your report.

Mrs Tina R. Molinari (Thornhill): Thank you very much for your presentation. I was at these pre-budget hearings last year and I remember you making a presentation, so thank you once again for coming forward and for all the work that you do on behalf of the vulnerable in our society.

As a government, we certainly do care. Safety is one of our biggest concerns, and certainly safety of those who are involved with domestic violence and their children. In the 1999-2000 budget we invested $110 million, and $135 million in 2000-01, and it will increase to $140 million in 2001-02 for programs and services to address and prevent violence against women and their children. So as a government, it's certainly one of the priorities.

These hearings are not only seen by the government members who are here, but they're also monitored by ministry and staff. So all of the comments that are made in these hearings would certainly be taken into consideration once we put together the report to the minister.

You've stated that it would cost about $4 billion Canada-wide. My question was going to be in Ontario, but I'm looking at the brochure that you've put together here that has some of the costs. Are these costs in this brochure specifically related to the recommendations that you've made here and specific to Ontario?

Ms Morrow: Yes.

Mrs Molinari: Having also been involved myself in some of the hearings with the Domestic Violence Protection Act, the new bill that was passed in December 2000, the intervention orders that are in place will make it easier for those who have been abused to be able to access the court system. As a matter of fact, it will be available 24 hours a day, seven days a week for those who need to access the court system in order to get protection for their families.

Were you involved in that? Did you come forward and make presentations on that bill as well?

Ms Morrow: Yes, we did.

Mrs Molinari: So I've seen you a few times, yes. Again, thank you for all of your input. Certainly the information that you've provided for us here is very succinct and detailed. On behalf of my colleagues and all of those from the government side, it will definitely be taken into consideration along with all of the other presentations that are made in the next two weeks as we engage in this very interesting and challenging process.

Mr Gill: Thank you for being here. On the labour front-I've been a parliamentary assistant to the labour minister-you have three recommendations. Two of those, I'm glad to say, have been met: for example, extended emergency leave not only to women, but to everybody who may need extended emergency leave, and parental leave benefits up to one year. So those have been implemented and passed.

Mr Christopherson: Not in small workplaces.

Mr Gill: But out of three, two recommendations have been met. I just wanted to point out that the work is being done and we are listening.

Ms Morrow: I just have to comment on that because women don't have pay equity at this point. In fact, women who leave abusive situations are going to be very poor. We're in a situation here where if we actually want women to leave abusers-and that's what this government wants them to do. If you actually want them to leave abusers, you have to set up a community where they can live and raise their children without the support of abusers. You can't do that if you're in a situation where you may have to work 60 hours a week, because it's unlikely that you're going to be able to fulfill the requirements of your family life in a situation like that. You can't support children without child care that's available, affordable, accessible. You can't do that without having a safe workplace. You can't do that without having equal pay and without having equity in terms of employment, so that we have equal access to employment for all communities of women, and that doesn't happen in Ontario.

Although it's fine to list the things that have been done and accomplished, and we can debate whether or not and how effective and useful those have been, I'm trying to convey to you that it's getting harder for women and children to get out of abusive situations, and there's a lot that still needs to be done.

I'm here to convey that message to you and to ask you to put in place some things that will move us on, and not just in a situation where we deal with an emergency, call the police and we'll give more money to victim services or get an intervention order. I have no problem with improving restraining orders, no problem with that whatsoever, but I just need to tell you that it's another order telling him to stay away, and you and I both know he doesn't stay away. When there's an order, he doesn't honour the order. Although orders are fine, and you need orders, no matter how great the orders are, no matter how perfectly they're framed, it's just another order.

The Chair: With that, we've run out of time. On behalf of the committee, thank you very much for your presentation this morning.

Ms Morrow: Thank you for listening.

ONTARIO COALITION FOR BETTER CHILD CARE

The Chair: The next presenters are representatives from the Ontario Coalition for Better Child Care. If you could please come forward and state your name for the record. On behalf of the committee, welcome. You have 30 minutes for your presentation this morning.

Ms Mary-Anne Bédard: Thank you very much. Good morning. My name is Mary-Anne Bédard. I'm the executive director of the Ontario Coalition for Better Child Care.

Ms Susan Sperling: I'm Susan Sperling. I'm the public education coordinator for the Ontario Coalition for Better Child Care.

Ms Bédard: We brought with us this morning just a mere drop in the bucket of the many documents, research papers and commissions over the last couple of decades that have called for the establishment of universal, accessible, quality child care, both provincially and nationally. These studies have made the arguments more than clear. We know why universal, accessible, affordable, quality and regulated child care is so important to our children and our families, our economy and indeed our society. It's essential for the following reasons: economic self-reliance, women's equality, lifelong health, crime prevention, work and family balance, a reduction of pov-erty, equity for children with special needs, entry to employment and training, school readiness, social cohesion, support to families, healthy child development, effective parenting, competent citizenry, job creation and appreciation for diversity. We gave you a graphic that's on the back of our brief to illustrate that.

For each of these documents and studies that substantiate the legitimacy of the argument, child care is at the centre of a healthy society. We've got tons and tons of these. This document here in 10-point type lists every document that has made this argument. We just brought a few with us today.

But this leads me to an overwhelming question that I'd like to ask as part of our presentation this morning on behalf of the thousands of children in this province without access to this type of care: what part of child care do you not understand?

1150

Ms Sperling: At the coalition, our own research shows that our child care system, once the envy of every other province in Canada, is being systematically starved by this provincial government, and we say that's shameful. Some 70% of women with young children are in the paid labour force, and this government has responded by cutting child care funding by 15% over the past five years, and no, we do not consider a child care tax benefit as a child care space. It does not create child care spaces, as welcome as it actually is for many hard-working families.

We're conducting our own tour of the province and our own hearings around the province. Our municipal tour has already shown us how truly problematic downloading has been for child care. In Kingston, they've just announced they are probably going to close one of their two municipal child care centres.

In Welland, Ontario, a woman named Marnie McLean had the guts to stand up before the press and before the public and say, "I make $500 every two weeks, and I have to spend 200 of those dollars on child care for my children. I qualify for a subsidy, and I am on a waiting list with 600 other families." She was assured at that meeting she would be fast-tracked. She hasn't been fast-tracked. She doesn't have child care, and she has now become another person on your social assistance rolls, because she has had to quit her job because she could not afford to keep it. The picture that's emerging about municipal downloading and the price that child care is paying for it is really starting to depress us.

It's all the more shameful when we look east to Quebec and west to British Columbia and now to Manitoba and see that universally accessible, quality, regulated child care is not actually a pipe dream. It's doable. It's within our grasp as long as the political will is there. In Ontario, we know there is the money to make this dream possible. There's a $1-billion surplus. It's not like we all don't know that child care is an important issue. We've known it for a long time. We actually have the government's research and commissions to prove it to us also if we don't believe our own stuff. It all points to the same thing, which is that accessible, affordable child care is urgently needed. Here's a sampling.

Ms Bédard: In 1999, an audit by KPMG, commissioned by the Ontario government, stated that your workfare program could never work without a huge expansion of quality child care.

Also in 1999, in Dr Fraser Mustard's landmark study the Early Years, which the Premier has so proudly taken right across this country and right across the world touting its benefits, they stated that Ontario's approach to early child development should be universal in the sense that all programs should be available and accessible to all families who choose to take part. There should be equal opportunity for participation, and all children should have equal opportunity for optimal development. Targeted programs that reach only children at risk in the lowest socio-economic group will miss a very large number of children and families in need of support in the middle and upper socio-economic sectors of society.

Ms Sperling: In 2000, the government's own Education Improvement Commission stated that the government has "talked and studied enough" and had, as its first recommendation, that the provincial government strengthen its commitment to Ontario's children by ensuring their access to affordable, high-quality child care programs and excellent standards of nutrition, health care and safety.

Yet another recent report by no less venerable an institution than UNICEF, UNICEF's State of the World's Children 2001, gave three reasons to put child care on the agenda: (1) early childhood care is a human rights issue; (2) early childhood care is grounded in sound science and practical experience; and (3) early childhood care is a solid investment.

Ms Bédard: So again I ask, what is it that you don't get? What is stopping you from investing in our children?

In the UNICEF report, it says that because child care is a long-term investment with short-term political returns, that's why we're not seeing results: because you guys won't get the votes. I think that is really shameful.

Ms Sperling: Especially when we are reminded, as we so often are, that the province handed out $4 billion in corporate tax cuts in last year's budget, all the while claiming that child care is too expensive to implement. That kind of makes us scratch our head and go, "Hello? Priorities?"

Ms Bédard: We've just been handed three quarters of a billion dollars by the federal government over the last five years to spend on early child development services, to spend on our children, and our Premier got on a plane immediately after that announcement and we haven't heard of this subject since.

We've sat in meeting after meeting that we've asked for with different officials from different ministries of this government, not one of whom has been able to tell us what the plans are, and this money is going to flow in less than two months. Yet our counterparts in every other province, every single province and territory of this country, have been consulted. They've been involved. They've had input into their plans. We have no idea what's going to happen in this province, which leads us to wonder, is there a plan? Do you guys know what's going to happen to this money? And if you do, why is it so secret? Why are you doing it without any input from the community?

Ms Sperling: Again, we ask, what's the holdup? The money is actually there; the studies have been done. We stand on the threshold of a new millennium full of challenge and opportunity, and to meet the future head-on, we need you to live up to your commitment that every child should be valued and have the opportunities to develop his or her unique potential by doing the following.

Ms Bédard: Returning to your traditional leadership role and developing licensed quality child care by making substantial new investments in this sector.

Ms Sperling: Making substantial new investments in children to address the serious issue of child poverty.

Ms Bédard: To match the federal government's expenditure with your own new spending, dollar for dollar.

Ms Sperling: And to collaborate with the federal government and other provinces and territories to develop an action plan that enshrines national principles and entitlements suggested in the agreement for early childhood development.

Ms Bédard: Because we need child care now.

Ms Sperling: Thank you.

The Chair: We have approximately four minutes per caucus, and I'll start with Mr Christopherson.

Mr Christopherson: Thank you for your presentation. We've been down this road with this government before in terms of secret plans and no consultations. We've got major pieces of legislation now on the books; nobody had a chance to comment on them. It really begs the question: how much do they really care?

Again, I want to call the government on this issue of their saying they're the ones that care about families. I'm not sure what kind of family it is other than some kind of retro family of the 1950s that existed only on TV anyway and really was never a part of our society. It's certainly not even reflected on TV now-I mean, that's just not the real world. It's insulting. It's insulting to you, it's insulting to all of us, for the government to say they care about families and do absolutely nothing about children who need care; about the issue of more and more children in poverty in this wealthy country. It's absolutely disgraceful.

I have a question. You mentioned that all the other provinces have some type of process underway where the community is engaged in determining how this money is going to be spent. Right now, is it fair to say that Quebec probably has the most progressive child care legislation?

Ms Bédard: Yes, Quebec has actually implemented a model, since 1997 in fact, so they're four years in. They have a great model. BC has announced a model that they've started implementing with their school-aged children and it's going to be further implemented in January. They've been joined by Manitoba who have just announced that they're going to begin the process of looking into implementing child care, and we hear that Saskatchewan and Halifax are not far behind, and Nova Scotia.

Ms Sperling: And Manitoba's first step toward doing this was to put out a call to the community for input on how best to implement this.

Mr Christopherson: Are there any studies, or is anybody coming forward from anywhere in the political spectrum that you're aware of, to show that the plan that exists in Quebec-because it does cost money, comes out of the public coffers, is supported-has created some sort of economic drag that is counterproductive to creating and maintaining a competitive economy? Is anybody making that argument from anywhere, that you're aware of?

Ms Bédard: Not at all. In fact we have many studies to show the opposite, and that's why we talk about child care as an investment. The most recent study was done in 1998 and it's a Canadian study by economists so it's a very legitimate study, and it talked about for every dollar that you spend on quality child care, you get a $2 return. This return has been met by parents being able to be more productive in the workforce, by lower costs for delinquency and programs like that when children grow up getting the resources that they need. So in fact this is absolutely a very sound investment, but it will take a few years to mature, as all good investments do. You put the money in now and you watch it grow. That's what we do with our children and that's what we can do with child care.

1200

Mr O'Toole: I'm sharing with Mrs Molinari. Just a couple of things. I thank you, first, for your presentation. It certainly will be and is being considered.

I would start with the consultation process. I believe in 1995-96 Janet Ecker consulted quite widely on the daycare issue and its methods of provision, and I think at a policy level probably the province recognizes much of what you said. Without trying to make it into a political statement, the Early Years Study and subsequent follow from that has affected and will affect the government's priorities; I think Ontario's Promise, which is the current five principles that the government has committed itself to, and you may see it manifest itself differently than perhaps you've outlined; the Healthy Babies initiative and initiatives like that recognize the importance of the early beginnings, if you will, and the supports that are needed. Ontario Works is one of the ways that we've provided supports. The $40 million in that program providing daycare, child care, is an important initiative and also the redirecting of the federal transfers in a method to support low-income families, specifically where they are in the workplace in transition. The other program would be the LEAP program, Learning, Earning and Parenting, allowing young parents, specifically single parents, to attend training so that they can in the fullness of time reap the benefits of participating in society and their children as well. Perhaps Tina would have a specific remark or question.

Ms Bédard: Maybe I could just answer that before we go on or I'll lose the point. Janet Ecker did do a form of consultation back in 1995, but it was by invitation only. It was certainly not a public process, and people had a very difficult time in getting invited. So I definitely wouldn't call it a public process. She did come out with a report that we lobbied very hard against, and in fact many of those things have not been implemented and we're very glad to see that.

The Early Years report, yes, it's a great report and, yes, you got a lot of mileage out of it. We have not actually seen it come to life in our communities. We've had a reannouncement of $30 million twice. We're probably going to get another reannouncement of $30 million in this budget. The whole process about setting up community co-ordinators is now in an order of council and that whole thing is now stalled because we no longer have a children's secretariat with its own minister. So I find it very difficult to say anything nice right now about the Early Years other than it's a good report but has done nothing for the children of Ontario.

Healthy Babies, Healthy Children: it's not child care. It is a good support, it is a support that families need, absolutely, but 70% of women are in the workforce and they need child care. The money that you put into workfare child care and the money you put into LEAP is not enough for people to get regulated child care, and that's what they need. That is where quality child care happens. It's in a regulated, quality environment with professionals, and that is not what people can afford to buy with welfare vouchers and with LEAP vouchers.

I'm sorry, where you're putting your money is not where you're going to get the bang for the buck. It's a quick, fast band-aid that may get you a vote today but will do nothing for the children of the future, and they're your future. They're the ones who are going to be looking after you. I'm sorry, it's not good enough.

The Chair: With that, we've run out of time. I'm sorry. If you want to make a quick-

Ms Sperling: I just want to make a quick comment about the early years challenge fund and also Ontario's Promise. That will not actually help people in many parts of this province where there are no big corporate sponsors to match money. It's happening; we're seeing that in rural areas and in small towns. There is nobody stepping up to take this challenge on to match any funds.

The other thing I just wanted to say was with the workfare money it's the first time that I know of that public tax dollars are going into unregulated care where we just don't know how safe it is, and we're waiting, holding our breath, praying that no child actually gets hurt while in that kind of care that there is no monitoring system for that our public tax dollars are paying for.

Mr Monte Kwinter (York Centre): I was interested in your remarks about the federal program, the $800 million over five years. You say the funds are getting ready to be flowed in two months?

Ms Bédard: Yes. On April 1 we'll get the first instalment of $114 million in Ontario.

Mr Kwinter: Is that conditional on the program being in place in Ontario?

Ms Bédard: Unfortunately not. We lobbied very hard for there to be some conditions on it, but it is not. It's flowing through the CHST and basically there are not a whole lot of strings attached to it other than the political will of the provincial governments. That's why I worry in Ontario.

Mr Phillips: I think we had this discussion last year, if you were here.

Ms Bédard: I was here and so were you.

Ms Sperling: I wasn't here. This is new to me.

Mr Phillips: I did my best to get the numbers, but whenever a question is raised on child care, it's, "We're spending the most in the history of the world on it." We don't have the same numbers that we're debating.

Ms Bédard: That's right.

Mr Phillips: When you don't have the numbers to debate, then the debate is less meaningful.

On the climate in Ontario, you indicated that the actual annual child care expenditures dropped 15% since 1995. Can you help me at least in understanding the numbers, where that comes from in an apples-to-apples comparison?

Ms Bédard: The 15% that is stated in our brief comes from the money the provincial government spends on regulated child care spaces. The number they quote when claiming that they're spending more than any other government is the global child care budget, in which they've added many things, including $200 million on the working child care supplement, which we don't consider child care. The money that actually goes to providing regulated child care spaces in Ontario decreased by 15% in 1998. So I'm sure that has decreased even further.

Just in general, speaking about, "We've increased the child care budget," you've been in government for six years. With inflation, I bloody well hope you've increased the budget, because costs have gone up, but you have not increased it in any way that's meaningful for the children of Ontario. If they are so proud of their figures, why are they not releasing them? Why don't they give us a breakdown of where they are spending the money so we can see? If you're hiding it, it means you have something to hide.

Mr Phillips: You have not been able to update those numbers since 1998, I gather.

Ms Bédard: No. It took us two years to get 1998 numbers; it will probably take us another two years to get 1999 numbers. But anything you can do would be great.

The Chair: On behalf of the committee, thank you very much for your presentation.

Mr Phillips: Mr Chair, maybe I could request from research staff to see if they can get us the numbers on child care expenditures by the province for the recent time.

The Chair: Certainly.

FARMERS OF ONTARIO COALITION

The Chair: Our next presenters are representatives from the Ontario Federation of Agriculture. Could you please step forward and state your names for the record. On behalf of the committee, I would like to welcome you this morning. You have 30 minutes for your presentation.

Mr Jack Wilkinson: Thank you very much for having us here. There are more of us here than the Ontario Federation of Agriculture. It was our time slot and I guess we did some calls, but everyone will introduce themselves as they go along. As you're aware, there are a number of coalitions in which the farm organizations try and work together and one of them clearly is the pre-budget presentation. So we'll all give very short introductions on one section of the brief and then move it to the next individual, and I'll allow them to introduce themselves.

1210

If you want to turn to page 4 of your brief, it will show the order in which I'll follow through. We'd like to talk about farm income risk management and marketing structures, research and technology transfer, agriculture as a primary client of OMAFRA and then competitive issues as they affect the farm community. I'll be doing the first section of that and then passing it on.

I'm Jack Wilkinson, the president of the Ontario Federation of Agriculture. I should introduce myself.

As you know, there are many commodity organizations in Ontario, as well as two general farm organizations, and the points that are in this presentation are all agreed upon by everyone to try and simplify the message we're giving to government about those areas which we would like you to address in your capacity as a committee giving recommendations through the budget process.

Farm income right now in this province and across Canada is in a very serious state. Grains and oilseeds in particular, as well as horticulture, have had a very difficult last two or three years. Normally the grains market is a very cyclical market internationally. Our prices are based on the international prices, so for the last two or three years we've had declining prices in Ontario. As well, this year, as many of you know, the weather situation impacted very dramatically on many parts of Ontario. It affected quality dramatically and in some cases yield was affected quite dramatically also. So the combination of a very severe price depression and weather has made it a difficult time period.

Also in the last couple of years the United States, last year in particular, increased its subsidization to its producers, particularly in grains and oilseeds, by close to $25 billion, on top of what they had currently been supporting their producers, and is anticipated to spend at least $20 billion-that's the figure we're hearing-again this year. With an open border, that kind of support being dumped into one sector really keeps our prices depressed.

To get to the point here, we've been trying go convince the federal government and obviously the provincial government to increase its expenditures in the farm income support program design.

If we move to the chart at the top of page 6, to illustrate as an example, we think the federal government has to increase its support. We're talking of $300 million in grains and oilseeds, and that would be cost-shared normally between the province and the federal government 60-40. We see neighbouring jurisdictions like Quebec-and this particularly impacts on horticultural and other crops as well-where they support their producers dramatically more in their agricultural industry.

If we look at the non-supply management, the first line of that graph, we can see that Ontario agriculture is almost twice as large as Quebec in the non-supply management sector, yet when it comes to provincial spending on safety nets, they spend nearly twice as much in an industry that's half the size. So you can see very dramatically how the income programs that are offered in jurisdictions like Quebec, Alberta and in the United States are able to keep their producers in business during these downturns and still keep producing, not following the market signals.

Our individuals are really having to fight the treasuries of these other governments out of the income of their farms. Hence, we feel that we need an injection of capital in grains and oilseeds immediately, as well as looking at how we can improve program design in the medium to long term so we're moving more closely to what Quebec would be. Just to give a number, if we moved up to the level of support in the province of Quebec, we would be talking of a provincial expenditure increase of $330 million. It is a huge number, and we know that, but that shows the difference in what our producers are having to deal with in the marketplace on a daily basis. With that, I would like to pass it over to Ken.

Mr Ken Porteous: My name is Ken Porteous. I'm chairman of the Ontario Agricultural Commodity Council, which is 24 non-supply management organizations.

A couple of years ago OMAFRA decided to downsize the department and turned to 13 centres of excellence to provide information to the agricultural industry and to keep the agricultural industry competitive. We established a group in conjunction with OMAFRA with 60 to 70 people from the agricultural industry and also the processing industry to develop a program that would keep Ontario competitive in this highly competitive industry that we have. We made the recommendation that $100 million be put into OMAFRA over the next five years to develop new technologies and new transmission information centres to agriculture. We also recommended that $24 million be contributed to universities for their enhancement of new technologies.

One of the things that has happened is that we find ourselves short of technical people who are world-class. OMAFRA, in its decision to downsize the 13 centres of excellence, also said to us that they would try to develop 13 centres of excellence with world-class people to deliver world-class programs to the agricultural industry. The problem we have is that competitive wage scales with industry and universities don't allow the hiring of this world-class expertise to transfer this information, which is limiting our ability to be competitive.

The objectives of this technology transfer and this investment in OMAFRA are listed on page 9. The benefits are: development of new products with functional qualities, biomass-based energy, pharmaceuticals, neutraceuticals and plantogens at the farm level; development of new domestic and international markets for both farmers and processors; retention and attraction of leading scientists; creation of jobs and economic opportunities in the farming and rural communities; new technologies for sustaining natural resources, soil and water quality and improving pest management; and creation of jobs and opportunities in knowledge-based sectors of Ontario.

With the new development in food safety and environment and the pressure that farmers find themselves under, we feel it's necessary to have this infusion of money in order to keep us competitive again.

If there are any questions, I'd be happy to entertain them later. Thank you.

Mr Bob Down: Good afternoon, ladies and gentlemen. My name is Bob Down. I am first vice-president of the Agricultural Commodity Council and represent the Ontario Corn Producers' Association.

We appreciate very much this opportunity of coming here and presenting our case. I am doing the area of agriculture as the primary client of OMAFRA. We have presented the government with our concerns about this over the last several years too. However, we are continuing to have some serious concerns about the direction that OMAFRA is going. We feel the indication is that the switch in the funding for OMAFRA is swinging from primary agriculture to rural. When you take that into consideration, the actual funding for primary agriculture in Ontario has decreased dramatically, as you will see in some of the figures here.

We are asking that this government reaffirm its belief that the importance of agriculture in Ontario needs to have government support in the core area of financing with OMAFRA, which funds many of the activities that OMAFRA does and which they have had serious cuts on, which has limited their ability to do some of the other things we're talking about here today that Ken has talked about and that Ron will talk about. In the executive summary at the front, you will notice some paragraphs there that have outlined that. If you look on pages 13 and 14, which give you background to that, it points out some of our real concerns.

One of the directions that has happened is project funding. Of course, we have to apply as groups or coalitions, partners, to get that funding. Through that process, the OMAFRA system, the ministry does not have any particular funding to support those activities or others.

1220

The recommendations that we have listed at the end of page 13 and the top of 14 are: ensure that agriculture is the primary client of the Ministry of Agriculture, Food and Rural Affairs, and separate and specify the budget allocation to support the rural affairs component of the ministry; work to increase the operational budget of the Ministry of Agriculture, Food and Rural Affairs and increase allocations when additional responsibilities are assigned to the ministry, such as nutrient management planning regulation, which we're into right now, and we are very concerned about that activity and the funding of it; ensure that the project-based funding initiatives produce at least the same value to farmers and taxpayers as funding for continuous programming; acknowledge the economic importance of agriculture in the province and the importance of the Minister of Agriculture, Food and Rural Affairs at the cabinet table; and ensure the Ministry of Agriculture, Food and Rural Affairs, as a separate entity, will be enhanced to support agriculture, Ontario's second-largest industry. The last point is to recognize the economic benefit and importance of agricultural organizations and institutions that contribute to the well-being of rural Ontario and the farm community through financial support, agricultural fairs, 4-H, Junior Farmers, etc.

Thank you very much for your time. I'll pass it on to Ron.

Mr Ron Bonnett: My name is Ron Bonnett, vice-president of the Ontario Federation of Agriculture.

I'd like to make a few general comments on competitiveness at first and then get into some of the specific recommendations. One point I'd like to make very clear right off the bat is that I think we have in Ontario some of the most efficient agricultural producers anyplace in the world. They have managed to actually create farm operations that in many cases are expanding in a business environment that sometimes isn't on an equal playing field with those of other countries. I think it's recognized now that most of our commodities are priced on a world market, so we definitely have to compete with world markets on pricing. That's reflected in the price that consumers pay in this province for the food they consume. They're getting basically a bargain, if you compare it to a large number of other jurisdictions in the world.

That being said, there are some issues with respect to competitiveness. It falls into a number of areas.

It could be with respect to input costs; what people are paying for fuel costs would be one good example. There is some concern over electricity costs with some of the restructuring that's taking place. We want the government to be aware that this could have a direct impact on how farm operations are proceeding.

There are still some issues around taxation. Other jurisdictions have different types of taxation with respect to retail sales tax. We are competing with those jurisdictions.

There's the whole issue of farm support. Jack mentioned earlier the chart showing the level of support that is provided in Quebec for their farmers. We compete directly with those farmers on our farms.

In a lot of cases, government policy both at the provincial level and the municipal level can have an impact on the profitability of farm operations. I think one of the things we want to make the government aware of is what the impact is down the road on some of those policy decisions.

To get to some of the specifics as to what we're asking for, the number one thing is retail sales tax. We are competing with other areas that have less in the form of retail sales tax, and we'd be asking that it be removed from farm vehicles as well as from farm office equipment and farm communications costs. In Quebec, they have a system where if the equipment is used at least 50% in the farm operation, then it qualifies for a tax rebate. We believe that this one step alone would make quite a difference to the farm operations, in the neighbourhood of $20 million to $25 million.

The second thing is, we would ask the government to be careful in their consideration on the implementation of new regulations. I think one of the key ones would be the nutrient management farm operations standards that are coming down the tube. If there is regulatory change that requires capital investment on the part of farmers, there has to be a recognition that there may actually be a public contribution necessary to make things happen. That applies to other forms of legislation that will be coming down. We know there's some research taking place now on how to restructure the food safety acts as well.

The final point I would like to mention is the whole issue of deregulation. We have seen natural gas prices escalating. We'd like to encourage the government to keep monitoring those and, if possible, make sure that any increases are limited. The other thing that has raised quite a bit of concern in the papers recently is the deregulation in the electricity service industry. We are hopeful that the model being put forward by the provincial government will leave us with something that looks more like Pennsylvania than California. I think we have to be conscious as we go to this that any change in the delivery of electricity has to make sure that the prices to the farms stay at a level where we can compete.

I think I'd close off at that because I'd like to give people a chance to go back and forth with questions to any of us on any of the topic areas that we addressed.

The Chair: We have approximately three minutes per caucus, and I'll start with the government side.

Mr Doug Galt (Northumberland): I much appreciated your presentation. You didn't read it; you had what you wanted to say and you told us very clearly.

Jack, I'd like you to expand a little more for the committee on the grains and oilseeds and the target that they've taken in the States to subsidize, thereby creating cheap livestock products to compete on the world market. If you'd just expand a little bit on that, it would be helpful for the committee: why we're struggling with what we're struggling with.

Mr Wilkinson: Thank you very much for the opportunity to respond to that. The US has had a long-term policy, as you've indicated, where it has chosen to subsidize the grains and oilseeds markets very substantially. It then allows their producers in many ways to be keeping a very low international price, which means we have trouble making a living in other countries that are priced on the international market. If we do not get close to equal subsidization, we cut back our production and the US expands their market share internationally. That is part of the strategy which as well, as you indicate, drives in lower meat prices and dairy to do the same thing.

They've been very aggressive around the world to grow their agriculture and their agri-food industry on processed products so that they keep the jobs in the United States, they keep their production in the United States, they feed their country cheap, drive us out of business on the international and then they choose to support their farmer with farm income support programs.

Mr Galt: I think it's something like $20 billion they're-

Mr Wilkinson: That was the additional they put in last year. They were three to four times ahead of us in the grains and oilseeds before they added the further $25 billion. That's where we get very frustrated. When that border is open-which is fair enough; we didn't lobby to keep it shut on grains and oilseeds so we don't complain about that, but when you see that additional support going into the United States, you see a surplus at the federal government level and, to be fair, on some provinces, we feel that it would be important then, if we're going to keep ourselves ahead of the pack, to come closer on the subsidy support side.

Mr Galt: Just a quick comment or question to Bob Down in connection with the two sections of the ministry. Certainly with the Premier's Task Force on Rural Economic Renewal, many of the provinces and an awful lot of the states, if not all, have two different administrations: one for small town, rural, whatever, and one for ag and food. You are alluding to this kind of thing, but you're not saying it outright. I know when the federation comes to see me in Cobourg, in Northumberland county, they're saying, "Everything goes to the small towns, goes to those cities," and the people in the town say, "Hey, we're not getting anything. That's the farmers' ministry." Do you have any comments on that?

Mr Down: I guess that's the thrust. We're not saying in particular that we want the ministry split. All we're saying is we would like to have the monies-the budgets, what's paid out-defined-

Mr Galt: Segregated.

Mr Down: -so that we can see and understand what is going where.

We have an old saying out in the country and it comes from my friends who are in the farm supply business, the equipment business, the grocery store, whatever, in small town Ontario, in Exeter, that, "So goes the farmers, so go we." It's not possible to say, "So goes rural Ontario, so go the farmers." It just doesn't work that way.

The Chair: And with that, Mr Galt, thank you very much. We have run out of time. The official opposition.

1230

Mr Kwinter: I want to pick up on what Mr Galt was talking about. I think there's a problem in the minds of politicians and of the general public. They don't realize Ontario is the largest agricultural province in Canada. As a result, there is a perception that agriculture is on the back burner and it's not really something we have to be worried about; Ontario is a manufacturing and technology centre.

It seems to me there are a couple of pressures, other than the perception, that you really have to deal with. I notice that in your projections you talk about non-supply management receipts. I know there certainly is a lot of pressure on Canada and Ontario, through the World Trade Organization, to get rid of supply management, and I would like to hear your comments on that.

The other thing I'd like to hear about is: with the advent of Walkerton and the whole problem with factory farms, the hearings are still going on, but eventually it would seem to me they're going to put some greater pressures on the farming community to deal with that issue, which is also going to create some problems in financing.

Mr Wilkinson: I would like to tackle the supply management question. We view that the supply management system has worked very well in Ontario and in Canada, even though it's under all sorts of pressure from provincial squabbling over market share and international pressure. We often hear complaints, maybe from the grocery people and restaurant industry associations, but even with supply management there, first of all it requires no government support other than through regulation, and with supply management we still have the lowest cost of food of any country in the entire world. So we think it is a mechanism that is able to pass its cost on to the consumer, which is the way most of us think it should be. You pay what it costs to produce, and we don't have to come and ask for government money.

We know there is a lot of pressure on supply management internationally, but I think they will find ways to solve that so that they meet the WTO standards. I've been involved in world trade stuff for some time as a past president of the Canadian Federation of Agriculture and an international vice-president, and it seems to me we are so close to the United States that it is just a big propaganda machine: "Everybody is moving in this direction. Supply management only has a couple more years to live and it's not going to be around any more."

If you go to Europe, I think you hear quite a different system, not that they have supply management like we do, but they say, "The borders are not going to open up any more, or substantially more, in this round of trade than in the last one. There are still going to be terrorists in the future. We are bigger than the United States. We got pushed around last time. We're not going to get pushed around this time." As long as they manage their system properly and keep consumer support, I think they'll find a way out of this, and supply management will be here for a fair number of years to come.

Mr Down: Could I just add something to that, Mr Kwinter. It's ironic that the US has numerous supply management systems, and they're not about to give them up either.

Mr Christopherson: Gentlemen, it's good to see you again. I'll raise a couple of things, and then you can respond, or not, to whatever part you choose.

One, I thought it was really interesting that you raised the comparison with Quebec and that it works out in such an easy, visualized formula that they've got half the business-how would I say that?

Mr Wilkinson: Supply management production.

Mr Christopherson: Yes, half the production we do, but they get twice the assistance from their government. It's interesting, because the previous presenters were talking about the fact that the best child care system in Canada right now is in Quebec. It also happens that Quebec takes a very different approach to youth crime. They don't take the hardline approach-you know, boot camp, lock `em up, throw away the key-and they have a lower recidivism rate than we do.

What's truly interesting for me, of course, is the fact that aside from their being separatists, their basic political philosophy is one of social democrats as opposed to liberalism or conservatism. I think it speaks volumes about the fact that you can still focus on the key industries in your economy, and agriculture is part of that, without jettisoning all the other things that matter in society. It's not Harris's way or the doorway. There are alternatives that will work; I just want to point that out.

Then I want to raise a question, or just pose something. The government likes to purport-especially Noble Villeneuve, who was the master at standing up in the House, and by the time he finished answering one of the lobbed-ball questions from the government backbenches, you'd swear that the only government that ever cared about agriculture in the history of Ontario was the Mike Harris government.

Mr Galt: Hear, hear.

Mr Christopherson: I said you would think so; I didn't say it was so. The zinger is that while this government seems to have been prepared to jettison every social issue, health issue and environmental protection out the window in the interest of its corporate agenda, you seem to have gotten left out. Everybody else has pretty much got what they asked for; at least they don't come in with the same reproach you do, pointing out the same discrepancies, the same concerns. I mean, philosophically there's been some closeness historically.

Believe me, I become more and more aware of this as the new city of Hamilton-a figure was noted recently in the local media that 68% of all the land now in the new city of Hamilton is actually zoned agricultural. It's a huge part of our new community, so I'm very interested in all this. But why, do you think, from a business perspective, given your relative or direct importance-it's not even relative; it's direct-you are being treated like the cousins nobody wants to deal with?

Mr Porteous: I'm not going to get involved in a political discussion here, but obviously-

Mr Christopherson: No, we wouldn't want that. We wouldn't want to turn this into a political process.

Mr Porteous: One and a half percent of the population of Canada is now involved in agriculture. One-half of one per cent produces 80% of the food. Obviously, we're a very efficient part of the economy of Canada and also of the economy of Ontario. I would venture to say that if the rest of the economy were as efficient as agriculture, we would probably have a higher standard of living than we have. We've done this, as has been explained, with extreme economic pressure from outside our boundaries. We've been able to stay in business to this point.

What we're asking is for the province to invest more money in agriculture to partner with us to go even further, to increase our competitiveness, to increase our standard of living, to resolve some of the problems we have in Ontario; for example, the situation around biomass and the production of ethanol fuels, which should be important to all of us, or is important to all of us. Think of the problem they have in Toronto in regard to garbage and the relationship to agriculture and the production of ethanol from biomass. Why can't that be coordinated and the situation resolved in the production of ethanol, which is important to the agriculture industry, by utilizing biomass and incorporating Toronto garbage with that to produce ethanol, which would reduce the pressures on all of us in Ontario? It would also alleviate environmental problems that we have in Ontario.

These are the kinds of things we're talking about investing $100 million in over five years. It isn't just to agriculture but to the whole economic community of Ontario that we can provide a situation that will create jobs and reduce the impact on the environment. Biological control of pests, where we can reduce the use of pesticides and make us more competitive-these are the things we're talking about. These are the things we really want to impress you with that you can invest money in the agriculture industry that will be to the benefit of all Ontario and produce jobs and a better standard of living for all of us.

The Chair: Mr Wilkinson has the last word.

Mr Wilkinson: Just one brief comment. It seems that investment in agriculture has no political party affiliation. We named the province that spends its largest percent. Quebec is one, which, as you say, is somewhat social-democratic in some of its policies. The second is Alberta, which is a very strong right-wing government. I think the key element that is the same in both, though, is that they have viewed agriculture and the agri-food industry as growth industries, not as a sinkhole for money, and I'm not saying the provincial government-we've had a number of things that have occurred over the last number of years. Most of the RST list has been exempt. We have a few more things to clear off. There have been some changes that have helped and lowered our costs in agriculture in Ontario, but the problem we're bumping up against now is that is not enough when you've seen what has happened, in particular the new standards of subsidization by the US last year, where a lower tax regime is of little value with current grains and oilseeds price because we're not paying a lot of income tax, and I'm not being flippant about that. That benefit isn't as big now.

We now see that the automotive industry may become the second-largest industry in Ontario with the way things are going and agriculture may become the largest industry, and our point of view is we could be the largest industry. We employ 600,000 now. Why don't we employ another 100,000? Instead of $7 billion gross receipts, why not $10 billion? Why don't we grow all sorts of things in an import displacement and process them here? We see it as a growth industry. That's part of why we want the investment. We want to be here. We want to be expanding and employing and growing.

The Chair: Gentlemen, on behalf of the committee, thank you very much for your presentation this morning.

1240

ONTARIO SEWER AND WATERMAIN CONSTRUCTION ASSOCIATION

The Chair: Our next presenters are representatives from the Ontario Sewer and Watermain Construction Association. Gentlemen, could you please state your names for the record.

Mr Sam Morra: Certainly. I'm Sam Morra. I'm the executive director, and I'm joined with Ted Cooper, who is our president.

The Chair: On behalf of the committee, welcome, and you have 30 minutes for your presentation this morning.

Mr Morra: Thank you for the opportunity to speak to you this morning, Chair Beaubien and the balance of the MPPs here today. It's good to see you again.

Basically, we'd like to give you an overview of what's ailing the water and sewage systems in Ontario, give you a little bit of an education as to some of the expertise that we may be able to bring to the table in regard to some of the numbers that we're looking at. Some of the numbers are mind-boggling. When you look at the total value of Ontario's water and sewage systems, we're talking about a $60-billion asset, $40 billion of which is buried underground and is never seen. Basically, you're looking at approximately 45,000 kilometres of water mains and another 44,000 kilometres of sewers. It's a huge, huge asset.

Water and sewage infrastructure has unfortunately been left to deteriorate, especially over the last 15 years. This has had a negative impact on the environment: we've seen more beach closings, we've seen rivers and lakes being polluted. But it's not an overnight problem and we're not here to point the finger at any particular level of government. In fact, it has been a generation of neglect.

The key issue is that the current systems are not sustainable. The current water rates typically only reflect operational costs, so many municipalities are not including the needed depreciation aspect of their assets and aren't putting enough monies away for future replacement needs. In fact, the monies and the expenditures that they report to the Ministry of Municipal Affairs and Housing are a mishmash of maintenance, renewal and replacement monies, but they also include replacement and new growth monies in their expenditure reporting. So you may look at the region of York, for example, that may be spending $80 billion on their water and sewage works, but fully three quarters of that comes from the development industry so that in fact when they should be spending more on their renewal and replacement costs, they are not.

Capital expenditures we've found have fluctuated greatly and it's been more based on the level of provincial and federal grants that are available. So if there have been provincial monies available in the past, you've seen municipalities go out and spend some money on water and sewage. The same thing at the federal level: if there was a federal infrastructure program in place, you'd see more money spent in our sector. That does not help our industry because it's a cyclic nature. We'd like a more balanced approach to looking after water and sewage infrastructure and we really think that at the end of the day there's legislation that needs to be put in place that we'll talk about a little later.

Unfortunately, municipalities have chosen to put off their water and sewage infrastructure needs and largely for political reasons, and this is the majority of them. As I mentioned earlier, three quarters of the asset is underground, out of sight. It's not a sexy issue. It's difficult to have a ribbon-cutting ceremony for a water or sewer pipe. Libraries and ice rinks have gotten a lot more attention in the past.

In terms of where we're at from an infrastructure deficit, and that would be the monies that are required to bring the infrastructure back to snuff, the Canadian Water and Waste Water Association pegs that number in Ontario at approximately $32 billion. We think that's the high end of the range. It's the Rolls-Royce of upgrades and it also includes growth, which is paid for separately by developers. It also includes the complete separation of storm and sanitary sewers, which we think have more innovative technical solutions to them.

When we looked at their numbers and modified them based on the expertise we can bring to the table, the numbers we had were closer to $12 billion. That's made up of $1.5 billion in water main replacement and expansion needs, $2.5 billion in water treatment plant upgrades, $2.2 billion in sewer replacements and expansion, $4.8 billion on combined sewer separation, and $1.2 billion on sewage treatment plants. When you add it all up and divide it over 15 years, you're looking at about $800 million that's required, $500 million of which is for replacement and expansion and $300 million for the treatment plants, whether they be water treatment plants or sewage treatment plants.

We wanted to talk to you a little bit about some of the problems that are coming to light. These are not new problems, but they aren't old problems either. As I said, over the last 15 years the issue is beginning to manifest itself into a potential hazard.

One of the problems is cast iron water mains. Cast iron water mains are found in a third to a half of all municipalities in Ontario. Unfortunately, what happens in a cast iron water main in many instances is that there's an encrustation that's built up in the inside of the water main, so your effective diameter basically shrinks. What also happens is that the encrustation affects the ability of chlorine to properly fight off the bacteria that's currently in the system. That's why you saw in Walkerton that one of the orders from the ministry was that they had to replace 3.5 kilometres of their cast iron water mains. There was encrustation built up and they couldn't guarantee that all of the E coli had disappeared.

One of the other things that encrustation does that is just as dangerous, if not more so, is reduce the flow that's available, especially during an incident such as a firefighting episode. We've already had examples of that where lives have been lost because firefighters have been fighting fires and then unexpectedly get a reduced level of flow because of a piece of the encrustation breaking off and jamming up their pumps.

One of the other problems that we're currently experiencing is the leaking of water mains. Estimates point to 20% of all of the water that's produced in Ontario being lost through leakage. That represents lost revenues of approximately $150 million a year. Many times you find with the leaking water mains that where we spent the money to actually treat the water, it then goes into a leaking sewer that accepts infiltration and actually goes back to a plant to get treated again, even though it hasn't been used. That's a double whammy that we're looking at from an efficiency standpoint.

On the storm sewer side, I'm not sure if we're all aware here of what a combined sewer is, but just a 30-second lesson it. Basically, in the 1950s and 1960s when they designed subdivisions, they allowed for only one sewer pipe down the middle of the road. This caught not only the sanitary effluent but also the storm sewer runoff. Nowadays, you have two separate pipes. Storm sewers go into rivers and lakes, and the sanitary sewers go into treatment plants. But in the older parts of many municipalities right across the province, the combined sewers take the brunt of the storm flows during peak storm periods. Unfortunately, what that results in is an overflow situation for this underdesigned single pipe. What invariably happens is that you have either basement floodings into people's homes or you have what are called combined sewer overflows, and that goes into rivers and lakes. That leads to beach closings and detrimental effects on our fish and habitat.

1250

We need to look after the combined sewer overflow problems right across the province, but we don't need to separate every sewer. There are innovative solutions to this. The city of Toronto is constructing a western beaches sewage tunnel which will alleviate a lot of their problems at probably a quarter to a third of what it would cost to completely separate the sewers.

If you look at revenue versus cost in Ontario, basically we're collecting about $1.6 billion in revenue overall from a water and sewage perspective. Our operating expenditures in sustaining capital estimates are closer to $2.1 billion. That means we are about $500 million short on a yearly basis.

When you look at the average water rates across the province, you'd be looking at approximately a 30% increase, with some municipalities somewhat more and others somewhat less. What we found is that most of the regional municipalities with the larger population bases have their systems on a full-cost recovery, but a lot of the smaller outlying municipalities do not. As a result, although the average would be a 30% increase, you may find that water rates would have to double in effect to properly maintain their systems. If you phase this in over five years, the results of the increases could be as low as $2 to $4 a month on a yearly basis. Really, that only represents a bottle or two of Evian, of bottled water, which should not be insurmountable.

One of the other things we did, and this was even before Walkerton, was to do a public opinion poll and get some results to some questions that we wanted to know. We were a little surprised by the public opinion poll in terms of who is responsible for ensuring the distribution of safe, clean drinking water in Ontario. We thought it would surely come out that the municipal level would be seen to be more responsible, but in fact the provincial government and the municipal government were seen by the public to be equally responsible.

In addition to that, we asked them-because we get a lot of feedback from concerned politicians that we can't afford any more increases, and in particular tax increases. What we found is that people do not want to see increases in taxes. In fact, they welcome the decreases in taxes that have occurred. But when it comes to the provision of clean water and safe sewage, 90% of people said they would support a mandated, regulated establishment of a special fund that would only be used to pay for water and sewage maintenance or related emergencies. So what we're seeing here is that when the fund is dedicated to a specific purpose, such as clean water, there is a very high acceptance rate among Ontarians. In fact, when they were asked whether they would pay more, 77% were either somewhat or very willing to pay more, and 86% fell in the bracket that would pay $2 a month more to make sure their sewage was properly treated and their drinking water was safe.

We have left the responsibility of water management recently in the hands of municipalities, and we know that providing grant money in the long term is only a band-aid approach. It is not the ultimate solution. What we really need is mandatory requirements for municipalities to treat their water and sewage systems like a utility. They need to put in place things like separate water and sewage service rates. We can't see moneys being taken off the property tax base to pay for water and sewage. It just doesn't make any sense.

Once you establish those separate sewer and water rates, you also need to establish separate, dedicated reserve accounts which can't be touched or raided to pay for other needs within the municipality. You need to have those dedicated reserve accounts, and what needs to go in those dedicated reserve accounts is a sustainable level of revenues that is based on not only the operational needs of the municipality but also on their future capital replacement needs. Therefore, we need to move to full-cost pricing to get to that type of situation.

In terms of mitigation strategies that could be done by the government to help soften the impact on consumers, there are a number of tools. Full-cost pricing is the ultimate answer to the problem. So a phased-in period of five years or even more would eventually get municipalities to the position where they become fully self-sustainable and the problem would be looked after once and for all. That is the real attraction to full-cost pricing.

Once you get there-and some municipalities have gotten there. Our chairman used to be the mayor of Petrolia. He could tell us about his experiences there. We find that those gentlemen and ladies who have been at the municipal level typically have more appreciation for the problem and are very much in favour of full-cost pricing. So what we need in addition to the full-cost pricing-because you can't do it overnight; municipalities have been used to 80% or 90% subsidies through grants-is a transitional assistance program. Over the five to eight years that you're going to implement the full-cost pricing, you need to make monies available so that you could have infrastructure improvements, cost mitigation, perhaps even provide some financial advisory services for the municipalities.

Currently, we were pleased to see that the OSTAR program was expanded to include water and sewage initiatives and in fact made a priority at the rate of approximately $120 million a year. Now, if you look at the $500-million shortfall that we're currently experiencing on a yearly basis and you divvy that up in terms of responsibility to all three levels of government, federal, provincial and municipal, you get closer to approximately $160 million a year that would be the responsibility of the province. This would only mean a top-up of about $40 million on a yearly basis.

Some of the other things that could be done that have been done in the United States, for example, are revolving loan funds. This is where a pool of money is made available to municipalities to borrow from. They're not grant monies but they have low interest rates. As they're paid back, other municipalities can then dip into that revolving loan fund.

There might be the opportunity to provide municipal bonds that are available on a tax-free basis with regard to the interest that's earned on those municipal bonds.

In addition to that, you may have some consulting expertise that could be offered in terms of their financial restructuring or any negotiations with private sector operators, for example, if they come into the picture.

It's very important that we help municipalities at least get to the state where they know the condition of their existing infrastructure. That's one big hole that we currently have in Ontario. I was pleased to see that, from SuperBuild's perspective, they have a study out on doing a condition assessment for water and sewage infrastructure here in the province. For the structures that are aboveground, the water treatment plants, the sewage treatment plants, we have a pretty good handle on how old they are, what kind of shape they are in. But for the pipes that are underground, we have very poor records in general in regard to the composition of the pipe, the condition of the pipe, the age of the pipe, sometimes even the diameter, the level of incrustation. Those sorts of things really need to be developed, and we hope the province helps out in terms of getting to that stage, at least where a municipality knows the extent of their problem.

To reiterate, what we are respectfully recommending, in addition to the $40-million top-up on a yearly basis through OSTAR, are changes to the Municipal Act. Those changes need to be done by legislation. We need to mandate the use of water meters, we need to have sewer and water rates that are separate from the property tax base, we need dedicated reserve accounts that are unable to be raided and we need sustainable pricing for water and sewage services.

1300

We need to do this over a transitionary type of period, and we need to be flexible in those local circumstances where municipalities find it very difficult to cope with the specific situations that they're in. We might also respectfully recommend that we have a clean-water guardian that may oversee municipalities and ensure that they are performing the proper things that are necessary to make their systems sustainable, whether it be from a pricing standpoint, whether it be from a condition-assessment standpoint or whether it be from a regular-capital-program standpoint.

Basically, those are my comments. Ted, did you have anything you wanted to add? I covered off most of the information I know.

Mr Ted Cooper: Yes, most definitely covered, Sam. There's one comment I would make. I come to the industry from the supply side of the industry. I think it's very important for you to know that by far the high majority of the products that are used in water and sewer infrastructure are manufactured here in the province and Canada, certainly. But most of it that we use in Ontario is manufactured right here in Ontario.

The Chair: Thank you very much. We have approximately six minutes per caucus. I'll start with the official opposition.

Mr Kwinter: You're certainly in an industry that has a very high profile as a result of what happened in Walkerton. I have some questions about your proposals. You're right in your presentation when you say that local politicians usually like to do things that people can see. If you take a substantial chunk of their budget and bury it in the ground, it's probably the right thing to do but it isn't very politically attractive, because it's very hard to convince people that they should be doing it. I don't know how you get around that.

You've talked about various things that I'd like to really get into, but I really don't have the time. For example, what are your projections as to the privatization of either sewage treatment plants or even privatizing the actual maintenance and supply of new piping? Is that something your association is dealing with?

Mr Morra: We haven't done any formal projections on what we think might happen from a privatization standpoint. Our official position is that we neither support nor deny the ability of the private sector to properly operate systems. We are not in competition with the private sector from an operational standpoint, but we see no reason why municipalities cannot themselves adopt a more businesslike approach to water and sewage as a utility and run the systems themselves. The key is to ensure that they've put the fundamental business principles in place and have a municipality that is mandated through legislation to ensure that those principles are in place and are kept up on a regular basis.

Where privatization will occur is a very difficult thing to predict. There are so many different variations, whether it's just operations, whether it's ownership and operation, whether it's the design-build that leads to some ownership and operation. There are so many permutations and combinations of what people refer to as privatization or public-private partnerships. It's a difficult question to answer, Monte.

The Chair: Mr Kwinter, I have to apologize. I think I did say you had six minutes, but we have a total of six minutes, so we have two minutes per caucus.

Mr Kwinter: Then I want to go to something else.

The Chair: Very quickly.

Mr Kwinter: Very quickly. Sorry about that. I was thinking I had six minutes.

The Chair: It's my fault.

Mr Kwinter: OK. No problem. In the Angus Reid poll that you had commissioned, you talked about the people's willingness to pay more money and ranking the priority of clean water. I'm old enough to have seen a situation where in Ontario no one even thought about their water. They turned the tap on, they got water, they drank it because they felt that was it; that's what you're supposed to get. Ten years ago, people said, "We're going to sell bottled water," and people said, "Are you out of your mind? Who in the world would buy bottled water when all you have to do is turn on your tap and get it?" The bottled water industry is huge now. Compounding all of that, of course, is Walkerton, where people are saying, "I don't really care if you put a new pipe in, I'm not going to drink the water."

Have you noticed that in your association? Have you noticed what the impact of that is on your projections?

Mr Morra: We haven't done any exhaustive analysis on the level of confidence within the public in regard to their water quality. We've obviously seen an increase in the sales of bottled water. We think that lack of confidence that is currently embracing the Ontario public could be overcome with definite legislation and programs that show you are taking steps to solve the problems. I think it wouldn't be that hard to get to the position where people feel comfortable again about drinking their water; I certainly do. I know a lot of people who continue to drink the water, in the newer municipalities anyway, and I don't think we should lose sight of that. It makes a lot more sense to put more money into an existing asset that is going to serve us and our future generations, as opposed to going off and buying bottled water.

Mr Christopherson: Thank you for your presentation. As a former municipal councillor, I hear you; I know where you're at. Although obviously you have a vested interest in wanting more to be built and refurbished, because that's what your organization represents, companies that do that, nonetheless your point is one that not enough people are listening to. Certainly representing an older city like Hamilton and having dealt with flooded basements-that's how you can make this a number one political priority overnight: have a few hundred homes flooded not with sewer water but the sanitary water, if you've got the old combined. Let me tell you, it suddenly gets a whole lot of attention, and then it disappears, of course, until the next time you get a storm. I wanted to say that.

I wanted to raise a couple of points, and if you can respond to them, that would be great. I wondered, do you have comparisons to other jurisdictions that we compete with? One of the things we've been arguing, some of us, certainly in the NDP, is that the social infrastructure is important, and that has been let go, in terms of health care, education, social services, environmental protection. All of these kinds of things are your social infrastructure. This is the economic infrastructure as well as the quality-of-life infrastructure. We need this part of our world to work, or you can't have business, you can't have industry, you can't have retail, it doesn't matter what it is, and you can't have a quality of life if you don't have decent water management control, both in terms of intake and dealing with it afterwards. Walkerton has helped put that on the map, but we need the bucks. Do you have comparators or an idea of where we stand vis-à-vis other provinces and other trading partners, particularly the United States? I know they've embarked on a massive infrastructure program. Do you have other information about how we stand relative to even European competitors that we deal with on a regular basis?

You had said there was 20% leakage. Do you have the figure-20% of what? How much water are we losing to leakage? As water is being more and more identified as the oil of the 21st century, 20% leakage seems to me to be totally inefficient and something that needs to be dealt with on a priority basis.

You said that more innovations are being done, rather than necessarily having to go to the separation of the combined sanitary and storm sewers, and I know again that's what we ran into in Hamilton: huge dollars to separate the two. One of the things we did was to use the overflow tanks, and at that time they were pilot projects, they were experimental. Is that part of what you meant too, or are there other aspects of technological innovations that can mitigate the expense of taking these unified pipes and separating them into two complete, different systems?

Mr Morra: In terms of how we rate against other provinces and jurisdictions, in Ontario we have a lot of built-up areas which are serviced by water and sewage infrastructure. That is not necessarily the case in the more sparsely populated provinces. I know that in Quebec they have similar problems. They have older municipalities that require upgrading. In Montreal, they still had some of their sewage going into the St Lawrence Seaway in its raw state; Halifax harbour-they're just getting around to cleaning it up now; in Vancouver, they're still pumping their raw sewage out into the ocean. But we still have combined sewer overflows here in Ontario, which is really sad when you think that we're in the 21st century. We should not be in a position where we are dumping our raw sewage into our rivers and lakes. We should have overcome that by now.

1310

When it comes to the US, they've put in specific accounting systems that they legislated that their local states and municipalities have to follow. That's basically what we're recommending here: that you put in place the dedicated reserve accounts, the full-cost pricing; you look at depreciation as a real cost that has to be accounted for at the municipal level, and you put that into legislation.

When it comes to the European model, they have much older systems than we do and they let them slide. If you look at the British model, they were looking at some 200-year-old water and sewage infrastructure that they had let pricing slide on, and there was no way they wanted to take the political fallout for having to increase rates 500% or 600% to deal with their huge problem, so they privatized. But we're not in that situation. We still believe we have the ability to mandate these types of provisions, provide some transitional assistance and allow municipalities to continue to operate and own their own systems. That is still doable in Ontario. In our systems, 70 to 90 years old, we can still tackle the problem.

In regard to the combined sewer overflows, you're right on the money in terms of the tanks. That is one of the things you can do, other than separating every metre of sewer.

Another innovative solution was a sewage tunnel. That's being built, as I mentioned earlier, right along the western beaches here on Lake Ontario. Basically what that does is it intercepts all of the sewers that would normally overflow into the lake, drops them down into huge chambers, which are basically manholes 100 feet in diameter by about 150 feet deep. There are three of them that they're constructing right across the waterfront. That contains the sewage during that critical period, which is the storm.

Mr Christopherson: Like the overflow tank.

Mr Morra: That's right. So as Mr Christopherson mentioned, once the storm's over you only see the effects of the flooded basements. This would hold all that sewage and then regulate the flow back to the main sewage treatment plant, which is then able to handle the treatment of the sewage.

Mr O'Toole: Thank you very much, Sam and Ted. I appreciate your technical buildup to it. As David has mentioned, I was on regional council and it sort of got lost in the works, for all the reasons you've explained.

Walkerton says to me that we've finally learned that water isn't free. Basically, if I was to summarize it, it isn't. I used to tell my children-I grew up on a farm and there was a well and a septic, and we had little symbols for when to flush and when not to flush. To everyone today the water is free; the tap's running-it's not free. In fact, I guess I support, not in a punitive sense, what you're saying, that full-cost recovery is absolutely mandatory. I see that Toronto is actually considering that, or at least increasing their fee, which is realistic. I see that in most regions. The region of Durham was in the paper, I believe yesterday, in that they're looking at it. It's more or less a full-cost recovery system in a relatively new area. As part of the transitional issues in Toronto, because of the age of the city and the absolute costs of dealing with huge infrastructure improvements, I suspect there may be some need to look at that in terms of capital and some way of mitigating it, as you call it.

I don't have anything more to say specifically, except that the whole debate around OSTAR-clearly, the money there is dealing with some of the depreciation you've mentioned in infrastructure and will probably consume most of it, actually. I suspect SuperBuild will be a significant part of that, to deal with environmental issues, of which water and treatment systems are extremely important.

Your report is very detailed. Specifically, the way of financing-the bond issue and that are good ways, without legislating and regulating municipalities and how they finance these. You tie the capital up for them but they've got a repayment plan, so it's not like it's going to leak away. That's the problem. Right now, if I look at my tax bill, these fees are really the most appropriate things. I've always argued that tax bills should be itemized-so much for police, so much for a cup of water-so that the taxpayer actually knows how they can interact with the potential savings. Right now they have no idea, when they look at the $2,500 tax bill. Garbage fees should be direct-cost recoverable: if it's a lot of money to get rid of it and it's a lot of money to collect it, they should be paying for it. It's the same with the water. So I like what you're saying.

I also believe, in the public interest, your polling number is important, to know that the public hold us in some overarching way somewhat responsible for the environment and our water and air and the rest-and that's appropriate. Then there's the whole issue you mentioned about whether or not the $60 billion of infrastructure should be somehow-I believe it should be managed in the public sector. I think there's more accountability, if you will, and no profit motive and that's possibly something I would support in the public interest of safety. So looking at a response from that might be on the SuperBuild: what's the next right move to do in trying to get the feds, the province and the municipalities to work together?

Mr Morra: We've had good discussions with SuperBuild and we're encouraged to see that the studies that are coming out of them were very similar to the recommendations we had made in regard to getting a feel for where we are with our current infrastructure needs here in Ontario, because that's where you need to start. The feds have put some money forward in regard to their $350 million, $400 million a year across the country. We'll get our share of that and I think the goal is to mix that in with the OSTAR monies and make that available to municipalities to get us back up to snuff.

We need a little more than that to get us there, but the real key, long-term, is to start putting in play these Municipal Act amendments. We have in fact developed those amendments that would satisfy these types of needs that we put together with our price impact study and our public opinion poll, and we'll be coming forward for your support in the very near future. We're hoping that all three parties would be supportive of that type of initiative.

The Chair: With that, gentlemen, we've run out of time. On behalf of the committee, thank you very much for your presentation this afternoon.

Before we recess, I have one announcement to make: for the members coming to Thunder Bay tonight, the bus will be leaving in front of Queen's Park at 5:30 sharp this afternoon, so be there.

Thank you. We're recessed until 2 o'clock.

The committee recessed from 1318 to 1403.

GLAXOSMITHKLINE

The Chair: Good afternoon, everyone. We'll bring the meeting back to order. Our first presenters this afternoon are representatives from GlaxoSmithKline. I see you're already at the table, so could you please state your names for the record.

Mr Stephen Dibert: My name is Stephen Dibert.

Mr Ryan Clarke: Ryan Clarke.

The Chair: On behalf of the committee, welcome. You have 30 minutes for your presentation this afternoon.

Mr Dibert: We're here today representing our president and CEO, Paul Luca, who unfortunately couldn't be here today. Both Ryan and myself are senior managers in our public affairs and government relations department at GlaxoSmithKline.

I'm going to begin my presentation by telling you a little bit about GlaxoSmithKline. Last December, Glaxo Wellcome and SmithKline Beecham merged to form GlaxoSmithKline. GlaxoSmithKline, or GSK, is now one of the world's largest and leading pharmaceutical companies, and the largest innovative pharmaceutical company based in Ontario. We have a $250-million headquarters just north of the 401. Beside that, we have a $120-million manufacturing and technical operations centre where we produce more than a hundred products. Several of those products have worldwide mandates; that is, they're shipped around the world.

GSK invests more than $100 million in research and development in Canada. We employ approximately 1,800 people, with 1,200 of those in Ontario. In addition, GSK is one of the top 10 corporate charitable donors in Canada, with approximately $4 million annually donated.

Our main therapeutic areas, by the way, are respiratory disease, central nervous system, anti-infectives and gastrointestinal.

We wanted to use our time today not to talk about drugs or ODB or market access or listings. Instead, we want to focus on asthma, specifically why asthma is a problem in Ontario, what GSK has done in an attempt to address the problem of asthma in Ontario and what we think the government could do to improve the treatment and management of asthma in Ontario.

Asthma is a relatively common chronic disease and the prevalence of asthma is increasing around the world, including in Canada and Ontario. It is probably safe to say that either some individuals in this room or individuals within the families of the people in this room know asthma quite well. About 12% of children and 7% of adults have asthma. That means we're approaching about one million people in Ontario with asthma-a significant disease.

Half the asthmatics in Ontario will have had to visit an emergency room, have had to be hospitalized or have had to seek urgent care in the past 12 months. Asthma is the leading cause of ER visits and hospitalizations in children, the number one reason children miss school. In 1996 there were more than 190 deaths in Ontario from asthma. Asthma deaths can be prevented.

In 1990, which is the last data we have available, the total cost for asthma in Canada was more than half a billion dollars, and in that half a billion dollars, more than half of those costs were directly related to physician visits, emergency room visits, hospitalizations, nursing services and drugs.

There is no known cure for asthma, but we know that asthma can be managed. It can be controlled by educating asthmatics and their families, avoiding those triggers of asthma attacks, using the medicines properly and monitoring their asthma conditions.

One of the major issues we have with asthma is that we've found in our research that 90% of asthmatics or their physicians feel that their asthma is under control, when in fact, upon further probing, 60% of those individuals are out of control; they do not have control of their asthma. Poor control leads to unnecessary burdens, both individually, personally, as well as to the health system. Of the asthmatics we surveyed, only 6% had attended an education clinic in the last year. Only 11% of asthmatics actually have a written plan that tells them what to do in case they have an asthma flare-up. This is likely because asthma is a chronic condition and individuals have just gotten used to living with asthma. They become accustomed to their breathing problems and they misjudge the severity of their condition.

GlaxoSmithKline is, has been and will be a leader in asthma care. We've partnered with health systems across the country and care providers to build programs to improve treatment and management in asthma. One such program is the community asthma care centres.

A community asthma care centre is an asthma education clinic which educates patients on how their asthma can be managed and how they can control their asthma. The CACCs also provide continuing education for physicians and can create outreach programs into the community, into schools or into workplaces or into places where people can get their help.

These centres are public-private partnerships initiated by GlaxoSmithKline with hospitals or other health care organizations. There are more than 50 of these centres across the country, 16 of them currently in Ontario. We'll be establishing new centres in 2001 as well as in 2002.

GlaxoSmithKline will invest $20 million over the next three years in Ontario to improve the awareness, education, treatment and management of asthma.

1410

This is done through various campaigns-patient campaigns, physician campaigns, those clinics. One campaign is that 30-second asthma test you have in front of you, a quick test developed in conjunction with the Asthma Society of Canada, which will allow people to determine whether or not their asthma is out of control and whether they need to seek help by a physician.

In addition, another innovative project we're involved in looks at asthma hot spots in Ontario. By studying at the community level across the province the levels of emergency room visits, hospital admissions and separations, you can tell where asthma's a problem. Once we identify these hot spots for asthma, we then can implement programs such as the CACC and its outreach programs to address the asthma problems in those areas. This is working in conjunction with some of our partners, this one being the Firestone Institute for Respiratory Health in Hamilton.

With our CACCs we evaluated what kind of impact they were having. We conducted a national evaluation where we followed approximately 1,000 adults and 1,000 children. We found remarkable outcomes relative to their asthma conditions and the health care resources which were utilized.

We found a 70% decrease in emergency visits, a 50% decrease in hospital admissions, a 45% decrease in physician visits, a 70% decrease in children's school days lost, a 65% decrease in asthma symptoms, as well as other quality-of-life measures. These are significant results through education programs.

With these approximately 2,000 individuals, those decreases in utilization translate into about $500 per person potential savings just in the first six months following the education program they went through. So these things work. If you did the math, it's 500 people, $500; 2,000 people, that's $1 million which could be avoided in service utilization.

In Ontario, in the 2000-01 budget, there was $4 million allocated toward an asthma strategy in Ontario. The government of Ontario is developing an action plan, or a broader asthma strategy, looking at improving surveillance, promotion and prevention and the clinical management of asthma in Ontario. Actually, our vice-president of research and development at GlaxoSmithKline represents the pharmaceutical industry on that committee, so we give input to that committee.

This is a good start, but we don't think it's nearly enough to be sufficient to mount a comprehensive campaign where we could make a significant difference in the outcomes in asthma. So we would suggest that the budget be doubled for 2001-02 from $4 million to $8 million, and then doubled again the following year-relatively small amounts of money in the budget scheme of things.

What we found through our experience and our evaluation, and what the province's strategy should include in their asthma action plans, are intentions to implement the treatment guidelines for asthma. There is a series of consensus guideline developed by the Canadian Thoracic Society, which gives stepped care plans for the treatment of asthma.

The strategy should also include asthma education. We have our education centres, but there are also asthma education clinics across the province where asthma care is improved.

Public awareness of asthma: asthma is out of control, and it can be controlled.

We should also look at including in the province's strategy protocols for managing asthma when individuals show up in emergency rooms, as well as a referral program that doesn't just let people go to the emergency room, be treated and then go home. It's a referral program where the individuals are referred to asthma experts, asthma educators, where they can learn how to best care for themselves.

An important step, we realized as we moved on with our programs, is the importance of monitoring-monitoring to ensure that you're successful, to ensure that you are delivering the results you predicted and that you can adjust levels of investment.

The first step, we feel, is for increased government investment in the treatment and management of asthma in Ontario. We came here today to ask you to increase your support for this worthwhile disease management program to realize long-term savings in the health care system and to improve the system's health outcomes and the quality of life relative to asthma.

That's the formal presentation.

The Chair: We have approximately three minutes per caucus and I'll start with Mr Christopherson.

Mr Christopherson: Thank you very much for the presentation. I certainly have to say it's a different approach than I was expecting when I saw it on the agenda and I want to commend you on the efforts.

I was going to raise two points, if I have time. I'll just load them up to you and you can comment on them as you choose. You talked about control, a disease that can be managed-we're about eight to 10 pages in. You note in one bullet point that it can be controlled by educating people, avoiding triggers, the proper use of medicine and monitoring. One thing that wasn't spoken of here, unless I missed it elsewhere, was the whole issue of prevention. I wonder what you have to say about prevention and how much of the work being done is geared toward identifying measures that can be taken that would prevent asthma.

That's my segue into the second point, which is two pages after the one I have just referred to, where you state in the last bullet point that you'll work to determine asthma hot spots in Ontario. As much as I don't always like to face the brutal truth sometimes, the reality is that Hamilton is one of those spots we have as an area that you can identify, and it's there for reasons we all know.

First of all, has Hamilton or have other cities already been identified and are you working to identify others? I guess what I'm asking is, what exactly are you doing once you've identified one? Of course, I'm being parochial here, talking about my own community, but I'm assuming that Hamilton would be one of them. What is it that Hamilton, then, would derive in terms of benefits after you've done all of these studies?

You can see why I'm linking that to the first question about prevention and how much of what you're doing will build the case for other measures that we need to take, because these things are clearly after the fact, where people already have the disease. Ultimately we'd like to be at a point where they aren't getting the disease.

Mr Dibert: Right. I'll deal with the second one first. There is one centre in Hamilton now. It's at the St Joseph's Community Health Centre. One of the areas for expanding the program for this year, which is again in Hamilton, is trying to look at a unique partnership with one of your major employers, to put an asthma centre in an actual workplace so that the employees can get access to information about how to manage and treat their asthma. Relative to the hot spots, yes, Hamilton is one of those spots where the asthma problems are very high.

Relative to the first question, which addresses the prevention of asthma, there are things which can be done to prevent asthma. Probably the primary one is not smoking. Children who live in households where their parents or others smoke have higher rates of asthma. It's as simple as that.

It's difficult to erase all those triggers of asthma. It's triggered by allergies, pollen, sometimes air quality. It's triggered by pets, carpets, dust mites. So prevention is certainly an issue and should be addressed.

Our company's primary concern was the treatment and management because of the nature of the business we're in. But there are things to do. I believe the medical officer of health for Ontario published a plan to look at the prevention of asthma, but the fact of the matter is that people do smoke and there are allergies and asthma is going to happen.

1420

Mr Christopherson: But there are other environmental intrusions. I'd like to point out that that's one of the disappointing things about losing the Occupational Disease Panel, which the government killed in its Bill 99. It was a world-renowned organization that had scientists, academics and health professionals who had no connection with politics or government bureaucracy whatsoever; it was arm's-length. Their sole purpose was to identify whether there were linkages between diseases that workers-and now we're noting too, their families-were coming down with, and exposure to substances in the workplace. That's now gone and they've replaced it with some namby-pamby BS that doesn't do anything near what the ODP did. But that's a whole other issue.

But there's a key component of this at some point. I recognize you are limited in terms of your involvement, and that's perfectly understandable. Again, thank you. I'd certainly be pleased to lend our support to such an initiative, if for no other reason than I'm taking care of hometown. Keep up the good work; it's appreciated.

The Chair: Mr Galt.

Mr Galt: My question won't be namby-pamby. Thanks very much for your presentation; I did appreciate it. I have a daughter with asthma, so we've sort of lived with it for some 25 years.

I want to direct my question to an article that was in the Toronto Star about two weeks ago. I'm trying to remember the details, but it went along the line that in the neighbourhood of 25% of hospital admissions for asthma were in September, and the major peak was in the third week. It may even have been 25% in that third week. That's kind of understandable in Ontario, but they went on to prove that all the triggers you might think of in terms of starting up the furnace and back to school sort of got shot when you looked at other countries like New Zealand and Australia, and the Northwest Territories. They all had similar spikes in the third week of September. I was curious what your thoughts were, if you had read that article or from what I've told you. Do you have any thoughts why this spike should come in the third week in September?

Mr Dibert: I'm aware of the research and the work that went into that article. It was followed up at a presentation at the Ontario Lung Association's better breathing conference about three weeks ago, where a researcher from the Firestone Institute for Respiratory Health from Hamilton, who is our partner in identifying these hot spots, went on to explain his research, which tracked for the last three, maybe five, years health system resource utilization, primarily hospital separations, to try to identify where the problems were geographically, as well as where the problems were at the time of the year. The spike in the third week is across the country. I believe some of the other countries, though, had different timing in their spikes.

Mr Galt: The spike wasn't as high, as I understood, as maybe here.

Mr Dibert: When he was asked the question-the researcher is an epidemiologist by the name of Neil Johnson, out of Hamilton-what would explain that, he related the same causes you spoke of: school coming back into play and kids remixing and sharing each other's pathogens, the issue of the furnace, the weather, the allergies. But that's the type of research we use and support to try to identify those hot spots.

You see where you can go with this. If you take that research and identify a geographic area with the highest peak in September, you go in there in the summertime and do a program where you invest in physician education about the treatment guidelines and how to implement those guidelines, patient management programs through education centres and work with the schools-if you fund that program over the course of the summer and early fall, as soon as those children are back in school, and then monitor what happens with that peak, you will see that by managing that disease in those ways, that peak will be a lot less for those periods of time. That's the type of work that we support and that we do.

The Chair: Mr Galt, we've run out of time. Mr Kwinter.

Mr Kwinter: Thank you very much for your presentation. I want to congratulate GlaxoSmithKline on the work they've been doing, not only in the asthma field but in others. I have an attachment to that company, because I was the minister who was responsible for getting them to locate in Mississauga. My only concern is that I just got used to calling them Glaxo Wellcome and now they're GlaxoSmithKline.

Mr Dibert: So did I.

Mr Kwinter: One of the questions I want to ask you is this: There's no question that asthma, both in the adult and child population, has a huge impact on productivity in the workforce and in the schools. I commend you for your proposal, but is Glaxo or other companies doing anything to get at the root cure, as opposed to eliminating some of the triggers, actually getting to a cure for asthma? What are the prospects of that happening?

Mr Dibert: We, as a company and as an industry, as well as with our partners in the universities and biotech organizations, are constantly doing research. The nature of the industry, with the nature of patents and products, is that patents expire and you need to replenish the product pipeline all the time. So research has been there all the time. A cure for asthma has not yet been found. Research is going on.

As I mentioned earlier, just our corporation will be spending $100 million in Canada on research and development. The industry will be spending $1 billion, or approaching $1 billion, in Canada on research and development just to do those things you're talking about, trying to find those cures and better treatments for asthma. I might mention that one of our competitors, Merck Frosst, has a pill which is used for the treatment of asthma, and that was discovered and developed in the Montreal research facility. We don't have one yet. We're looking for the answers to cures for asthma.

The Chair: We've run out of time. On behalf of the committee, thank you very much for your presentation this afternoon.

ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS

The Chair: The next presenters are representatives from the Ontario Confederation of University Faculty Associations. Could you please come forward and state your names for the record. On behalf of the committee, welcome, and you have 30 minutes for your presentation this afternoon.

Dr Henry Jacek: Good afternoon, Mr Chair and members of the committee. Thank you for having us here. I am Dr Henry Jacek, the president of OCUFA. Joining me today are Henry Mandelbaum, the executive director; Mark Rosenfeld, our director of government relations; and David Scott, OCUFA's researcher.

I'm also a professor of political science at McMaster University, and I was delighted to see that just leaving this table was Ryan Clarke, one of my prized former students. That was an unexpected and pleasant surprise. I was just able to greet him briefly, but that was something I haven't been able to do for some time.

The Ontario Confederation of University Faculty Associations represents over 11,000 professors and academic librarians in Ontario's universities, and we're pleased to be here today. Our brief has been circulated for your reference. We make four specific recommendations, and I will speak briefly to each one in turn.

Our first recommendation, and our main recommendation, is that we increase the base provincial support for Ontario's public universities by $500 million over the next four years. This investment is required to meet the needs of future enrolment, to expand the research capacity of Ontario universities and to improve the quality of the educational experience in Ontario universities.

One of the most critical challenges facing Ontario universities is the need to hire 15,000 faculty and academic librarians over the next decade. The need to hire so many faculty and academic librarians is driven by at least three factors: we have a surging enrolment demand of over 40% over this period, we will have unprecedented faculty retirements, and we have right now a very high student/faculty ratio. It's our desire to see this at least be returned to the Canadian average. We are currently the worst in the country.

I think all members are aware that there are changes in population demographics, participation rates in university education and the secondary school changes, which will result in an increased demand for university education probably of the order of 90,000 students by the end of this decade. Further, the demand for universities is projected to grow by 25% over the next four years alone. This means that the capacity of the Ontario university system must expand by the equivalent of one new McMaster University each year for the next four years.

1430

The age of our faculty population is another aspect of this challenge. A large wave of retirements is coming. One third of our current faculty members are between the ages of 55 and 64. Unfortunately, too many of them look like me-grey hair-and will be walking out the door very soon. Another way of putting it is that a majority of our university faculty are 50 years of age or older.

The student-faculty ratio in Ontario universities is the highest in the country. Over the past 10 years, the student-faculty ratio has increased by 25%. This increase marks a very clear and measurable decline in the quality of education that we can provide to our students. It is a matter of good public policy to reduce this ratio and improve the quality of university education through smaller classes and more faculty-student interaction.

The other side of the faculty shortage crisis is the supply of faculty. There will be, unfortunately, no made-in-Ontario solution for this challenge, because we know that the domestic supply of PhD candidates will probably fill only about one third of the positions we need to fill. That means we have to get the remaining 10,000 or so positions filled in an internationally competitive market. This is at a time when PhD graduates and current faculty are being sought out by public and private university and other sector employers. Competition is coming from universities in other provinces-primarily in western Canada in the Canadian case-and countries. Both the United States and Britain are experiencing faculty shortages. In the case of the US, better-funded universities, higher salaries and enriched research programs have proven highly attractive. The result is that there is currently a larger percentage of faculty leaving Ontario universities for the United States than there are American academics accepting positions in Ontario, and this percentage is growing. So at the very time we need to retain our faculty and bring in faculty from outside the province, the reverse is happening; we're having a drain of faculty outwards because of our inability to compete with those universities.

Quite simply, the competitive challenge for Ontario is that better-funded US public universities, with 50% more revenue per student than Ontario universities, can provide better salaries, better research facilities, better equipment and better resources for their faculty.

What would be achieved through this increased investment that we're asking for? First, enrolment demand would be accommodated. Universities would be able to plan and respond to the increased demand of the next decade through hiring the new faculty and academic librarian, through setting up the new programs we need for a competitive society and for new resources for students. The government of Ontario's promise of a space for every willing and qualified student would be achievable. That is a goal that OCUFA strongly supports, but it has to be made realizable.

Second, the ability of universities to hire full-time faculty would ensure that the teaching and research capabilities of our universities would not be diminished. We have excellent universities currently in the province of Ontario. These universities, though, are drawing on the legacy of the years of support that came from the Frost, Robarts and Davis governments. We are now drawing down that legacy, and the question will be, what will be the legacy of our current government for the quality of our universities in the next two or three decades?

Third, the quality of university education would improve as the student-faculty ratio was lowered to be in line with the average of the other provinces. Smaller classes and greater interaction between faculty and students would be achieved. We don't think it's too much to ask that Ontario, the richest province in Canada, should be at least the average in terms of the quality of education that it offers in terms of class size.

The recommendation to increase base funding by $500 million needs to be placed in a context to demonstrate that it is a reasonable and practical investment for the government to make. We want to emphasize that we have to distinguish between necessary investments-and that's what we believe this $500 million is-versus discretionary spending. I hope the government and the Treasurer of the province will be able to make that distinction in a careful and proper way.

In 1992-93, Ontario universities received slightly more than $2 billion in provincial operating grants. In the current fiscal year, Ontario universities will receive $1.7 billion. That doesn't even include inflation. We know, for example, and it's one thing that has not been discussed very much, that over the last 12 months Ontario's inflation has increased by 3.6%, causing further erosion to the dollars that Ontario universities have to provide a quality education. Even aside from the inflation, which is now a serious problem for Ontario universities, we are still trying to make up for ground lost to the cost-cutting exercises of the 1990s: the 24% reduction in government operating grants that has occurred through a period of enrolment growth. A $500-million increase to the base would move annual operating grants up to $2.2 billion, only $200 million more than they were in 1992-93.

OCUFA is now putting forth the argument that public policy should be made solely on the basis of these benchmarks. The case for investment is based on accessibility-that is, the opportunity for our students to go to university-affordability-can our students and their families afford to go to university?-and quality, of which the faculty-student ratio is one very important indicator. The case for investment depends on those three things.

The utility of looking at comparative funding is to place the needed investment in an important context. The conclusion that we cannot escape is that the very jurisdictions that Ontario universities must compete against want to hire faculty from us and in competition with us and that they are better funded. The faculty shortage crisis is a critical public policy issue that the government of Ontario dares not dismiss, especially in light of its funding responsibilities for higher education and the social and economic importance of our universities.

It needs to be clearly recognized that the universities, as the major purveyors of knowledge in this province, are the engines of economic growth, and if this province is to grow, it must nurture its universities, not starve them for resources.

Our second recommendation stems from the fact that access, or opportunity for post-secondary education, is linked to Ontario's economic performance. Therefore, OCUFA calls for an immediate freeze on tuition fees.

We are troubled by the relentless increases in student tuition fees and the increasing share of university operating budgets that must be paid for by students and their families. The Progressive Conservative Party's policy document for education, New Directions II, in 1992 stated, "Tuition fees should be allowed to rise over a four-year period to 25% of operating costs of universities." Yet in the most recent electoral platform, Blueprint, the PC Party proclaims that in fact tuition fees were brought "to the reasonable and affordable 35% level." Currently, for this academic year, tuition fees account for over 37% of university budgets, while the provincial support barely holds above 50%.

Given the unfortunate inverse relationship between tuition fees and access to post-secondary education, the government has now placed our universities in a very difficult position where we must choose between educational quality and access and opportunity. Not only is this poor public policy, but it is contrary to the Premier's own belief that, "The requirements of the knowledge-based economy will make access an even greater necessity for our province."

1440

We need to give our students, our potential students, our young people, opportunity for education and to basically develop themselves to the highest degree so as to benefit not only themselves but our province.

Our third recommendation is to shift government policy to deal more effectively with rising university education costs and student debt load. Therefore, we call for a reform of the student assistance program to include the following types of items: first of all, we need grants for students in need to help reduce their debt load, which we think is far too high; we need to target assistance for students with dependants or special needs; we need to expand work-study opportunities for students so they can earn money while they learn in university; and finally, we must expand programs to help students who after their studies find it difficult because of the nature of their jobs and their salaries to repay the large student debts they incurred while they were in university.

Unfortunately, rising tuition fees are only the tip of the iceberg when it comes to barriers to access and opportunity. Indeed, one of the compounding effects of the government's policy on tuition is the ever-increasing student debt load. While the government claims that its increased funding for student assistance has ensured continued accessibility and opportunity, the unfortunate overall reality is that in the last academic year the average debt load for a graduating student was in the neighbourhood of $25,000. Instead of tackling the issue head on, the government has chosen to focus exclusively on student loan default rates as the sole measure of student assistance success. We believe that a broader measure of students and their ability to go to university must be focused on and certainly measures that are up front while the students are in school and how they pay for their education, not whether they can pay back their loans after they've long since left university.

Our final and fourth recommendation concerns the research policies of the government. OCUFA urges the government to act on the recommendations that have now been made in two government-commissioned reports to adopt and support a comprehensive research policy. Instead of supporting research through block operating grants, as in the past, the Ontario government today has moved toward a model premised on public and private sector collaboration. In May 1997, the R&D 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, immediately commercially viable research have had difficulty accessing this fund.

In a climate of limited resources, universities are tempted to divert support away from less lucrative basic research as well as social science and humanities research in order to leverage money from the maxed fund. I must point out that the money doesn't cover even the grants for these hot areas and does not cover the costs of the students in those programs, so money is sucked away from the social sciences and the humanities and the other areas. In fact, we're supporting things like software engineering and other types of things. The result is that resources are going there and there is a subsidy coming from the faculties that are doing most of the teaching in our universities.

This kind of research policy, we believe, is extremely short-sighted. Not only does innovation draw on the full range of sciences, humanities and social sciences, but Ontario's current research approach puts the province at a disadvantage in comparison with Canadian counterparts. The lack of our coherent research policy has placed the province behind Quebec, Alberta and BC in attracting federal grant awards. So the research policy is actually costing us federal money. In that sense, it's dysfunctional.

You've heard our four recommendations. We believe the challenge facing Ontario universities is unprecedented, yet there is an opportunity for public policy to ensure that the shared goals of university education are achieved. Enrolment demand would be accommodated by our recommendations. The ability of universities to hire full-time, qualified, high-quality faculty would ensure a high quality of teaching and research. The quality of university education would improve through the lowering of the student-faculty ratio. Access to universities would not be constrained and our research capacity would improve.

The government of Ontario, we believe, must act this year, in this year's budget, to preserve and enhance public university education in this province.

That is the conclusion of my remarks. I would like to thank the members for their time and attention, and I welcome any questions or comments any of you may have.

The Vice-Chair (Mr Doug Galt): Thank you very much for your thoughtful presentation. We'll start with the government side. We have about three minutes per caucus. Ms Molinari first.

Mrs Molinari: I'll begin, and I know my colleague John O'Toole would also like to make some comments.

I want to thank you for coming and making this presentation today. You were here last year as well and we've had several opportunities to dialogue with you, along with Minister Dianne Cunningham, about some of the concerns you've raised here today. The retirement of a number of professors is going to need to be addressed within the next little while, to deal with the students who will be coming in, and the dialogue that is going to continue to take place between the ministry and yourselves is helpful.

You've raised a number of issues here that are things we need to look at as a government. It's a difficult job trying to balance all of the requests that come forth from presenters and trying to split that pie when it's only so big and the number of dollars that are there in all of the areas. Your plan calls for an injection of large amounts of funds to be invested. I hope we can work on some dialogue to address some of the concerns and also with the realities that presently exist within the economy as it is. As a government, students and post-secondary education are very important for all our futures. I hope we can continue that dialogue with you.

I hope I've left some time for John O'Toole, who has a question to ask.

Mr O'Toole: I follow the reports and the issues in the press more academically as well. I have five children and two are still in university, or at least undergraduates. I applaud you for the three points: access, affordability and quality. Your report does expand on solutions to that, but I just want to ask a couple of questions.

First of all, I'm looking at the version of the private university discussion. Two of my nephews are both doing PhDs, one at UCLA and one, I think, at the University of Georgia. One is from Mac. He got his masters in biotech or something like that and he's on a full scholarship, making money at a private university. I don't get it. They can do that and they're private, and we're public and we're not doing it. We're way behind. That's two of them. The other is in computer animation and he did his undergraduate degree at Mac as well.

My question is, what is outside the box? We've got the Ivey business school, $25,000 tuition, advertising on television. Queen's is doing it now. These are kind of outside-the-box approaches to the issue of where the money is. Then there's the whole issue of e-education for certain undergraduate programs. I know there's a social aspect to university. Can you respond to that? These are not in the report, but they're important components of the solution. The same old ain't going to work.

Dr Jacek: I think there's a very different tradition in the United States to university education than there is in Ontario. Many years ago, many private institutions were set up in the United States. They had their investments in companies that went on to make a great deal of money and they have very large endowments. We essentially went a different route in which our private universities over time became incorporated into a public system. In Ontario, we cannot simply in any way replicate the American private university system because it's based in many cases on hundreds of years of portfolio investment that has been compounded over time. The cost would be incredible.

I doubt that private universities are going to set up in such a way that our young people coming out of high school want to go with them. Our young people want universities with walls. It's very clear. I know myself, I tell my students, "You can call me or e-mail me any time," but what they simply say is, "Can I come in and see you?" Unless they are sitting right next to me, they feel they're not getting their money's worth. These are the same students who will play video games or all types of computer games, but when they want to talk to a professor, they want to see that professor and they want to interact with him. That's why I think actually these private on-line universities are really overstated. There has been a report coming out lately in the United States that the cost of on-line education is much higher than the universities expected and that demand for it is much less. The result is that they're not making the money they thought they were going to make. That report came out within the last week.

1450

This has surprised me. I think we tend to overestimate the cheapness of technology. People who want to use technology tend to underestimate cost and overestimate revenue, and I think the report that came out from the United States is like that.

I think you said those were nephews of yours. I hope we can bring them back to Ontario.

Mr O'Toole: So do I.

Dr Jacek: The only way we'll be able to bring them back is to offer them a competitive salary and, if they're scientists, we have to be able to set up laboratories that they feel comfortable working in. That's what I hope.

The Vice-Chair: We'll have to move on. We can't run over our time. The official opposition.

Mr Phillips: I'll try and get two questions in at once. I carry around this little document of why you should invest in Ontario produced by the Ontario government. It's what they tell business, why they should come here, and, with all due respect, all their programs head in the opposite direction. It talks about our exceptional workforce here in Ontario; that Ontario workers are well educated and well trained; that 60% have attained university or college, a big advantage over the US; a high-quality education system. They have a chart here of educational attainment, well above the US. I think on another page here they talk about-oh, this is on tuition fees, which is a big selling point. They point out how much lower basic tuition fees are in Canada than in the US: "Ontario tuition fees for law, medicine, computer science and electrical engineering are also much lower than American fees."

Of course, all of that is changing now. My old business school, a $25,000 one-I would not have gone to that school if that's the way the fee structure had been in 1958.

My two questions are these. The government frankly has been able to get away with it. They've dramatically reduced support for universities and have dramatically taken tuition fees up. As you point out, the percentage paid by students is dramatically higher now than it was. But they've been able to get away with it in spite of all the things they said about, "The future economy depends on our knowledge-based economy and investment." That's my first question, how they get away with it.

My second question is, you point out a clear, obvious, looming crisis, and that is recruitment of staff over the next few years. Can you tell us what in your opinion is being done right now, and are you aware of a government program that is going to tackle that issue in a significant way?

Dr Jacek: The first-I've just gone blank.

Mr Phillips: They've gotten away with it.

Dr Jacek: Why that has happened? As one of my colleagues at Queen's University said, if the student-faculty ratio gets worse year over year, nobody dies from it. You just have a larger classroom. You have the students sitting on the steps of the classroom. It's not like an emergency room where somebody dies if you don't have the emergency room properly funded. So essentially it doesn't have an immediate consequence. What it does is have a consequence on economic growth and quality of life five, 10, 20, 30 years down the road. That is why it's so important for us to deal with this problem in a reasonable way, looking to the future. As I said earlier, we're drawing on the legacy of previous governments but we're running down that legacy because the quality of universities is dependent on past decisions, not on something that happens today or that happened in the immediate past.

I can imagine it's tempting for the government of the day that's looking for money. They'll say, "We'll cut the universities," as they did drastically in 1996, and the public doesn't notice. They don't realize that 24% cut and what it did to the quality at the time.

The second question about hiring faculty: the universities are trying to do their best in different ways. The board of governors of Carleton University, which is in a deficit position, said, "Rather than paying back the deficit, as important as that is, we have to hire faculty, one a week, because our faculty base is eroding so quickly." So universities are desperately trying to hire faculty.

They are doing things like deferring maintenance. We have a huge deferred maintenance bill. You look at the leaking roof in a building and you say, "Do we fix the leaking roof or do we try to go out and hire a young faculty member?" The result is that we're ignoring the maintenance and our buildings are really falling apart. But how long can you do that? It's pay me now or pay me later and it's really false economy.

Even under these situations, we're not hiring enough faculty and can't continue to sustain this to replace those who are leaving.

The Vice-Chair: We'll have to move on to the third party.

Mr Christopherson: On behalf of Marie and myself, I welcome a fellow Hamiltonian. Henry, it's good to have you here, and everyone else in the delegation.

This scenario is one of those that just perplexes the hell out of me. There are some things the government has said no to since they've taken power that, as much as we might disagree, you at least know where they're coming from. You understand the why of it. This one, like a few others today, escapes me.

One of the questions I want to leave with you, if you have time to answer it at the end-you touched on privatization, Henry. Is there any concern within your organization that the long-term goal is to eventually see private universities overtake, to use the term the majority market share, of post-secondary education, where clearly now it's with public universities? I just leave that with you to comment on.

What I want to draw to your attention, and it may be helpful to you, is that one of the first presentations this morning was from the senior vice-president and chief economist of the TD Bank Financial Group, Mr Don Drummond. He presented 17 pages of slides, charts, things they consider to be of key importance for us as we go through our deliberations. Two of those presentations both deal with the issue of funding of higher education. One of them speaks to the declining Canadian government support for higher education, it speaks to the dollars and the 24% cut in constant dollars, and also the declining relative budgetary importance of post-secondary education, and again they show the chart where, although it has come back a bit in the last few years, we're still well down from where we were in the past.

If you need somebody to point to, to say there's a business case being made, there are copies of these from the clerk. It should resonate with the government members that the business case is not being made solely by you as a convenience; the business case is being made by bankers as being an important part of the equation of growing the economy.

One of your main focuses was the whole replacement of faculty. Just to look at the worst-case scenario, so we understand what the world looks like if we don't do anything: in five years, 10 years, if we don't begin to recruit the quality professors and other staff that we need in the universities, what happens? Obviously, if the people aren't there to hire, you've got a number of choices: you either have fewer students or you're hiring less qualified people, but that's just my view from the sidewalk. What's your sense of that?

Dr Jacek: I think you will see two things fairly quickly. If we don't pick up the hiring of faculty, with more money, we're going to have potential students who are going to get rejection letters. They're going to get letters from the university saying, "There is no room for you. You're qualified but there is no space in Ontario universities, so you'll have to do something else; either not go to university or go to university outside the province or outside the country."

Then eventually the universities will run down further, because it's the full-time faculty who go out and get external money, from the federal government, from private foundations, from outside the country. The huge amounts of money that support our universities come from faculty members going and getting money from foundations, from the federal government. That money not only supports their research but they use that money to hire the students, to support graduate students and undergraduates. The result is, if those full-time faculty are not there, or in reduced numbers, they don't generate the income for the universities and there's a further slide downwards. That's how the quality of a university erodes. It doesn't have the full-time people who are going out and getting the money to contribute to the operating budget. This is a vicious cycle in which you just start going downhill faster and faster until suddenly you're left with third- and fourth-rate universities, with few numbers, decrepit and without much money.

The Vice-Chair: We've ended up that each party got a good extra minute there. We appreciate your enthusiasm and your presentation here today.

Dr Jacek: Thank you very much. I would say you are going to hear something pretty close along these lines when you hear the Council of Ontario Universities in about an hour or so.

1500

RETAIL COUNCIL OF CANADA

The Vice-Chair: We now call the Retail Council of Canada as the next delegation, Peter Woolford. Welcome. When you get set up there and start, just give us your name for recording purposes.

Mr Peter Woolford: Thank you very much, Mr Chairman. It's a pleasure to be back with the committee members again. I think this is my 12th year appearing before the committee, and it's always an enjoyable opportunity to come back and-

Mr Christopherson: Is it?

Mr Woolford: Yes, it is, sir. I enjoy this. It's a chance to kind of step back and review what has happened in the year and look forward and talk with some people who are very knowledgeable about what's happening in the province.

Mr Christopherson: He has a meeting after this one.

Mr Woolford: No, no. Say it isn't so.

As always, I'd like to start with a quick review of last year, and our members' forecast for this year. I know that's very helpful to committee members as they start to consider budgetary matters for the next fiscal year.

I'm delighted to say that 2000 was another good year for the retail trade. Reports out of StatsCan and from our members suggest real growth in sales last year was between 2% and 3%. That is down somewhat from 1999, but we must remember that 2000 was building on a very strong previous year, which itself was building on a strong year before. So we're looking at purely incremental growth at this point, and we feel it was a pretty good year for the retail trade.

Our members said that Christmas was a good season for them. We did a survey of independent retailers just after Christmas. While the numbers were quite scattered, the average was between 3% and 4% growth over the Christmas season of the previous year.

Looking forward to 2001, our members are equally optimistic-a bit of a surprise for us. With the bad news that was starting to come out of the States in the last quarter of 2000 and with some of the concerns that were being expressed with respect to the Canadian economy, we thought they would be a little more cautious about 2001. In fact they forecast their sales this year will go up between, let's say, 2% to 3% again. So our members are relatively positive going forward into this year. Certainly the very early returns in 2001 suggest that January was a pretty good month for them.

For our formal pre-budget presentation this year, I've taken a slightly different perspective from doing a traditional submission. What I've tried to do in this little presentation I'm going to run through is give the members of the committee a bit of a sense of the role that retailing plays in relation to individuals, communities and the economy of the province.

More than anything, retailing is a people business. Retailers are in the business of providing individuals with the goods and some services they need to live their daily lives. Roughly half of all the dollars you and I spend are spent in retail operations. These are the merchants who provide the kinds of things we fill our houses, our cupboards and, yes, our garages with. So it's very much a business that relates to the ordinary human being. The citizen, the voter and the consumer are all one and the same person.

The second key piece I would draw to your attention here is that retailing is relatively more important to low-income Canadians, and low-income Canadians are relatively more important to retail. Why is that? Well, there are a lot of lower- and middle-income Canadians, and they're the people who spend the great bulk of money in our members' stores. Equally, retail is important because lower-income Canadians, as you can see from the chart, are people who spend relatively more of their income on consumption in retail stores. So this is an industry that connects very directly to the ordinary man and woman in the street.

What do retailers sell? As I said, they carry the merchandise we need for the necessities and little pleasures of everyday life: clothing, sporting goods, cars, food, health and personal care-the full range of products that any of us buys over the course of a day.

I guess that's the other piece that we're trying to get members to understand, that this is an industry that deals with ordinary people in their daily lives every day. We buy something in the store-well, men don't. Most of the people here probably don't go in a store here every day-shame on you-but certainly most Canadians and all women go in a store pretty well every day. That means that they come in contact with this industry on an ongoing and regular basis. Men go in on December 24 and right before Easter and February 14.

Interjection.

Mr Woolford: Yes, you were all in a store yesterday.

Now let's look at who sells what. Traditionally, the retail trade was broken into some well-defined categories. We have found that under the pressure of competition, foreign competition coming into Canada, new technology, restructuring of the industry, those traditional specializations are blurring and we're seeing that retailers are competing with each other in sectors they would not have been in in recent years. We have also seen, of course, the emergence of large general-purpose retailers, the so-called big boxes, which have been very successful in setting new standards of competition and productivity and competitiveness.

Well, where is retail, then, if we've got these stores? Again, as I said, retailing follows people. It's a people business. In fact, you'll find retailers in every village, town, city, suburb of Canada. I would suggest that you don't have a town until you have a store. So this is an industry that is very connected to the daily lives of citizens. On the other side for you as economic policy-makers, this is an industry that provides jobs, income, investment and opportunities right across the face of the province. Unlike just about any other industry, we are an economic factor in every single place that Canadians live in the province.

This next slide usually gets a better reaction in provinces outside Ontario than it does here. What it compares is employment between retail and manufacturing, and you find that in this case Ontario is something of an anomaly. In Ontario, manufacturing actually accounts for more jobs than retailing. Through most of the rest of Canada, retailing accounts for the same amount or more jobs than manufacturing. The other key point here is that retailing is remarkably consistent: between 6% and 7% of all jobs in every province are accounted for by retailers.

Retailing is, above all, a small business activity. When you look at this chart, you can see the overwhelming majority of retailers are small businesses. The large beige-coloured portion of the pie labelled "Indeterminant" represents partnerships in family-owned businesses, which in almost all cases are small businesses themselves as well. So you can see that when we get into larger companies with, let's say, more than 200 employees, there are so few that they show up in this chart as 0%.

Not only are independent stores important in terms of the number that they represent in your community, they're also important in terms of the dollar value of sales. Something people have often assumed is that there are lots of small retailers but they don't count for much in the market. As this chart shows, that's not really the case. In a number of the subsectors, you can see that independent merchants make a significant portion of the sales in their sector.

I mentioned earlier that this is a very competitive business. One of the consequences of that is that retailing is a business where it's hard to make a profit. A lot of people think retailing's easy: "I bring some stuff in. I pay less for it, I sell it for more and I get to keep the rest." In fact, under the pressure of competition, the data from StatsCan show that roughly a third of all retail businesses are losing money at any given point in time. This is not a business in which you succeed easily, nor do you get rich easily. The other side-I don't have these data here, but StatsCan data also show that roughly a fifth to a quarter of all retail businesses at any time have negative equity in their business. So it's a very challenging and precarious business, serving the needs of consumers.

I put this slide in because of the role of retailing in terms of encouraging the rest of the industrial economy to adopt new technology, and particularly computer and telecommunications technology. Our largest members are very sophisticated users of modern technology and are forever pushing the edge of the envelope. But something that really does concern us is that we've got almost a quarter of our members who have no computers and almost a fifth who have no intention ever to buy one. In this day and age, as I'm sure committee members can understand, that's a real concern. The point here is that not only are these firms going to be less competitive in the marketplace, but they have an effect on their suppliers. If the retailer is not following modern business practices and is not productive and efficient and effective in dealing with his or her supply-chain partners, they don't have that incentive to upgrade their operations either. We see that as being important both for our industry and for the industries that support it.

1510

I'd like to talk a bit about employment. These are the numbers for all of Canada, and then by province. As you can see, over 650,000 people in this province earned their living in retail in 1999, and since then the number has gone up. I'm going to talk about job opportunities in a minute, but I should mention that last year retailing alone accounted for a quarter of all the new jobs created in Canada. Canada created about 320,000 jobs last year; retail accounted for 83,000 of those. I think that's the largest single contribution of an industry. So we had tremendous growth in employment. These are all new jobs, incremental, and we're very proud of that kind of dramatic growth in the industry.

The other side of job creation is also what we call job opportunity. This chart shows the percentage of people in the industry who have been working in that job for less than three months. These are essentially people in a new job. That could be a brand new job; it could be a promotion; it could be with a new company. But it's a new job in the industry. You find that roughly an eighth of the labour force in retail started a new job within the last quarter. That's a very steady pattern. If you look at it going over a number of years and by numbers, what that shows, for example in 1999, is that every quarter throughout that year 40,000 people in Ontario moved into a new job in retail-160,000 job opportunities over the course of the year. Those are not brand new jobs, but they're opportunities for an individual to get a paying job. I imagine when the data come out for 2000, we'll see that number go up even higher. It's a great opportunity for people to enter the labour force, to better their skills, to move up and to get a paying job.

I'd like to talk now, just to finish off very briefly, about the number of businesses in Ontario in retail. Again, just the sheer size of this industry somewhat overwhelms me when I consider it. Look at the thousands and thousands of companies that are represented in Ontario and, again, the very large number that are small businesses. We found it helpful to take these data and break them down into a couple of sample communities that we picked. We picked a couple almost at random.

This is Vaughan, just north of Toronto. When you look there, you see-what is it?-98 gas stations, 125 stores selling health and personal care, 63 for sporting goods, hobbies, books and music. That's a lot of small businesses in this one sample town. We chose Parry Sound for reasons that will be obvious but are less relevant now, as a result of changes in the last couple of weeks. I didn't have a chance to change my slides. You can see, in a town like Parry Sound, just how much the retail industry contributes to the economic and the personal life of the community.

I'd like to finish off with some policy observations. This year our members asked us to be fairly general. We don't have a shopping list of fiscal or other changes. They feel that the broad directions this government is pursuing are largely ones that they would support, so they asked me simply to flag three pieces to the members of the committee here: first of all to remind you, as I'm sure you're very much aware, that it's terribly important that we promote the growth of personal disposable income, especially of lower-income Canadians. It's easy, sometimes, to forget that when the economy is strong, but the purpose of having an economy, of having economic growth, is in fact to improve the well-being of our fellow citizens. That's a fundamental policy principle that a lot of our members keep referring us back to as one that we should keep emphasizing as a priority-particularly lower-income Canadians. Now you understand why: because they are by far the people who shop in retail stores.

Secondly, on the basis of our concerns about the employment of technology, we would suggest the government might consider better tax treatment for computers and software. I don't have any hard and specific recommendations in that area. I hope to come back. We're just starting to look at that, as a result of the data that we've gathered.

Finally would be, where possible, to lower per-person employment costs-we are an employment-intensive industry, as you've seen-and to give us the opportunity to promote some flexible labour practices. Certainly we welcomed the changes in the Employment Standards Act that came through just before Christmas. We see some positive developments there in terms of allowing employers and employees to arrive at more flexible arrangements.

Those are my opening remarks. I'd be glad to take any comments or questions.

The Chair: Thank you very much. We have approximately three minutes per caucus, and I'll start with the official opposition.

Mr Phillips: First, oftentimes the retail industry is one that feels the economy earliest, you would think. But I gather from your comments that your members are not seeing any slowdown right now.

Mr Woolford: No. We had a board meeting a couple of weeks ago, February 1, and just as part of the process of introducing a couple of newer members, the other members went around the board and indicated their company and sort of a rough explanation of how they saw things going. The reports back were uniformly very positive. Admittedly, we tend to get larger companies and healthier companies on our board, but again, the forecast from our independent members was very positive for this year. It's very anecdotal, but talking to independent members, they still see quite a good year ahead for them. Like you, I'm a little surprised at it. I would have thought they'd be more cautious.

Mr Phillips: You were saying that they project a 2% to 3% increase in sales. That's kind of inflation. Is that what they are predicting?

Mr Woolford: I think in retail that's probably not inflation. Retail prices are still not going up that fast, so I'd say there's real growth in there of at least 1.5%. When you take out population growth, that means that real after-tax disposable income growth being translated into consumption would be less than 1%, I would guess. So you've got 1% employment growth, a little less than 1% growth in spending power, if you will, and maybe a little more than 1% in inflation.

Mr Phillips: Judgmentally, I would have thought on the employment side, because I see so many of the box stores being built-the Wal-Marts, the Home Depots, all of those that look to me like they employ fewer staff per million dollars of sales than the stores they are replacing-that employment would be stagnant in the retail business, so I was pleasantly surprised to see that growth. What am I missing there? As the huge stores come in, are there also lots of labour-intensive smaller stores being opened?

Mr Woolford: Certainly there is no question that the larger formats are much more labour-efficient. You can move a larger value and a larger volume of product with fewer hours of employment.

I think what has happened is that in the last two to three years we have finally seen some significant growth in personal disposable income, and that has flowed directly through to our members' stores. They have seen customers show up who now have a job, who have a better-paying job, who have got a promotion, and they're prepared to spend. We've seen much higher rates of growth in spending in 1997, 1998 and 1999, and somewhat softer but still positive growth in 2000. When retail is growing, that's when retailers make their money, on growth. So I think they've been able to go out and hire a lot more people. You've probably seen more businesses start up as well.

Mr Phillips: I've always worried when I see a large box store go into a community about who then won't exist, because they take a huge volume. There's a store in the area that's open 24 hours a day. You can go into Home Depots at midnight.

But my question is this: in good times, maybe the ones that might have been hurt by it aren't hurt by it, but are there any danger signals to us, when the times slow down a little bit, that the casualties of the big box stores may be accelerated?

Mr Woolford: This is something we've wrestled with over the years. There's no question that in a downturn, retail feels it first and they feel it hard. Less efficient, less competitive retailers will be pushed to the wall. The larger formats are more successful. Customers like them. They are certainly lower-cost, and so they will survive a downturn better than your typical smaller retailer.

The position of the trade association, though, is that this is a consumer-driven business and what's good for the consumer is good for the industry. So it is better for the industry to see that bloodletting, if you will, because it reflects the demands and needs of consumers, than to try to somehow protect it from the effects of consumer demand. It's a brutal business, there's no question. This is a very tough business to make a living in. You can see it in the data for profitability. I think those data were from 1997, which was a relatively good year for retailing, and yet roughly a third of businesses were still losing money. This has never been and never will be an easy business.

1520

Mr Christopherson: Peter, welcome again. You and I mixed it up before on labour issues, and since you referenced it here, I'm going to touch on it, but that's not going to be my sole focus this time, because the legislation is behind us. I know how you feel; you know how I feel. Again, I won't just argue the point about the flexible; we could go into that. But I do want to ask you how you square the fact that your first point, and you mentioned it a number of times after, was to promote the growth of personal disposable income, particularly at the lower end, which is understandable because, as you mentioned, that's where the money circulates and in a local economy that's what makes it go, but then at the end you say you supported the last piece of labour legislation. That was the Employment Standards Act, where the government refused to increase the minimum wage. Ordinarily, you and I can lock horns over the issue of minimum wage. I raise it this time not because debate between you and I is anywhere new that we haven't been, but rather you started with the issue of talking about disposable income, so I'll mention other things and let you comment, but I would hope to hear you say that some movement in the minimum wage is something that you wouldn't oppose in light of what you deem to be your most important issue, which is people who are earning minimum wage.

If I can, I want to pick up a bit on where Gerry Phillips was, because those are the notes I made. It's fine for all of us to say at the end of the day, "Well, it's a tough business, it's cutthroat," and so the box malls go in and the anti-union Wal-Marts go in there and they get a lot of business. But it has an impact not just on the dollar side of business; it has an impact on our communities big time. If you look at downtown Hamilton or any of the other smaller business areas, such as Concession Street in my colleague from Hamilton Mountain's riding, Westdale in mine, the smaller downtown centres of the former municipalities of Dundas and Ancaster, over time, they lose their whole character.

Is there something above and beyond just the dollar dynamic of the markets that government, at whatever level, should be looking at, if not incentives, something to preserve our downtowns so that they become something more than just little mini Las Vegases and lose that liveability? Because it seems that in order to revive older communities like Hamilton one of the key things is your mix of business, service and residential, and then a mix of income within that residential component.

Just standing back looking at it with all your years of experience and your pan-Canadian breadth of view, are there aspects of this that government ought to be looking at that aren't necessarily going to interfere with the marketplace-see, John, I can say that-that don't necessarily have to do that but do allow us to preserve an important part of our communities? Just your thoughts on that, Peter.

Mr Woolford: That's an interesting question, and it's one that we've wrestled with. First of all, I have to tell you, Mr Christopherson, I am going to disappoint you.

Mr Christopherson: Oh, no.

Mr Woolford: I know this comes as a shock.

Mr Christopherson: How can you keep these people in poverty, man? How do you sleep?

Mr Woolford: I think the answer there is that the market for labour is like everything else: there's a market. What you want to do is ensure that people respond rationally to signals. I think you'd find today in fact, if I'm not mistaken, that the average retail wage in Ontario now is significantly above the minimum wage. That is driven there by market pressures.

Mr Christopherson: A lot of that's also driven by the UFCW, which negotiates good rates for their members who work in grocery stores.

Mr Woolford: In the general merchandise retail trade, the UFCW is not a significant factor.

Mr Christopherson: No, but they would affect the average. But anyway, sorry to interrupt.

Mr Woolford: Our argument there would be again that we feel it's better for buyer and seller to operate in a free way.

The impact of big boxes on communities is a tough one. We've actually had a lively debate within the trade about this. As a matter of fact, if I'm not mistaken, it may be in this copy of Canadian Retailer or an earlier one-I'll send you a copy, Mr Christopherson-where I wrestled this through, because our retailer of the year last year was in fact Dave Ferguson of Wal-Mart Canada, and we had a number of independent members come to us and say, "How can you honour somebody who's the Darth Vader of retail?" and our answer was, "He is in fact a very good retailer. We should be proud of him and small merchants should be proud of him as well."

Those big boxes have built a format, a style and a way of retailing that is very attractive to the consumer. If the consumer wants to go downtown, they will go downtown, but they have voted with their time, their wheels and their dollars to visit those stores and it's not the retailer's business to tell them they can't do that. That's the hard nut we have to chew on in the retail business. The consumer is the king or the queen of our business and what he or she wants drives the retailer.

Mr Ted Arnott (Waterloo-Wellington): Thank you very much, Peter, for your presentation. I haven't been here for 12 years to hear you but I've enjoyed the last three or four.

I wanted to ask you about the minimum wage because our friends in the NDP continue to raise this. The adult minimum wage, I believe, is $6.85 an hour and it was raised considerably under their tenure in power. Was it 40% that it went up, Dave?

Mr Christopherson: A little under, but I'll take credit for 40%.

Mr Arnott: I believe it is their position that it should be raised to $7.50 an hour.

Mr Christopherson: It would make it equal with the American minimum wage.

Mr Arnott: It seems to me our position in 1994-95, as a caucus, was that we would freeze the minimum wage until competing jurisdictions caught up. To be fair, I think some of our competing jurisdictions have caught up, if you convert American dollars to Canadian dollars. That's my understanding.

Mr Christopherson: Didn't that just support my argument?

The Chair: One discussion at a time, please.

Mr Arnott: Just let me finish. There have been some economic studies which indicate that an increase in the minimum wage actually costs jobs and that employers choose not to hire people as the price of labour goes up. What do you think the impact of an increase in the minimum wage to $7.50 an hour would be in terms of jobs in the retail trade in the province?

Mr Woolford: I think the impact would be negative. At the present time, the negative effects might be somewhat muted because conditions are so strong. Where you'd probably see a stronger effect would be whenever growth does slow down.

It might be helpful for members to understand how retailers go about the business of paying. A retailer will have a certain amount of margin on the product which generates the revenue to the retailer above the cost of the goods sold, and out of that margin they have to pay all their operating costs. Typically what a retailer will do is calculate a certain portion of that margin as their salary budget, their wage budget, and out of that comes everything: the Canada pension plan, employment insurance premiums, workers' comp premiums, pay, benefits, the whole works. So in a sense, the salary or the wage that a retailer can afford to pay is the residual after you've taken the other elements off. Then you simply calculate out what you can afford to pay or what you're required to pay by minimum wage and that becomes in essence your wage per hour.

What it means in our business, then, is that if the cost per hour goes up, as a retailer, if there's not additional money in that pot, you simply reduce the number of hours the people work in the store. Retail hours are somewhat flexible. You can dial them up or dial them down. The saying in retailing is, "You're only as good as yesterday's sales." They watch their sales very closely. Most medium- and large-size firms have computer programs that measure it almost to the quarter hour. They know exactly when the customer wants to shop and they try and ensure that set staff are there for those times. So they do manage those costs extremely closely, they watch them on a daily or weekly basis, and if the base tends to get raised, then the impact at least in the medium to longer term will be fewer hours of work for people and probably somewhat fewer opportunities.

The Chair: We've run out of time. On behalf of the committee, thank you very much for your presentation this afternoon.

Mr O'Toole: See you next year.

Mr Woolford: Same time next year.

1530

ONTARIO SECONDARY SCHOOL TEACHERS' FEDERATION

The Chair: Our next presentation is from the Ontario Secondary School Teachers' Federation. Will you please come forward and state your name for the record. On behalf of the committee, welcome. You have 30 minutes for your presentation this afternoon.

Mr Earl Manners: On behalf of the 50,000 members of the Ontario Secondary School Teachers' Federation, I'd like to thank you for the opportunity to present today. My name is Earl Manners. I'm president of the Ontario Secondary School Teachers' Federation. On my right is Mark Ciavaglia, who many would probably know from our staff, who is our legislative liaison, and on my left is Dale Leckie, another member of our staff, who works in the area of education finance.

You have a copy of our brief and, knowing we have just half an hour and wanting to ensure there is time for questions, I do not intend to read it or go through it page by page, but I will try to highlight some of the key points that I think need to be emphasized.

To cut to the chase, it is our position that there are not enough teachers and education workers to provide for the needs of Ontario's students today. Therefore, there needs to be a significant infusion of money into the education sector. The lack of funding and the inflexibility of the funding formula and other related legislation have served to make Ontario schools less attractive places to work. Finally, there is not enough money to support the educational reforms embraced by this government, whether they be your safe schools policy, the integration and provision of programs for special-needs students or the new curriculum.

There is an illusion out there, though, that there's been a lot of new spending on education in this time of prosperity. Throughout the last year there has been a series of announcements about education funding, which we have listed in our brief. For example, new funding for the learning opportunities grant has been announced four times, funding for new textbooks has been announced five times and special education funding has been announced 10 times throughout the past year. It does, I think, create the illusion. Some people may believe that each time these announcements are made, they are really announcements of new funding for the education system. If you add them all up, they come to $4.7 billion. I don't think that has been an accurate reflection of how much money has been invested in education in the year 2000. In fact, most independent analyses of the education funding formula have agreed that over the term of this government more than $1.7 billion has been extracted from public education when you take into account enrolment increases and inflation as well.

We see this as a missed opportunity, because there has been no new investment in education, despite the prosperity that has been emphasized by both the previous finance minister and the current finance minister. The government has said that in the last fiscal year they have increased funding to public education by $190 million in net new money. But when you take into account inflation in Ontario, enrolment increases and the fact that the funding formula continues to claw back pension contributions and any savings from retirements and hiring new teachers, there has been an actual decrease in the past year, as there has been in previous years under this government.

I don't often quote the finance minister, but I will. In Hansard on February 13, the Honourable Jim Flaherty said, "we are on track for a $1.4-billion surplus in 2000-01." We know that Minister Ernie Eves indicated there was a surplus last year, but none of it went to the public education system. We believe that if there are real surpluses this year, it is time to reinvest in our public education system.

In that same presentation, the Honourable Mr Flaherty noted that Ontario has the most educated workforce in the OECD. He also indicated that in order to be competitive, we have to remain competitive with the Great Lakes states that surround us. If the logic is accepted that we have to remain competitive with our colleagues in the Great Lakes states, then I think it would apply to education expenditure as well, if one of the drawing points for the Ontario economy is that we have the best-educated workforce.

When you look at a comparison of Ontario with the Great Lakes states, we just don't measure up competitively. In New York, our neighbour to the south, they're spending over $10,000 per pupil; in Pennsylvania, over $9,000; in Wisconsin, over $8,000; in Indiana, over $7,000; in Minnesota, almost $8,000; in Ohio, almost $8,000; in Illinois, just over $7,000. In fact, the average of the Great Lakes states on per pupil expenditure is $8,458. What is Ontario's expenditure? Almost half: $4,992.

As a result of that, we're in danger of losing the most highly trained and educated teachers and educational workers in this province. In our brief, on pages 10 to 13, we highlight the teacher shortage in particular. I'd specifically like to reference page 12 of that section, because the shortage of teachers is not just due to the demographics of retirement; it's due to a work environment that is increasingly unattractive and not competitive. Last year, over 9,000 people left the rolls of the Ontario teachers' pension plan. Of them, 5,142 were due to retirement; 4,414, though, were quits. That's almost half the number of people who left the rolls.

This is unprecedented, and they are not people who are just nearing retirement and decided to leave with penalties. They are people like Dan Duquette, who happens to teach at my old high school, Grey Highlands Secondary School in Flesherton, who is recognized as an exceptional trades and technology teacher, and after many years of teaching has decided to quit and leave the profession in its entirety. He is an example of many young people who don't want to teach any more. His leaving is particularly poignant, because as a technical teacher he is one of 1,525 technical teachers who will be leaving the profession in the next year. There are only 77 technical teachers being trained in our faculties of education across this province. I don't know who is going to replace Dan Duquette in my hometown of Flesherton.

Last year, 6,669 teachers graduated from Ontario faculties of education; however, 662 did not apply for college accreditation, which they need in order to teach in this province. That's 10% of the students who graduated from Ontario faculties, a 135% increase from 1999. Applications to faculties this year are down 35%, and the number of spaces in the faculties doesn't match the number of retirements even if the faculties filled up all their spaces.

This is a problem that in part was predictable due to demographics but was also predictable due to the changes in legislation and funding formula that have hurt our education system. In fact, since this government has been in power, because of the impact of the funding formula and legislation, the number of teachers and education workers, whether directly or indirectly, has declined by over 9% across this province. There are only 58 staff per 1,000 students in our schools today, and that has a direct effect on school safety. The more adults in the school, the more safe the school. That 9% reduction does have an impact.

1540

I'd like to talk directly for a second about students and the impact of the funding formula on student opportunities. I will not reiterate the concerns that are raised in our brief about special education funding and other areas. I think they're well known to everyone in this room and to the public at large. But I want to bring up an aspect of the funding formula that concerns teachers and educational workers greatly, and that is the underfunding of student credits.

The funding formula, as it's written, only provides funding for an average of 7.5 credits per student. Many boards, when they look at their student enrolment in courses, find that the average number of credits is greater than that. That's something that should be applauded. Our students are trying to take as many courses as possible. They're trying to get a wide-ranging education in a number of fields so that they've got greater opportunities for the future.

These average credits per student should get higher with the introduction of the new curriculum in an attempt to try to ensure more students graduate in four years. But today, even under the old method, in Thames Valley, for example, the average credit is 7.56. That doesn't sound like an awful lot of difference between the average of 7.5. But in terms of the number of credits it generates and the number of teachers that's required to teach those extra credits, that's an $800,000 shortfall on the funding formula to the Thames Valley board of education. Halton region also has a 7.56 average credits per student ratio, and that means a shortfall of $450,000. We just use those two as examples, but there are many more like that all across this province.

In conclusion, I would just like to say that this government likes to look to the United States when it comes to making comments about competitiveness. Some of our American neighbours have made a number of the mistakes that we believe are being made here in Ontario today, in particular that the American education system has seen the effects of funding neglect over many, many years. Recently, New York state, for example, is revisiting its state-wide funding formula. On page 6 we've included a quote from Governor Pataki of New York, who has stated that the state funding formula is a straitjacket and that school districts need more flexibility when it comes to funding for education because they can better meet the needs of their communities that are served by those district school boards.

We have seven recommendations. We believe that there should be some measure of flexibility in the funding formula that allows school boards the historic right to raise funds locally. We believe that the provincial support for public education should match and indeed exceed the inflation rate on a yearly basis. We believe that workload provisions, like those established in Bill 74, introduce a level of province-wide bureaucracy and red tape that is hurting the education system; and that the student-based funding formula, if it is to be a student-based funding formula, should not limit the number of student opportunities by limiting funding for the number of credits that students take. Recommendations 5, 6 and 7 reiterate concerns about aspects of the funding formula that we've talked about before, whether they be special education or the clawbacks that are introduced when school boards hire new and younger and well-educated teachers.

We'll end on that point. Thank you very much.

The Chair: Thank you very much. We've got approximately three minutes per caucus, and I'll start with Mr Christopherson.

Mr Christopherson: Thank you, Earl and colleagues, for coming forward. Just to stand back for a second-I was trying to think exactly where I'd like to go when I had a chance to get the floor-in as short a time, obviously, as possible, Earl, is it possible to just give us a snapshot of where we were five years ago, before the government started down its road of creating a crisis, and compare it to where we are now, and some sense of where we're going to be at the end of, say, this term of the government, hopefully the last, in terms of the changes that are happening? So where did we start out, where are we now, and if we keep going down this same road, if they don't listen to you and they don't listen to anyone else who's coming in and saying education at all levels needs to be funded for a whole host of reasons, including good business, if they don't do that, where's that going to leave us four years hence? What's the system going to look like?

Mr Manners: In 1995, we had an education system that had one of the best graduation rates in the western world. It included more students than anywhere else in the education system to make sure their needs were met. It was flexible enough that local communities had some say and influence over the kinds of programs that were available in schools and throughout communities, and where there was some democratic access by parents and the community through their school boards to the decision-making process.

That has dramatically changed with the introduction of a province-wide funding formula, province-wide legislation that has created more and more inflexibility in the system and has led to significant cuts to programs and services for students.

Today, communities can't meet all the needs that parents would like to see met for their students. There are waiting lists for special education. Adult education, for example, which was probably one of the most impressive programs in the world here in Ontario, has been eliminated and privatized throughout Ontario and does not reach the number of students that it used to reach in any way, shape or form. The money's just not there.

In 1995, when people entered the education system as a teacher or an educational worker, they chose that as a calling and because they had an interest in education and it was usually their working life commitment. Today what we're seeing is a dramatic increase in people leaving within their first five years of work because their idealism is no longer being sufficiently realized because of the changes to the education system. And we're not getting the kinds of people entering anymore, wanting to work in education, with the qualifications that this education system has depended on for years. That doesn't bode well for the future.

The Chair: Mrs Molinari.

Mrs Molinari: Thank you very much for your presentation. I have some comments but I'll start off with some questions.

I find the chart that you gave us here, that shows the breakdown in per pupil expenditure in various areas, quite interesting. I have some questions on what assumptions were used in preparing this chart. It's been my experience that you can take numbers and, depending on what you put in it, you can make it look like whatever you want it to look like.

To be more specific in this area, to compare apples to apples, I would like to know what assumptions have been used to come up with these numbers. What percentage of this is in fact salaries versus ours? If you could start off with answering those questions, it would help.

Mr Manners: The comparisons are based on the same basket of items from the various states through the various provinces, the District of Columbia and the territories. If you're talking about the per pupil expenditure rankings for North America in its entirety-and that's where we got the statistics for the border states around Ontario that I quoted specifically in my presentation-they reference the funding formula and the program services, salaries etc that are required to run the education system, so we are comparing apples to apples.

As we note in our brief, we have used the January 31, 2000, conversion rates of Olsen and Associates of Zurich, Switzerland, to make sure we're controlling for the differences in the value of the Canadian dollar and the US dollar.

1550

Mrs Molinari: Would you know what percentage of that would be salaries? In Ontario 75%, 80% of the budget is salaries.

Mr Manners: Education, like health care, involves people working directly with students, so salary is a significant portion of the budget in any state or province when it comes to public education, just as it is with public health care. I would suspect-and I could probably check some of these figures and provide them for you if you like-that in some of those American states and other provinces the ratio for the salary component of this would be about the same as Ontario.

Mrs Molinari: It would be interesting to know.

Several studies have been done in the past that have stated that the old funding model was inadequate and flawed. It had been presented to previous governments numerous times and no government had the courage to actually come in and change that funding model, whereas in 1995 this Conservative government came in and put forth a per pupil funding model that was more fair to all of the students in Ontario, rather than areas rich in assessment, which always had more money and were able to offer more for their students, versus poor in assessment.

The other difficulty with the old funding model was that when boards were allowed to levy tax increases, there was a threat of strike action, so boards were forced into positions of increasing salaries to a certain extent and taking money away from classroom expenditures, because that's not as tangibly seen by the parents and students as a strike. Some of the changes that were made in the present funding model put more parameters into what classroom spending should be and gave boards more restrictions as to what that should be with respect to administration, staffing and supplies and services for the schools. So there have been a number of changes that were made that were positive, that would directly benefit the students and would not put boards in a situation where they were forced into certain decisions because of public pressure and the pressures of all of those around them. I'd like your comments on that, please.

Mr Manners: I appreciate the question. There is no question that the previous funding formula was not working as well as it might, but there were no studies ever suggested that I'm aware of that the province should take over complete control of the funding of education. In fact, one of the problems with the old funding formula was not the principle it was based on but the fact that the provincial share of funding had decreased to the point where it put too much strain on the local property tax system, which is not a progressive tax system like income is. So more and more burden was being placed on local school boards to go to the local tax base to pay for the basic costs of education that historically had been the responsibility of the provincial government.

When the funding formula was developed, it was based on the assumption that about 60% to 70% of the funding would come from the province and 30% would come from the local tax base. As that dwindled-it ended up that 70% of the funding was coming from the local tax base-you ended up with problems related to rich assessment bases and poor assessment bases. If it had stayed at the original ratio, that would never have happened, because that was already built into the assumptions of the original funding formula.

School board tax increases over the last 20 years are tied more to the decrease in provincial funding than to negotiations or to the demands of the community for new programs. School boards were asked every year to pick up more and more of the burden and that's why there were increases in the local tax base.

I don't know why you were trying to emphasize salary in both of your questions. Salary is a factor that is part of the education system. If the salary was so good in Ontario, why is there a teacher shortage in this province? Why are people leaving in droves from this province? Perhaps to get out of education in its entirety, or to go to places like New York state, where they recently had over 400 people apply to work in places like Harlem because they thought that was a better place and better environment to work in than Ontario.

I don't apologize for teachers who are highly trained, well educated and dedicated to the cause getting a fair salary. At no time have our salaries ever taken advantage or gone beyond inflation or other factors that the previous speaker here talked about-supply and demand-in Ontario. In fact, teachers and educational workers in this province have not had a pay increase for 10 years and they cannot be blamed for the inadequacy of the funding formula.

Mrs Molinari: Just to clarify, 85%-

The Chair: Ms Molinari, we've run out of time. Mr Phillips.

Mr Phillips: Just an observation, then a comment and then a question. They gave us some numbers yesterday or the day before on funding, and it was interesting to note that while Mike Harris now sets all the property tax rates, he is actually raising more money off property taxes today than 10 years ago, in spite of the fact that it was all supposed to be, "We're going to take it off property taxes." I see that 10 years ago they were raising $5.473 billion and today they're raising $5.739 billion. So that's the shell game you talked a little bit about.

I got elected to the school board in 1969, when the TVs were coming in, and I had this thought that they were going to replace teachers and all that sort of thing. I learned in 10 years on the school board. Education, to me, is very simple: it is a well-trained, motivated teacher in front of a bunch of students in a safe environment. It's just that simple and it probably hasn't changed in 3,000 years. I believe that to the core. That's why I always say to the government, "If this were a business, you are making a huge mistake in demoralizing your prime asset, which is the motivated teacher. It just doesn't make any business sense."

I hate to live in the past, but we had the 40th reunion of our old football team and, amazingly enough, all three of our coaches were there when we went back after 40 years. They remembered not only our names but our numbers, every play, every mistake we made. My point is, from my own experience in school and my experiences as a trustee, that we've got to understand what this is all about. As I say, it's putting students in a safe, clean, warm environment with a motivated teacher. We just make a huge mistake in demoralizing our prime asset.

Now my question: the challenge, Mr Manners, is that there's a lot of jargon in education. The funding formula is a trap, because the government, in my opinion, can hide behind it and say, "We've increased the amount of funding for X," and they do it by taking away in a bunch of other areas, but then we're debating the details of the formula.

I'm searching desperately to find ways that we can humanize this. I know you try your best in this, but I think until we do that, the public who observe us will simply be confused about what the true state is. I guess I'm pleading with you to do a very difficult task, and that is to help humanize this for us and the implications of all the changes that have gone on-you've done some of that for us today, but for now and in the future-just so that when the public are subjected to the funding formula and this and that, they also have a human side of it. That's somewhat of a comment but also a question. Is there any way we can get some measurements that the non-educator can relate to easily so we can begin to gather what I think should happen, and that is, overwhelming public support for our public education system?

1600

Mr Manners: Thank you very much. We always try to humanize this and sometimes the best way to humanize the situation is to talk about people. I don't intend that to be self-serving, just to talk about teachers and educational workers, but also students and the people who are involved in education throughout the system.

The government makes a big deal that they've taken money from administration and moved it to the classroom, yet their definition of the classroom has become ever smaller so that it doesn't even include large aspects of the school. Yet I think most people in the public would believe that anything that is going on in the school is classroom or classroom-related.

You can't operate a school, you can't have students in a safe, welcoming, clean environment, if you don't have a custodian, yet a custodian is defined as administration under the funding formula, a definition that any custodian would have a hard time rationalizing. The secretary in the school, who is often the first person to phone home when a student is absent and may be the first person to discover that there's been an accident on the way to school, is defined as administration yet is integral to the operation of that school. Other support staff are also defined as administration. It's a nice way to shrink the school, to shrink the services and eliminate the programs.

Adult education: because they turned 18, they were no longer considered students and therefore all of the expenditures were defined as administration. Here were people getting a second chance, getting off the welfare rolls and getting back into productive life, yet that was defined as administration in order to eliminate the program from the public education umbrella. I think that's the best way to humanize it.

Let's just take a look at that arbitrary definition between administration and classroom and say that's the point where we need to rethink and re-look at the funding formula. If we come up with a real definition, where the whole school is considered a classroom and administration is something else off campus, then perhaps we can get back to a better funding formula that's serving the needs of students, parents and communities.

The Chair: On behalf of the committee, thank you very much for your presentation this afternoon.

COUNCIL OF ONTARIO UNIVERSITIES

The Chair: Our next presentation is from the Council of Ontario Universities. Could you please come forward and state your name for the record. On behalf of the committee, welcome. You have 30 minutes for your presentation this afternoon.

Dr Mordechai Rozanski: I am Mordechai Rozanski, vice-chair of the Council of Ontario Universities and president of the University of Guelph. I'm joined by Dr Ian Clark on my right, who is president of the Council of Ontario Universities, and Ken Snowdon to my left, who is the vice-president of the council.

Thank you for allowing us to present to you today. In doing so I note the fine OCUFA presentation made earlier. As you will hear during our presentation, there is agreement with many of our colleagues' key points. Knowing that our time is limited and that OCUFA has drawn your attention to many of our shared concerns, we'll be very focused in our presentation.

The evidence clearly illustrates that a highly educated population and a dynamic research culture are vital to positioning a jurisdiction to compete in the new knowledge-based economy and to contribute to improvement of the quality of lives of Ontarians. The outcomes of the Premiers' conferences held in 1998 are clear reinforce-ment of these facts. Over half of the priorities identified in the summary report, Road Map to Prosperity, revolve around education. It is widely acknowledged that education is inextricably linked to our province's vision for economic vitality, social advancement and cultural improvement.

You have all received a package which contains our brief to the committee and two other documents that provide yet more very compelling arguments for investing in Ontario universities and, therein, Ontario students.

Ontario universities make a vital difference to the quality of life of this province and its people. In addition to the very important social and cultural reasons for investing in our universities, there are sound economic benefits.

Let me share with you a few key points from the Economic Impact Study: The Economic Impact of Ontario Universities. This report, by Enterprise Canada, was commissioned by the Council of Ontario Universities and has just been released here today. I hope you will be impressed, as we are.

First, Ontario universities are provincial leaders in job creation. This means that Ontario universities are major contributors to economic growth and job creation, directly or indirectly sustaining more than 375,000 jobs in this province.

Second, for every dollar of investment in universities, the government gets back $1.50. This means that with the direct provincial investment in Ontario universities of about $2.1 billion per year, the province receives more than $3.2 billion back in revenues generated directly and indirectly by the university sector. You might see this on your pie charts on the front cover of the newsletter.

Third, Ontario universities generate more than $10 billion in economic activity each year. This means that the gross domestic product of the Ontario university sector is larger than any of the province's plastic products, textiles, paper products, fabricated metal, electrical and electronic products, communications or chemical products industries.

You have a copy of the report and the special edition newsletter in your folder and I hope you will be able to steal time from your busy schedules to review these materials. The newsletter also provides a glimpse, through specific examples, into the scope of the contributions that Ontario universities make to the province and its people. I know these examples will make you immensely proud of the rich resources we possess in our universities and the direct relevance to us, both as individuals and as residents of the province.

The evidence is clear: an investment in Ontario universities is an investment in this province. The social, cultural and economic dividends are significant and far-reaching. University education benefits Ontario in the aggregate by creating jobs and wealth in the new high-growth sectors, by developing a high calibre workforce that is one of the greatest attractors for new economic investment and by preparing graduates to contribute to society in the arts, humanities, social sciences and sciences as creative and well-rounded individuals. A university education benefits students individually by increasing their employment and income prospects and stimulating personal growth. Ontario's investment in university students produces immediate gains for the province that accrue over time.

Let me also say that a jurisdiction's research capacity is another key determinant of prosperity and quality of life. Among its many benefits, research spawns innovation, commercialization and technology transfer, and attracts investment. Canada depends on the higher education sector for almost one quarter of its national research and development effort and Ontario is home to over 40% of the scholarly and research activity in Canada. Research and scholarly activity, the wellspring of innovation, pervade every aspect of university teaching and learning, pushing the boundaries of knowledge and encouraging free inquiry.

Allow me to place this important point about innovation in a context that was cited earlier by our colleagues from OCUFA. A vibrant and diverse research environment is central to our teaching and learning success. It also stimulates our ability to attract and retain the very best faculty and graduate students in what is an extremely competitive international marketplace. When I say "diverse research environment," I join OCUFA in referencing Heather Munroe-Blum's study, Growing Ontario's Innovation System, which makes clear that innovation draws on the full range of basic and applied research in the sciences, humanities and social sciences.

Why is investment in Ontario's universities so important at this particular juncture? Ontario is on the verge of the greatest surge in demand for university opportunities in more than 30 years. Yes, the challenges are considerable and universities have been working closely with government to plan for the expansion for some time, but there is reason to welcome these challenges, to build on our strengths and in turn to ensure Ontario's success in the new economy.

Over the next decade, an additional 90,000 students are likely to be seeking admission to Ontario universities, bringing the student total to some 320,000 by 2010. You can see that on our chart. Our population of 18- to 24-year-olds is growing. It is expected to increase by over 18% by 2010, and within this age group there's an increase in the number of individuals participating in post-secondary education. Conservative projections indicate that increases in participation rates may reach 25% by 2010. It is also expected that participation among those in mid-career will increase as the knowledge economy requires more working adults to renew their skills.

1610

As most of you here know, secondary school reforms in our province, particularly the elimination of grade 13 in 2003, will create a significant increase in demand. In less than two years, we will see the last of the students in the former secondary school system and the first of the students in the reformed secondary school system seeking university admission at the same time, resulting in an abrupt increase in the demand for first-year places. At the height of this peak, in 2004, secondary school reform could result in an additional 33,500 students seeking admission to Ontario universities, which are at capacity. Remember, that's over and above the normal first-year admission numbers, which total close to 50,000.

Let me make you see one other point if we go out further, to 2005. In 2005, we expect to see total full-time undergraduate enrolment approach 300,000 students. Just as our student numbers are peaking, our faculty numbers are on a steep decline. We must reverse this trend as quickly as possible. It is faculty who help guide students' thinking, challenging them to deepen their understanding. Through teaching, research and their ability to nurture innovation, they generate the advanced knowledge that Ontario needs for leadership in the new economy.

It is estimated that, at a minimum, 13,500 new faculty will need to be hired in Ontario; that means 1,350 faculty to be hired each year for the next 10 years. Seven thousand five hundred will be needed to offset faculty losses, due primarily to retirement, a trend that is mirrored across North America, resulting in competition from virtually every jurisdiction on this continent. It makes good economic sense for Ontario universities to be in a position to seek out the best and the brightest. Four thousand two hundred will be needed to meet the projected enrolment expansion over this decade and 1,800 will be needed to improve the quality of the educational experience that is currently undermined by Ontario's disproportionately large student-to-faculty ratios, which lag behind the other nine provinces and the United States. You might take a look at page 4 of the brief.

Consider that Ontario's ratios are some 10% below the average of Canada's nine other provinces and some 30% below our peer public institutions in the United States. We must start recruiting faculty as soon as possible. The surge of new students will arrive on our campuses by 2003, two years away. It takes 12 to 18 months to recruit new faculty in an environment where universities in other Canadian provinces and in the United States are also competing for faculty.

This situation also reinforces the importance of expanding graduate studies to develop the pipeline of new faculty. Let me mention that currently Canada produces 4,000 PhDs per year. Government and industry recruit some 50% of these graduates. We have a daunting challenge.

A number of other factors contribute to the quality of students' learning. Faculty rely on the support of numerous individuals to deliver excellence in the classroom and beyond. Our students count on a host of resources to round out their life as a student, from academic and administrative support staff and well-maintained labs and learning resources, to heating, lighting and food service facilities. Given the inadequate funding, Ontario universities have had to defer the maintenance and renewal of these teaching faculties and resources.

Providing our students with the deeper tools and the proper tools and resources for success creates the solid grounding that stimulates the pursuit of excellence. That results in the acquisition of knowledge and skills that will make the province a winner in the new economy.

The university of 2001 is a different, more efficient and dynamic institution than that which existed just a few years ago. But significant reinvestment by government in basic operating grants is necessary to enable Ontario universities to move forward and develop the infrastructure that provides the necessary tools for teaching, learning and research.

A predictable planning environment will create more stability for the well-being of our universities and, more importantly, for the ultimate economic, social and cultural well-being of our province. That well-being is fuelled in direct proportion to the level of investment in our universities. The Ontario government has recently begun substantial reinvestment in university education through innovation programs such as SuperBuild, ATOP and improved student assistance programs. As you will note from page 7 of our brief, the Ontario government is also making exceptional investments in research through doubling the Ontario Research and Development Challenge Fund, expanding the Ontario Innovation Trust by $500 million, doubling the Premier's Research Excellence Awards for the remaining years of the program and creating an annual research performance fund to support research overhead costs.

Universities have responded to these forward-thinking initiatives, resulting in increased enrolment, new and expanded courses, increased use of technology-mediated learning and innovative partnerships with the private and public sector. Ontario universities are well-placed to ensure that Ontario students can access world-class education and, as a result, can help position this province to compete in the global economy.

Some excellent work has taken place thus far. What we need to turn to now is an investment in university operations, to meet enrolment demands, to hire new faculty and retain them, to ensure that students are offered the highest quality learning experiences, that university physical infrastructure is sound and to build the province's research capacity. Here we have an opportunity to do something terrific for the future of our province, to contribute toward the objective of making Ontario one of the world's leading jurisdictions, as well as one of the best places to live, work, invest and raise a family.

The people of Ontario have every right to expect maximum return on their investment in their universities, and to achieve this, it is clear that further investment will be required. But it is also clear that it is a wise and necessary investment that will generate considerable payback for this province in the new economy.

Before concluding our presentation, I'd like to ask Dr Ian Clark, who has been intimately involved with the Investing in Students Task Force consultation, as well as the economic impact study, to add anything that he may wish.

Dr Ian Clark: Thank you, Dr Rozanski. The committee has probably heard in the course of presentations lots of claims of different groups of how their particular sector is good for Ontario. This economic impact analysis that we are tabling today is very surprising to me, because it's the first time I've been able to see how this has actually been calculated. It just seems like magic that you put in $1 and get out $1.50. Let me just draw your attention to the analytics very briefly on page 4 of this document, so you can see how this magic occurs.

This is actually a very conservative kind of analysis, because it's looking just at the Ontario government-the Ontario government puts out money, what comes back into the Ontario government, not what goes into the general economy, not what goes into people's increased incomes, but just the government. The provincial transfers, the first line, are $1.9 billion, and another $225 million for student aid, and the right-hand columns show what comes back every year. So $771 million comes back directly from universities in terms of the taxes and these other various components. Coming down, the one that makes it such a dramatically important investment is the payback, which is the third from the bottom line, the increased income taxes that university graduates provide to the province because of the increased incomes that they generate by virtue of having a higher education.

1620

That's why, in terms of when you think of any sector, I don't think there is any other sector where this occurs. You put the money in and it really is an investment in the most sort of classic, bean-counter sense of an investment. You actually put the money out from the Ontario government and here the government gets back in more than you put out. We're just making this public today. It's quite a remarkable thing.

Dr Rozanski: It's remarkable. It's a case where you can actually say that we're doing well by doing good.

Let me conclude with the comment that we are very appreciative that Minister Cunningham and her colleagues in the Ministry of Training, Colleges and Universities have a profound and sympathetic understanding of these needs and are committed to trying to meet them. Because we have worked so constructively in partnership with the ministry over the last year to develop plans to meet these various challenges, we remain hopeful that the government will be able to commit the necessary resources to make this happen.

On a closing note, I want to thank the Chair and I want to thank the members of the committee for giving us the time to be present today. We'd be very pleased to answer any questions that you have.

The Chair: We've got six minutes in total for questions and answers, so two minutes per caucus. I'll start with the government side.

Mrs Molinari: I know my colleague John O'Toole has a question, so I'll just make a very quick comment just to thank you for all the work you're doing with respect to the issues you've brought forward. I know Minister Cunningham values the work and the constant dialogue with your organization and also the work you've done in the Investing in Students Task Force. I'm anxious to have a look at that report that's coming out. Certainly, I know the work you've done is appreciated by all of the ministry. So thank you and keep up the good work.

Mr O'Toole: Just very quickly, you've made a statement, and I appreciate your presentation, and I do believe it's an investment in intellectual capital. We've heard that argument from the business side, but this is an interesting investment proposal. You mentioned that Ontario has 40% of the research of all of Canada, and yet when I look at the other numbers, we're the lowest funded, the way it's put to me. How would you explain that? Is it the traditions of the great universities like Guelph, like U of T and Queen's and Western, or is it something else? Is it this synergy of industry, research and universities all working together as part of-it's the right place to be in technology and medicine and-

Dr Rozanski: You've answered the question wonderfully, so thank you.

Mr O'Toole: Governments can't do it all.

Dr Rozanski: That's clear, and we understand this partnership. I think part of the reason why it's so concentrated here is the excellence of 17 world-class universities with outstanding faculty. The key is that to be able to sustain that activity, we need to keep attracting these people. We're going to lose 35% to 40% of our faculty over the next 10 years, plus we have to have a significant portion of that for the growth that we'll have and the quality.

But let me also indicate that when we talk about investing in resources, while we may represent 40%, by comparison to other jurisdictions, the dollars, while they've been tremendously increased in the last few years both by the province and the federal government, our focus is also on the operating grants, which is the key. It's great to get research funding, but we need to have the faculty, we need to have the laboratories, we need to have the technicians to be able to bring that into practice and have technology transfer that results. Otherwise, the research activity will be moribund.

The Chair: The official opposition.

Mrs Marie Bountrogianni (Hamilton Mountain): Welcome. A great presentation, as always, from the council. Less conservative research studies on the impact of public money spent on education, of course, have shown that for every dollar spent on colleges and universities, $4 goes back to the local economy, sort of more general research outcomes. I think I may have read that from one of your documents.

Dr Rozanski: That's the number in our local community. That would be true. But we tried to be extremely conservative and look at direct impact, and I'd let my colleague speak to that. But you're absolutely right: one could say that the number is actually larger.

Mrs Bountrogianni: With respect to your discussions and your optimism that the government will co-operate and give the need money for universities, how soon would you need to know how much you will be getting at the university sector for 2003 to deal with the faculty shortage and the influx of extra students? I have another question if I have time, so please answer quickly.

Dr Rozanski: We're always hopeful. We've been working for over a year in developing plans that deal with enrolment and focus on funding issues. It is of course our hope that we would know as soon as possible because we need to begin the task, as we've said and as you have mentioned, of the hiring and investing. We're already at capacity with our students and we need to go forward, so the sooner the better because of the lag time just in hiring. We're competing with every other jurisdiction, including in Canada the other nine provinces.

Mrs Bountrogianni: Duly noted. Government, as soon as possible, they need to know.

Lastly, again with respect to your optimism, you also made a presentation for the private universities bill and made a number of good amendments. How many of those amendments were passed and integrated into the bill?

Dr Rozanski: I don't believe any were.

Mr Christopherson: Thank you very much. It seems to be education day today. Hopefully, the folks at the ministry are tuned in.

I don't know if you were in the room. I did point out-I won't go into the same spiel; if you're interested in how it'll play out, it's there in the Hansard-but there are two examples cited by the chief economist for the TD Bank first thing this morning. Two of the charts that he presented were very much a detailed analysis. Two of these charts speak to the underfunding of universities in the context of their importance to business.

Dr Rozanski: I'd love to have a copy.

Mr Christopherson: I'm sure if you ask Susan she can make arrangements for you to get a copy of the TD presentation. There's probably one kicking around.

I made the point earlier with the faculty association that it's not just you making the case, that there are good business reasons to do this. You've now got business making the argument that there are good business reasons to do it, so you might want to be sure you remind people of that.

A lot's been dealt with with the underfunding. I just want to maybe deal, in the short time I have, specifically with the double cohort. Number one, you say there are some plans in hand. That's probably the most optimistic and all you said was you've been working on it for a year. I hear a lot of folks who are terrified about exactly what's going to happen.

There are a few things in this I'd like you to address for me if you would. Number one, what sort of things are being looked at specifically? Just a little more sense of on-the-ground. In my community, at McMaster University, what are we going to see there?

Dr Rozanski: A great university, number one.

Mr Christopherson: Absolutely.

Dr Rozanski: Number two, we have developed, in partnership with the government, a five-year plan, institutional plans at our institutions, to be able to respond to the double cohort. Of course, that is contingent on getting the funding we need to hire the faculty and maintain the facilities that we have.

Mr Christopherson: One's a nuts-and-bolts question and the other is a philosophical one, if you will. But the nuts-and-bolts one is, if there's going to be a lot of money-and obviously there's going to have to be a lot of money to deal with this double cohort-how much money is going to be spent that is sort of a one-off, that's lost because the bulge comes in and then the bulge isn't there any more?

Dr Rozanski: Can I make a point, if you'll allow me? Whether you call this a bubble or whatever, the fact of the matter is the combination of the four factors that are at work, which is demography-the baby boom echo is here, they're here-so even with the double cohort coming in and out, just the increase in participation numbers in the cohort will absorb that bubble and continue on. So this is not a momentary phenomenon.

Mr Christopherson: So there won't be a drop-off after-

Dr Rozanski: No. As you can see, the numbers grow and even if we project out, while there may be a stabilization, the numbers, some projections, they go on. But we know that for the next 10 years there is a steady increase. This is not a momentary phenomenon. Our numbers have been going up before that.

Mr Christopherson: The other concern that I have, like all members, I'm sure, is I have quite a few constituents whose children are in this and on the cutting edge-and not too thrilled about it, by the way. The experience hasn't been so great so far, going through the early years of high school. However, what about the fact that there will be twice as many graduates competing for what will arguably be the same number of jobs? How do we come to grips with that?

Dr Rozanski: My hope would be, and I'll let my colleagues join me, that by investing in university, the goal is that we will be expanding the number of jobs; that by the research we do, by the technology transfer, we will fuel the economy to create more jobs.

We have created many jobs. I would only add one example. During 1990 to 1998, even when one says good times or bad times, if you look at the total new jobs created between those years, there were 2.1 million jobs created out of the post-secondary system, those who were post-secondary graduates. Those with a high school education or less lost a million jobs.

1630

Mr Christopherson: I still wouldn't want to be one in that group. If I had my druthers or if it were my daughter, I'd rather go one year before or one year after. I wouldn't want to see them out there, having to compete with twice as many graduates for the same number of jobs, because I'm not aware that there are any special plans being made around provisional jobs to get us through that. Now, again-

The Chair: I think I'll end the discussion, because we're running out of time, on your positive note that if you get a college education, your chances of getting a job-

Dr Rozanski: Particularly if they're graduates from the University of Guelph sitting up here. I see at least two of them.

The Chair: We won't talk about which year, either. Thank you.

ONTARIO PHARMACISTS' ASSOCIATION

The Chair: Our last presenters this afternoon are representatives from the Ontario Pharmacists' Association. So if you could please come forward and state your name for the record. First of all, on behalf of the committee, welcome.

Ms Barbara Stuart: Good afternoon, Mr Chairman and committee members. My name is Barbara Stuart. I am the chief executive officer of the Ontario Pharmacists' Association-and a University of Guelph grad, so I had to go shake Dr Rozanski's hand.

The Chair: Good.

Ms Stuart: Thank you for allowing us to make our submission. I guess we're last on the agenda today. We'll be brief. I know you must be tired. Before we begin, I'd like to introduce my colleagues with me today. To my right is our chairman of the board, Mr Sal Cimino, who is a practising and licensed pharmacist in Ontario. To his right is Holly Rasky, who is our director of government relations and our general counsel on staff. To my left is Ruth Mallon, who is our senior director of pharmacy services.

The Ontario Pharmacists' Association, for those who don't know, is a voluntary, not-for-profit, professional association representing pharmacists and pharmacy students. We have approximately 5,000 active members in the association, although we represent all 9,000 pharmacists in the province.

With the government we have an official memorandum of understanding, which is an agreement between the Ministry of Health and Long-Term Care and the Ontario Pharmacists' Association, recognizing our association as the lead voice for pharmacists in the province.

We are a significant stakeholder in the health sector, certainly giving a lot of our time and attention at the front line, dealing with patients on a daily basis. We take the obligations of our memorandum of understanding very seriously. To this end, we constantly are searching for ways that we can help the government save valuable dollars, because pharmacists at the front line spend a great deal of their time during the day looking at medication use and how that's being spent.

Every year we participate in the pre-budget process. We view it certainly as a good opportunity do so, mostly because we know that there are opportunities to save valuable health care dollars. We also know that there are other stresses that can be relieved at the front line with pharmacists having input. So it's to that effect that we're here today.

I want to talk about three programs that are up and running that we are very active members of, because they are significantly postured to make savings for the government. One that was launched this morning, and I'm sure you're well aware of it, is the Telehealth program. We are a key partner in that program. In fact, I left them this morning at 8 o'clock. The phones started ringing at 8:30. By noon they had 30 calls, and the number has not even been published yet. So I think we're off to a good start. Pharmacists are partnering with nurses to provide the medication information and expertise on the calls that the nurses are handling frontline.

In addition to that, we also are going around the province presenting seminars to our seniors in what's called the seniors' safe medication use program that was set up by the Ministry of Citizenship, Culture and Recreation, focusing primarily on seniors and their safe use of medication, which has been very effective thus far. We're also involved in another government program, with the clinical tobacco intervention program, where we're working with dentists and doctors in front line primary care provision, in trying to get patients to stop smoking, hoping that will in turn impact on the health care system.

We encourage the government to continue the support of these programs. However, we would also like to see the government initiate other cost-saving programs. Since we've been here five years running, there's a little bit of frustration with this particular presentation because this will be the sixth time we'll be presenting programs we have brought forward that would save the government significant numbers of dollars in terms of health care savings.

At this point in time I'd like to turn it over to our chairman of the board, who will share with you what those programs are, because they have not yet been implemented.

Mr Sal Cimino: On behalf of the board of directors of the Ontario Pharmacists' Association, I am very pleased to be here today. Pharmacists have an important perspective to offer, both as primary health care providers and as the owners, operators and employees of small businesses across the province.

The first thing I want to talk about is the future of two programs we have presented to this committee over each of the past five years-which still have not been implemented, as Barbara has mentioned-the trial prescription program and the prescription clarification program.

In March 1999, the Ministry of Health and Long-Term Care announced that it would work with us on these two key initiatives. Based on the effectiveness of these programs in other jurisdictions across the country, we are confident that these initiatives will improve patient compliance with their medications and reduce adverse drug reactions. This will lead to overall cost savings for the provincial government and improve health care for the people of Ontario.

Unfortunately, nearly two years later, these programs have not yet been implemented. The result is that the Ministry of Health and Long-Term Care is failing to take advantage of two programs that could (1) save potentially millions of health care dollars, (2) reduce the number of emergency room visits by patients with medication-related problems, and (3) improve the health of the people of Ontario.

The trial prescription program would allow pharmacists to use their professional expertise to ensure each patient gets the right drug and uses it appropriately. All ODB program patients receiving medication for the first time would be given an initial trial supply. The pharmacist would follow up with the patient to ensure that the claimant is tolerating the new medication and is taking it properly. If the treatment is safe and effective for that patient, the pharmacist would fill the remainder of the prescription. We estimate that each year that the government fails to implement a trial prescription program, it forgoes a saving of at least $3.6 million, or almost $10,000 each day.

The prescription clarification program would allow for the payment of a cognitive fee to the pharmacist for not filling a prescription where, in the pharmacist's professional opinion, and in consultation with the patient's physician, the filling of the prescription may be harmful to the patient. Examples of these situations include interactions with other medications the patient may be taking, or a previous history of an adverse drug reaction.

We estimate that each year the government fails to implement a prescription intervention program, it forgoes a saving of approximately $500,000, or more than $1,100 each day. You can refer to page 3 of our paper for references on how we calculated these numbers.

We had the opportunity to meet with the outgoing Minister of Health and Long-Term Care just before the cabinet shuffle to discuss this and other issues. Following that meeting, she provided us with a written commitment to bring these programs forward to cabinet by the end of this year. We hope we can count on your support for these programs.

The next issue I would like to address is drug pricing on the ODB formulary and the impact it has on pharmacists. Despite the fact that ministry bureaucrats say they froze prices on the formulary in 1993, this price freeze is not being enforced. There is a growing list of products on the formulary, approximately 140 drugs, that have increased in price, both through actual price increases or through pricing related to packaging. In some cases these increases are over 100%-that's over double the costs we were paying before. In these cases, the price listed on the formulary remains the same, but the price at which the pharmacist can purchase the product exceeds the formulary price. The list includes high-volume products such as Tylenol 2 and Tylenol 3.

In our paper we use Lanoxin, a common heart medication, as an example of how much money the government is losing each year and how pharmacists are not being adequately compensated in this situation. If Lanoxin were available to pharmacists at the formulary price, the government would be paying just under $2 million per year for this drug. Of that amount, 10% is a legislated markup on the product that goes to pharmacists to compensate for business costs such as inventory carrying costs. However, in the last year Lanoxin has more than doubled in price. The government is actually paying just over $4 million per year for this product, and pharmacists are denied the 10% markup. We are only reimbursed for the amount we paid for the product, with nothing for the business costs we already mentioned.

1640

In addition to losing the 10% markup on approximately half a million prescriptions for Lanoxin that we fill each year, the pharmacist must go through a cumbersome procedure called "cost to operator" to recoup the cost of purchasing the Lanoxin. So there is an extra step we have to do, actually a couple of steps. This is time-consuming and takes us away from caring for the patients. We explain the administrative steps involved in carrying out this procedure in appendix D of our written submission.

This is just one example. As I said, there are approximately 140 products on the ODB formulary that are not available to pharmacists at the formulary price and require pharmacists to perform the cost-to-operator procedure and forgo appropriate reimbursement from the ODB plan.

The government has the legislative tools to deal with this issue. The regulations under the Ontario Drug Benefit Act require manufacturers to be able to continue to supply their products at the prices listed on the formulary as a condition of remaining on the formulary. I want to read the actual section for you from the Ontario Drug Benefit Act regulations: "The following conditions must be met in order for a designated listed drug product to continue to be designated as a listed drug product." Condition 3 reads, "The manufacturer of the product must continue to be able to supply the product at the drug benefit price in a quantity that is sufficient to meet the demand for the product."

Basically, the government is not enforcing its own legislation, and as a result the government is losing millions of dollars every year and has not instituted any measures to control spiralling drug costs. Whether the government enforces its own regulations to address this situation or uses some other means, pharmacists cannot and should not be made to continue to subsidize the Ontario drug benefit program.

We are seeking full reinstatement of the 10% markup. In addition, we request a written commitment from the government to conduct a comprehensive review of the ODB, similar to its hospital restructuring initiative. The purpose of the review would be to achieve a more responsible and accountable approach to drug costing and distribution.

The next issue I would like to address is Ontario's economic climate and the shortage of pharmacists. It is essential that the government take immediate steps to stem the shortage of pharmacists in Ontario. One of the actions our government must do to attract and retain pharmacists in Ontario is ensure that pharmacists receive sufficient compensation. The government has not provided pharmacists with a raise in over 10 years. The current ODB dispensing fee of $6.47 was set in 1990. A conservative estimate of the current cost to a pharmacist to actually dispense a prescription in Ontario is $9.50 per prescription. This number will increase as the shortage of pharmacists impacts on pharmacists' wages-fewer pharmacists, costlier to hire one. The government must take immediate action to correct this discrepancy.

The government must also consider and take responsibility for the administrative impact government programs have on pharmacists; for example, the administrative burden associated with the government's limited-use program. This alone costs pharmacists approximately $3 million out of pocket each year. Pharmacists must be compensated for their time. We will lose more pharmacists if we're not properly compensated.

The OPA recognizes that it must do its part to assist the government to achieve health care savings. Every year we propose a number of initiatives that we believe would achieve that end. In addition to pursuing the programs we already discussed this year, the OPA is proposing two programs: medication use reviews and an antibiotic resistance strategy. It should be noted that both programs were presented in the OPA's 2000 pre-budget submission, though to date the government has not pursued either program.

First I will explain what we mean by medication use reviews. Drug use varies among the population. For individuals who utilize a particularly high number of drugs, such as is the case with many seniors, the OPA proposes that the government utilize the pharmacists' expertise to implement annual medication reviews. This relatively simple program could, first, save the government millions of dollars by identifying and correcting improper medication use and waste; second, prevent possible interactions with other medications; third, optimize drug therapy; and fourth, again, improve health outcomes and the quality of life for the people of Ontario.

The second initiative we would like to work with the government on is a province-wide antibiotic education program. The OPA has been working collaboratively with the private sector to implement an antibiotic awareness program across Ontario. The purpose is to reduce the growing threat of antibiotic resistance by educating the public on the appropriate use of antibiotics and various over-the-counter products, and highlighting the risks associated with antibiotic resistance. In short, the program seeks to reduce inappropriate antibiotic utilization and expenditures through education.

Programs we have run in communities such as Brantford and Belleville were highly successful in demonstrating a significant reduction in the inappropriate use of antibiotics in those communities. These areas respectively saw a reduction of antibiotic claims at a rate of 245% and 72% greater than the overall reduction of claims for antibiotics in Ontario during that pilot period. We anticipate we could produce similar results across the province if given the chance. We encourage the government to work with OPA on a province-wide antibiotic education program.

In conclusion, I would like to highlight our recommendations, which are also found in our written submission.

First, the government must get on with implementing the trial prescription and prescription clarification programs. Other new initiatives that will save money and improve health care, such as medication reviews and a province-wide antibiotic education program, can be easily implemented and should be discussed with OPA.

Second, the government must ensure that pharmacists are appropriately compensated or we are going to lose them to other jurisdictions or face a situation similar to what arose in Quebec. This includes the restoration of the 10% markup, increasing the ODB dispensing fee and paying pharmacists for time spent dealing with administrative burdens caused by government programs such as the limited-use program.

Third, the government should conduct a comprehensive review of the Ontario drug benefit program to ensure its viability.

Fourth, the OPA encourages the government to continue to support programs such as Telehealth and the funding of the medication information service, the seniors' safe medication use program and the clinical tobacco intervention program.

Chairman, I thank you and your colleagues again for allowing us to make this submission today. Any questions?

The Chair: We have approximately three minutes per caucus. Mr Phillips.

Mr Phillips: Thank you. A very thoughtful presentation. Many questions, but time is sort of limited. The first one would be on your comment on Lanoxin, as your example. Are you saying you actually have to purchase that drug for more money than you get?

Mr Cimino: Over double what we were paying last year.

Mr Phillips: But more money than you can receive from the persons who reimburses you?

Mr Cimino: No. The government has regulations in place that are supposed to stop manufacturers from increasing their prices or to make certain adjustments for increases. Nothing was done with these particular 140 drugs. They arbitrarily raised their prices, and what has happened is that we're now paying double what we paid for Lanoxin last year. We used to get a 10% buffer to offset any administrative costs. Now we don't even get the 10%. Obviously, on double the price it would be a little higher-it would be twice as much-but we're not getting that. But we are spending more money to purchase it, plus we have the administrative headache of tracking down the invoices to prove to the auditors that, yes, we purchased it at a higher price, even though they know the price has gone up.

Mr Phillips: On the surface, it seems that if the government is not living up to the legislation, there's almost a legal case. It's surprising to me that there hasn't been a resolution of this issue. What's holding up the resolution?

Ms Stuart: That's a very good question. We don't know.

The simplest way to describe the formula is, there's a mathematical formula and we'll use a very simple, basic example. On the drug formulary, if you were to purchase a drug for, let's say, $10, pharmacists are entitled to their $10 reimbursement plus 10%. In theory that should be $11. Now let's say the same drug costs $15. What they have to do is fill out a cost-to-operator form, which means they get reimbursed the $15 but don't get their 10%. So if you take $10 on the basic formulary plus that $1-$11-and subtract the difference, it's one of two things: the pharmacist is losing $1 or they're subsidizing the system by $1. Either way, they're out of the mathematical formula. We have raised this now for 16 months and still have not had the issue resolved.

1650

Mr Phillips: It seems like almost a legal matter, that they're violating the legislation.

Ms Stuart: It may become that. The point we're trying to make is that the drugs are becoming so expensive and the regulation is not being enforced, and that's our concern. The pharmacists are seeing it day to day.

Mr Phillips: You have at least two recommendations here of how you can help to limit the inappropriate use of drugs. Again, they seem like relatively straightforward things to me. What is the answer you get back from the Ministry of Health when you pursue them? You'd think almost on a pilot project basis that they're certainly worth investing in.

Mr Cimino: It's all been funded privately up until now. Pharmacists have taken it on with some of the pharmaceutical companies; local associations have done it. The response from the government is, "We'll do it," but nothing has gone on yet.

Ms Stuart: Administratively it seems to be where it's bogged down.

Mr Christopherson: One observation and two very brief questions. We've been hearing an awful lot of delegations come in and talk about a shortage of skilled workers, and we've heard from a lot of professionals and professions where people are leaving because they're demoralized over working conditions and a lack of decent income, or at least commensurate with their experience and their education. The observation would be that it seems to me we're now beginning to see some of the fallout of this government's very serious attempt to lower the value of labour right across the board. I've been one of those maintaining that in the Employment Standards Act, where it talks about minimum wage, you ought to care about that because everybody who is trying to reach for the ceiling in terms of the highest dollar they should get is going to find it that much harder to do if the government is constantly lowering the floor. It looks to me like here's yet one more profession where, because the government is not matching its financial obligations, your quality of life, the value of your labour, is lowering and that's causing demoralization. I'll leave that with you for a comment or not.

The two questions are these: I was curious as to what percentage, on average, of a pharmacist's income is related to ODB clients or business; the other one is on page 7, where you talk about the prescription clarification program. I have to say, and I'm just putting it out there, that what struck me was, when you said examples of these situations-meaning mistakes-include interactions with other medications the patient may be taking or a previous history of adverse drug reaction, that you think there is up to half a million dollars in errors that are related to that. I know that no profession wants to point fingers at another one, but I thought it would be the rare exception where a doctor for whatever reason has given a mistake or the wrong prescription or overlooked something, and yet, when we're talking half a million dollars, it suggests to me there's a problem.

Mr Cimino: That's not necessarily an error. Patients tend to take medications from more than one physician. If they're seeing a specialist and the communication hasn't been that good or the-

Mr Christopherson: The communication should be, though. It's expected that would happen, though, right?

Mr Cimino: Absolutely, but that's the implicit strength of having to go to the same pharmacist all the time: you have that record. Patients don't always go to the same pharmacy all the time. Because of convenience, they may stop someplace, so you don't have a full profile at times. Yet, when we have all the information, you can certainly intervene and make these recommendations with the physician's knowledge. It's not necessarily an error. Over-the-counter products, herbal products, which are huge now-alternative medicine sells products-the physician doesn't even know they're taking them. They're afraid to tell the doctor they're taking something because they're afraid the doctors-

Ms Stuart: That patient is afraid sometimes to tell the doctor, so the pharmacist is the other-

Mr Cimino: But they will speak to us on the front line. They're much more open to us. They always have been.

Mr Christopherson: Actually, I'm glad you've got good answers to that. It kind of worried me that that was what it said.

And on the ODB percentage?

Ms Stuart: It varies.

Mr Cimino: About 50%, 45%.

Mr Christopherson: About 50%?

Ms Stuart: Well, it actually varies. Some can be 50%, but it depends on where the pharmacy is relative to-

Mr Christopherson: Yes.

Ms Stuart: It could be even 90%.

Mr Christopherson: It's significant, nonetheless, across the board.

Ms Stuart: Some have 80% to 90% ODB recipients.

Mr Christopherson: Any thoughts or comments on the demoralization within the profession?

Ms Stuart: I think you've put it very well. Just to add to that, though, the physicians bumping into the nurses bumping into the pharmacists-with the shortage of nurses, that means pharmacists are doing more front-line work, so they're staying open longer and it adds to the whole equation of what their workload is.

The Chair: To the government side. Mr Galt.

Mr Galt: I'd like to explore just for a few minutes the trial prescription program that you're putting forward. I'm not sure why the Minister of Health is resisting, but I'm just curious on how it might or might not operate, particularly when I think of rural Ontario, where the pharmacy isn't exactly next door. It may be as much as 30 or 40 miles between villages in small-town Ontario to get to a pharmacist. I can see some difficulties there. You also hear concerns about even those on welfare getting taxis to go and pick up their prescriptions. This would possibly mean extra costs to them.

The other area I'd like you to respond on is how it would work with-and I've been told that in Europe, most if not all the tablets for prescription come in blister packs, so they're dispensed that way. In this way the medication is uncontaminated and, I would think, could be returned. Is that possible? Is that a way of handling it? Or is packaging it in blister packs extremely expensive?

Ms Stuart: You've asked a lot of good questions. The previous Minister of Health, Elizabeth, has been very supportive of the program's moving forward, and I can only hope and anticipate that Tony will be the same. It's not from the Minister of Health's perspective; it's administratively trying to move the program forward at another level. That's where our challenge has been. She's been fully behind our moving forward on the program.

You asked a good question, and I'm going to ask Ruth if she'll answer that, relative to the rural, because there are some exceptions that have to be included on the trial prescription administrative details of the program.

Ms Ruth Mallon: One of the things we've put forward all the way along is that there be an exception from a professional point of view for pharmacists when they recognize that there may be an issue. The very last thing a pharmacist wants to do is interrupt therapy for someone who should be getting that proper therapy. In a case in a rural environment-in fact, trial prescription programs have been going on in Saskatchewan, and that's one of the things. There's a general override that can be done: "I'm sorry, this patient is just not going to be available. I'd rather dispense it and then I'll call her in seven days anyway to make sure the medication is working OK."

Welfare patients, by the way, are not anticipated to be part of this trial program. The first phase is a 30-day trial. Welfare recipients only get a 34-day supply maximum, so they wouldn't be affected by it.

As far as the blister packs are concerned, yes, as a practising pharmacist you often get patients who bring back those packages saying, "I didn't use it," even seniors. They hate to see waste because they were brought up in the Depression. The problem with that is that we can't legally re-dispense them. It's unfortunate, but one of the things some pharmacists do is that they collect them and give them to a company that gives them to Third World countries. As far as to Ontario citizens, we cannot re-dispense them.

The Chair: The time has expired. On behalf of the committee, thank you very much for your presentation this afternoon.

Ms Mallon: Thank you for your time.

The Chair: I don't have any further announcements, but just to remind the members that we do have transportation available in front of the building at 5:30. We should be there on time.

Mr Galt: Mr Chair, if I might make a request of staff. We were given a sheet by the secondary teachers' federation with some figures on it pointing out where Ontario comes with the average of the Great Lakes states. I'm wondering if we could have those figures checked by a neutral source.

The Chair: I think you probably should submit that sheet to the researcher.

Mr Christopherson: Is there some reason for that request? Is there a reason why you're questioning their data and nobody else gets a copy?

The Chair: There have been different requests made by different members in the past couple-

Mr Christopherson: I haven't noticed anybody since we started.

The Chair: Mr Phillips made a couple of requests, I think.

Mr Christopherson: Did he ask for material to be checked because he didn't believe it to be true?

The Chair: No, but he's asked for-

Mr Christopherson: What evidence-

The Chair: We'll adjourn until tomorrow morning in Thunder Bay.

The committee adjourned at 1700.

Committee Transcripts
Contact an MPP
Participation in Committees
Watch the Legislature in Action
Use of Assembly Grounds
Petitions