Volume XLI Tu esd ay Province of Newfoundland FORTY -FIRSTGENERAL ASSEMBLY OF NEWFOUNDLAND First Session VERBATIM REPORT {Hansard} Speaker: Honourable Thomas Lush Number 8 6 June 1989

The House met at 2:00 p.m . MR. SPEAKER (Lush): Order, please! DR. KITCHEN : Mr. Speaker . MR. SPEAKER : The hon. the Minister of Finance . DR. KITCHEN: Mr. Speaker, I move that the House resolve itself into a Committee of Ways and Means and that the Speaker do now leave the Chair. MR. SPEAKER: The motion is that this House resolve itself into a Committee of Ways and Means and that I do now leave the Chair . DR. KITCHEN : INTRODUCTION Mr. Speaker, I am pleased to present to this Honourable House the first Budget of the Wells Administration .

While this is a Budget of restraint, it truly is a liberal Budget, bearing a strong message of hope and opportunity to every Newfoundlander and Labradorian. It signals a new and fresh beginning . The Wells Government brings with it new ideas, new directions, and a comprehensive approach to re vitalizin g our Prov ince. But major changes cannot be wrough t ov ern igh t. It w ill take mu ch time and effor t f or our idea s to cry stalize int:o a p la n of a ction to prov ide ne w oppo rtunitie s for our peop le.

The ta sk , whic h b ega n on Apr il 20 and cont inued in the Throne Speech, today moues one step furthE!r with the tabling of this document. L3 74- June 6, 1989 VOL XLI The ability to pursue our economic and social agenda is dependent upon the availability of resources, both economic and fiscal. This presents a special challenge in Newfoundland and Labrador. The economy of this Province is narrowly based and more fragile than that of most other provinces . Our financial flexibility has been limited by many years of borrowing at close to our annual capacity.

The few weeks we have had to prepare this Budget were not sufficient for the document to reflect fully the priorities of this Government. In fact, this Budget .i.s in some respeci :s a ho use kee ping Budg et and inclu des pro gra m c omm itm ent s inher ite d From the pre vio us administ ration. Ma jo r d ecision s on the economic and fis ca l ma nag ement approach most appropriate f o"r I: he Province cannot be made hastily; but this is not to suggest that we have not acted. Already, we have restructured and downsized Government departments and effected some changes .in spending priorities.

Today, I will be addressing further our mast urgE!nt and immediate priorities. This Government has approached the preparation of its first Budget with a sense of purpose, and a determination to put our f':i.nancial hou se in ord er by a pplying the pr in ciple s an d practices of respons ibilit y an d good ma nagement . I be lieve this Bud get re fle cts that. It al so leads us decisivel y into the next de cade. It makes a fi rm sta rt in providing l:he people of this Province wi tl1 the services and opportunities they expect and deserve. It is, however, a prudent Budget. THE ECONOMY No. 8 R371J.

M r . Speaker , I s h a 11 now dis c us s the economy, first from an historical perspective. Then I shall review briefly the events of the past year and the outlook for the coming year. Historical Perspective Mr. Speaker, the essential character of the economy of Newfoundland and Labrador has not changed appreciably over ·the past decade. There have been some positive developments, and we are currently going through an extended period of economic grot~Jth.

The undeniable realities, however, are that our economic base is still narrow, the disparity between this Province and the remainder of the country is still large and has in many respects been increasing over recent years. We are still, to an unacceptably large degree, dependent upon transfer payments from the Government of canada for our economic well-being. In 1988, the gross domestic product in Newfoundland grew by 3.8 per cent, after taking inflation into account. This represented our sixth consecutive year of economic growth.

Notwithstanding this fact, the previous administration was unable to balance the budgets during that period. Neither was our economic progress unique. Our economy grew at a slower pace than that of the Maritime Provinces and that of· the country as a whole from 1980 to 1988 .

During t:hat periorl, Newfoundland's economic output per capita ~increased fr·om ~7. 2 per cent of the national average to 58.2 per cent, but l:his apparent improvement was due more to our relatively slow growth, and loss in recent years, in population, than t.o real economic improvement. · L37~ June 6 , 1989 UOL XLI During the 1980s, population growth in Newfoundland was substantially below that of any other province in Candda. In fact, there are fewer people residing in this Province now t:han at any time since 1983. Out-migration has created a net loss of about lJ., 000 people E!V ery year.

Newfoundlanders have been leaving home because the opportunities for meaningful employment in their own Province did not exist. Mr. Speaker, personal incomes grew quite strongly over the last several years in this Province, but our performance again was below the Maritime and national levels. The slow popuJ.ation growl:h also resulted .in a slight improvement in personal income per capita relative to the national average, but the per capita gap between us t~tnd the Maritimes widened. Economic Review of 1988 Mr.

Speaker, in the year jus i: past our resource based industries, which Link \:he performance of !:he economy of Newfoundland and Labrador to the performance of other countries, benefitted from continued growth in the international economy. As a result of strong dE!mand and high commodity prices in .important export marke!ts, the total va1ue of mineral production in 1988 rose by 31.7 percent. Newfoundland also shared in the explora~ion boom Lhat was experienced across Canada. In 1988, both the dE!mand and thE• price for newsprint improvl:~d over previous years.

Shipments L.r.JPrE! due thE! about 2.1 percent lower, primarily to the strike at Corner Brook mi.ll, wh .i.l(• value No. 8 R375

rose by 0.2 percent. Pulpwood production rose by about 5.6 percent from the previous year. The fishing industry recorded some growth in 1988 despite lower cod prices in the United States, the Province 1 s main export market. This was offset somewhat by higher prices for other spE!Cies such as capl in, crab and shrimp. Overall, the value of landings was down 3.8 percent compared to 1987, while the volume rose 7.6 percent. The service sector benefitted from growth in the goods producing industries, increased tourism and high consumer expenditures.

Strong disposable incomes, boosted to a large extent by lower personal income taxes and higher unemployment insurance payments, contributed to an 11 .6 percent increase in retail trade. Economic Outlook for 1989 1\'Jr. Speaker, the rate of growth in the Provincial economy is forecast to be 2.8 percent in 1989, compared to 3.8 percent last year. In t:he Prov·.i.ncr::~ 1 s main export market, the United States, real economic growth of 2.3 percent is anticipated. Economic growth in Canada is Forecast to be 3.0 percent.

Inflation in Newfoundland will continue to_ be low, at 3. 1 percent compared to a 4. 7 percent national rate. We expect employment growth of 2.3 percent in 1989. The unemployment rate is expected to average approximately 15.7 percent, a decline of 0.7 percentage points from the previous year. The single most important issue facing the Provincial economy is the critical fishery resource shortage which has developed, particularly in the northern cod L.3 76 June 6, 1989 VOL XLI fishery. The Harris report calls for further quota re!ductions.

The Province will consult the indus t:ry and work closely with thE:' Federal Government to cope wi l:h t:h.i.s major resource crisis. Government will be seeking industry 1 s co-operation to design operational plans which are sensitive to the people who depend on the fishery and who arE! most vulnerable i:o a downturn. We u.lill bE! looking to various programs to diversify the indus try by broadening the sp ecies and product base. Partic ula r atten tion will be given to developing under-utilized species through exploratory fishing and technoJ.ogy transfer.

In addition, we will be seeking means to utilize more fully fish which already is being harvested, and WE! will pursue innovative approaches to market development and promotion. The Federal Government must deal more decisively with foreign over-fishing. This issue has to be elevated to the top of the national policy agenda, with the personal involvement of the Prime Minister. ThE:~ amount of fish taken over and above quotas . if processed in the Province, would have created close to 5,000 person years of employment in 1989 in the processing sector. 1\'Jr.

Speaker, this Governm ent is keenly aware of the economic development opportuniti es presented to this Province by tl1ree potent i.al major projects: offshore oil and ga s development, Labrador hydro power development, and the establishment of a NATO facility in Goose Bay. The issue of offshore development has been public policy issue No. 8 o·il. and gas a central in this R376

Province for almost two decades. Unfortunately, during the last decade the Government has relied almost exclusively on this developme~t to be the basis of our economic future and as a result created expectations unrealistic both in terms of time and value. There is no doubt that development of our offshore resources presents an opportunity to open a new

chapter in the Province • s economic history but we will be disappointed if we conti nu ·e to judge its potential by what we would like to see instead of what it can realistically provide. The Hibernia project does represent a major industrial undertaking which would provide much needed employment, and at the same time provide numerous business opportunities for local industry, thereby broadening our overall economic base. When developed, we intend to ensure that the project results in appropriate technology transfers to the Province, thereby enabling us to take full advantage of subsequent projects. Mr.

Speaker, Labrador contains one of the greatest undeveloped hydro -electric resources in Canada. Its development has been in abeyance For the past 17 years. As part of our determination to develop that resource, this Government will continue negotiations towards an agreement with the Province of Quebec that .will enable Labrador power to be delivered in a manner that will provide the people of this ProvincE! with the bE!nefits of l:he developrnr::~nt and sale of their resource. Should agreement be reached and development take place, it will provide the Province with major economic benefits .

Unless and until such 1..3'17 June 6, 1989 VOL XU development is certain, this Government will not count on or speculate on its value. The potential development of the NATO facility in Goose Bay offE!rs tremendous economic benefits in terms of construction, permanent employment and industrial and commercial opportunities. ThE! current level of military activity, which already has done much to rejuvenate that region of the Province economically, wj 11 expand several-fold if NAfO selects Goose Bay over the alternate site in Turkey.

SubjE!Ct to ensuring that the conCE!rns of our native people are properly addresSE!d, and our environrnE!n'L protected. we intt<HHl to do everything in our power lo SE!CUrE! on a permanent basis the new found enthusiasm and prosperity now evident in the Happy Valley .. -Goose Bay region. FEDERAL - PROVINCIAL ISSUES The economic and financial well-being of Newfoundland and Labrador is highly depe~ndE!nt upon the actions of l:he GovernlnE!nt of Canada. The recent Federal Budget is regressive in distributing the burden of increased taxation and expenditure restraint across provinces.

The measur·es contained there will co1lectiVE!ly nnnove $80 million from the Newfoundland economy this year, and double that amount next year. It will inflict hardship upon lhe residents of this Province, and w:i.ll imp(•de the ability of this GouernrnE!nt to pursue its objectives. Mr. Speaker, correcting regional disparity requires a recognition of l:he real problem and a continuing and increasing No. 8 IB7'7

commitment on the part of the Federal Government. Instead, funding levels will be reduced next year and then frozen. The Atlantic Canada Opportunities Agency had its time frame stretched by two YE!ars wj thout an increase in total funding al1otment. Also, funding will be less accessible. Expenditures under the Economic Regional Development Agreements will be $72 million this year. The decline from last year's level of $82 million reflects federal financial restraints. The Province is currently attempting to negotiate several new and recentl~ expired agreements. Mr.

Speaker, the Province needs these agreements to further our economic and social development, and the Province will pursue vigorously a satisfactory conclusion to these agreements. The reduction of one percentage point in the annual rate of growth of Established Programs Financing transfers from the Government of Canada, coining on top of previous reductions in this area, wil1 make it even more difficult to fund our health care and post-secondary education systems. These program areas are already hard pressed to prov·ide our· people with access to the quality of services enjoyed by other Canadians.

Growth in our health and post-secondary education expenditures already exceeds the! gr·owth in the federal commitment. The Federal Government's tough Budget stance was a reaction to the problem created by high interest rates which in turn resulted primarily from the federal policy to curb inflation generatE!d in thE! booming southern Ontario economy.

The outlying L378 June 6, 1989 VOL XLI regions of the country, which themselves have been experiencing none of the overheating, are already paying heavily For that problem through high interest rates, and are now being asked to shoulder a further share of the burden through increased federal taxes. The Federal Government claims that the burden of its admittedly tough Budget will be equally dj stributed throughout Canada.

On I: he surface such a strategy appears to be fair, however, because there are tremendous divergences in regional economic performances, a broad brush approach is not appropriate for curing Canada's problem. To balance economic growth and move the country forward into the 1990s, federal fiscal polic ies should be targeted to the fullest extent possible to enhance the performance of the economically disadvantaged reg ions through increased transfers, and spending for economic development, · whilE! directing the tough measures at the overheated segments of the economy. Mr.

Speaker, the Federal Government is also moving independently to introduce a broadly based goods and services tax, a new federal sales tax at thE! retail consumer level, to take effect January 1, 1991. We share concerns with other provinces about the implications of this new tax on our people, and on our tax base. The Federal Government proposes to amend the Unemployment Insurance Program by increasing the minimum period required · to qualify for benefits and by reducing the maximum duration of benefits . These changes will cause considerable hardship for !:he many No. 8 R378

Newfoundlanders in areas of limited job opportunities and low incomes who are unable to find the required number of weeks of work. The changes will be of particular concern in many rural communi ties where there are fewer full-time job opportunities, especially when considered in conjunction with the current situation in the fishing industry. The Canadian Constitution commits the Federal Government and Parliament to the principle that all provinces will have sufficient revenues to provide a reasonably comparable level of public services without having to resort to unduly burdensome levels of taxation.

The vehicle for living up to this commitment is the Equalization Program. Mr. Speaker, this program adjusts only for imbalances in relative ability to generate •revenue, thereby assuming that all provinces have the same program delivery costs and the same physical infrastructure to provide services. This is simply not the case. There arE! many special costs involved in providing services to a widely dispersed population in a Province characterized by such geographic factors as rugged terrain, physical isolation and distances.

The progr·arn does not recognize that economically disadvantaged provinces like Newfoundland have driven up thedr own debt service costs in an attempt to provide the basic infrastructure taken for granted elsewhere, leaving lE!SS money for current program expenditure. This Government w:i.ll pursue fair treatment for the Province in this area. The Newfoundland Transportation In i U at i v e , signed in 1 9 8 8 , was aimed at compensating l:he Province L379 June 6, 1989 VOL XLI for the closure of the Newfoundland railway by providing funding for the capital cosl:s of highways and ports.

This Government believes that the Province does not have the long term financial resources to maintain, without the level of financial help given to the other provinces, the Newfoundland portion of the natiocal transportation s y stern. We w:i.11 pursue discussions with the Federal Government towards a financial commii:ment for the increase in construction, operation and maintenance costs that resulted from the phase down and ultimate closure of the railway. FINANCIAL POSITION Mr. Speaker, so far I have beE!n discussing the economy, historically, for the year just. past, and for l:he co1ning year.

Now I shall comment on the f i nan c .i a 1 p o s i t ion of \:he P r o v i n c e using these same three time frames. Historical Perspective Mr. Speaker, the Governme!nt of Newfoundland and Labraor has experienced budgetary di ffi cul tiE!S in this decade as have all governments in Canada. These difficulties were exacerbated by the effects of the recession of the early 1980s, which, combined with the run-up in interest rates during the sctme period, created problems and pressures which we still have not completely overcome.

As I indicated earl'.ier, si.nce thE! 1982-83 fiscal year, the Government of ~ewfoundland and Labrador Current economic years. No. 8 incurred six consecutive Account deficits, despite growth in each of those The rate of growth in R379

Current Account expenditures exceeded that of revenues in many of those years, and, combined with the Capj_ tal Account expenditure program, resulted in significant new borrowing each year. The result of these large budgetary requirements was a significant increase in our total public sector debt, from $3.0 billion in 1980 to $4.9 billion at the beginning of this fiscal year. It is projected to ·reach $5.1 billion by March 31, 1990. Our total current indebtedness of over $8 ,500 per capita is one of the highest in the country.

Despite the hi gh level of s pend ing pr eviousl y und erta ke n in the Prov inc e, tremendous exp end itu re pr essu re s r em ain on o ur he alt h, educa tio n, soc ial service s an d transportation systems. Moreover, the homes of many families in this Province still do not have adequate water and sewer services. The combination of high existing debt and substantial unanswered needs is the major challenge faced by this Administration. This Government•s flexibility to finance these needs is ljmited .

Not only are existing borrowing levels high, but our ability to raise revenues from our economic base is the lowest in the country. We still rely upon the Government of Canada for almost 50 percent of our revenues. Financial Review of 1988-89 Mr . Speaker, the unaudited results for thE! 1988 -89 fiscal year indicate that Government ended the year wjth a deficit on Current Account of $2 . 1 million.

The improvement of $39 million from Budg•~t resull:ed almost entirely L380 June 6, 1989 VOL XLI from stronger than projected revenue flows, most notably j_n retail sales tax and equalization payments from the Government of Canada . The . 1988 --89 Capital Account net expenditure was $5 mi 11 ion higher than proj e c I:E!d, and thE! total budgetary requireiTIE !nt was therefore $34 million less than Budget. Financial Outlook for 1989-90 Mr. Speaker, upon assuming offj_CE!, we were informed that the Province faced a $90 mjllion deficit on Current Account for 1989-90.

Expenditures were forecast to grow by 8 . 5 percent above 1988 ·-89, while Current Account revenue wa s pro jected to be up by only 4 .6 perce nt on a ca sh fl ow basis . One majo r r es trainin g facto r on revenu e gro wth is ov erpa ym ents of fe deral trans fe rs fo r prior years which will be recovered from 1989-90 revenue. The negative impact of the Federal Budget adds to the decline in revenue growth. No provision has been made to fund the significant expend itur e commitments.

The previous adminjstration was obviously not prepared to take the responsible course and make the tough decisions necessary to bring our operating budget into balance or to face the publ.ic wiLh t.he b1E!ak outlook they had wrought . To us a Current Account deficit of any magnitude was clearly unac ceptab] E! at this time. Mr . SpeakE!r, I <:·un pleased to announce that for thE ! 1989-90 foiscal year, we will have a modest surplus on Current Account of $5.3 milli on.

This could quickly disappear, however, if a deteriorating economic situation were to rE:~sul t in J.ower revenues and put more pE!Ople .in need of Government help. No. 8 R380

This Budget does not yet incorporate the full economic agenda of the Wells Administration. That was not possible within the brief period since we took office. Other initiatives will become apparent when the recently announced Economic Recovery Team moves into action, and when our legislative program for the Fall sitting of the House of Assembly is announced.

We have served notice through the measures I wiil be announcing today, through the downsizing of Cabinet, and through the streamlining of Government departments, that we are determined to take action, and that we will be prudent and efficient managers of the taxpayers• dollars. Financial decisions wi 11 bE! rational and based purely upon need and economic E!fficiency . They will not be made for political gain. r~r. Speaker, I am also announcing today that Government will be embarking upon a Capital Account expenditure program of $370.2 million in the 1989-90 fiscal year.

Of this, $111.5 million will be offset by related revenues, resulting in a net Capital Account requirement of $258.7 million, and a total combined budgetary requirement of $253.4 million. The increase in our Capital Account spending program over 1988-89 is attributed in large measure to the requirement to repay $14 million to honour loan guarantees associated with Newfoundland Enviroponics. This Administration is determined that this and subsequent Budgets will chart a course that will lead to a gradual strengthening of our fiscal situation, thereby ensuring Government • s ability to pr·ovidE!

L38l June 6, 1989 VOL XLI the public services people of this Province deserve. BUDGET STRATEGY l:ha t nE!E!d the and Mr. Speaker, this Governrne!nt has given our people a commit:ment to be prudent and efficient managers of the taxpayers 1 money and to be fiscally responsiblE!. We have no intention of buying goodwill, either through keeping our tax effort artificially 1 OIAJ or our expenditure levels exorbitantly high.

We :i.nt:end to earn support, through sound management and the fair and balanced treatment of all sectors, all regions and aJ1 people of our Province. fhis cannot be accomplished unless we balance the books with sensitivity to the genuine needs of our people . To meet these needs we cannot borrow frorn the future. lrJe cannot and should not burden our children with our failure to act responsibly and prudently today. Our children and grandchildren have the right to to SE!t thedr own priorities and to deal w:i.th the demands of their own day unencumbered by the debts of their parents and grandparents.

We felt it would be inexcusable to ask the people of this Province to accept a Current Account deficit, particularly after our E!Conomy has been buoyed somewhat for several years by the global economic expansion. Eliminating this Cur r E:~ n t A c count deft c i t IJ.k'l s a necessary but not an easy task . Some expenditures wc•re reducc~d or reallocated to help relieve more p r e s s :i. n g p r i o r i t_i E:~ s . G .i v e n 1: h e demand for Government services and the proportton of our Budget consisting of fixed commitments, restraint measures a1one cou1d not balance our Current Account . The No. 8 1081

needs are too urgent and too long neglected. Mr. Speaker, what are our alternatives? Essentially we have thr ·e e sourCE!S of funding: what we generate ourselves, what we receive from the Federal Government, and what we borrow by adding to the Provincial debt. We cannot justify borrowing to have future generations pay for our day-to-day bjlls. We cannot depend on the Federal Government to fulfill our financial obligations. The only remaining option is to increase Provincial revenues. Ideally this additional revenue would flow from a stronger Newfoundland economy.

The right economic deve:1lopment initiatives can and will accomplish this. But that does not solve our immediate problem. Mr . Speaker, in the past few weeks we have reviewed our revenue options. Ou r review of the tax sy ste m indicated that because pf increases in taxes by other provinces, thR tax effort in this Province is only 99 percent of the all-prov-.ince average. Our traditional reliance on the highly visible personal income and retail sales taxes, has contributed to the popular misconception that our tax burden is more onerous than that in other provinces .

Accually, the tax effort in this Province is lower than in Ontario, Saskatchewan and British Columbia, and substantially lower than that in Quebec and Manitoba. In implementing measures to enhance our re!VE!nues, it is also our duty to ensure that they reflect the same fair and balanced appro ach that will be the hallmark of this Government in all its endeavours. The burden of taxation must be distributed in 1_382 June 6, 1989 VOL XLI proportion to a taxpayer 1 s ability to pay, and should ensure that the beneficiaries of public spending contribute as they are able to its funding. Mr.

Speaker, I believe we have fairly achieved this balance. In arranging our spending priorities we have emphasized those measures which will bring the greatest good to the greatest number in the greatest need. In revenue enhancement we have drawn equitably on consump tio n and income taxes, indiv:iduals a,nd th E! business sector, and, to the extent possible, have avoided regressive taxation in favour of proportional or progressive measures . REVENUE MEASURES Mr. Speaker, in order to spread the burden equitably, we have adopted several revenue genE!rating initiatives, rather than rely on one major tax change.

The revenue measures that I am announcing today will raise $31.5 million this year, and $43.4 million in the 1990-91 fiscal year. These measures will place less of a burden on taxpayers than a one percentage point increase in retail sales tax or a nev.s measurE! like health insurance . pr emiums . As part of our revenue measures, I am moving today to elirninal:e two loopholes we have identified: one in our tobacco tax and the oth er in the children 1 s clothing exemption. Over the past several years therE! has been a significant shift in tobacco sales away from cigarettE!S in favour of fine cut loose tobacco.

This shift has bE•e!n large 1 y tax mo i:i va ted be c.:'lu s e i: he tax differential bE!t.ween these two products has encouraged smoi<E!rs to substitute one for the ot.hE!r. Mr. No. 8 R382

Speaker, smokers burden our health care system and therefore should bear a fair portion of that cost. To this end, I am announcing an increase in the fine cut tobacco tax rate to two-thirds of the c i gar e t t e rate , wi t h a con c u r r e n t increase in the cigarette rate of one-half cent per cigarette. It is now possible to evade the payment of retail sales tax due on the purchase of taxable adult clothing by misusing exemption certificates meant to be used only in the purchase of children•s clothing.

This exemption is in place to ease the burden on parents who have to continually replace these articles before full utility is received from them because of growing children. Since this grow th phase occurs primarily before children begin to wear adult sizes, the clothing exemption will now be limited to standard recognized children•s sizes. As well as removing the opportunity to evade tax, the elimination of the exemption certificates will also simplify our tax system by reducing the administrative burden on clothing stores. r.llr. Speaker, our environment is a prime concern of this Government.

Consumers should not be induced to add to our environmental problems. A body of scientific research has revealed . such a danger to our health from leaded gasoline that the Federal Government has moved to ban all sales of this product after December 31,1990. In support of recent efforts by othE!r provinces and l:he Federal Government to further discourage the use of leaded fuel, I am announcing today a leaded fuel surtax of 1. 5 cents per litre designed to promote earlier conversion to unleaded U83 June 6, 1989 VOL XU fUE!l.

Because sales of leadE!d fuel will cease at the end of 1990, the surtax is not a permanent tax change but only a temporary measure. Mr. Speaker, with the increasing demands that are being plau:~d on our system of roads and hjghways, we have to look to traditional sources for funding our road network. In this regard, I am today announcing an increase in the ad valorem rates on motive fUE!ls of one pecentage po:int, or slightly less than one-half cent per 1 j tre. As well, revenue from drivers• licenses and vehicle registrations will increase by approximately five percent. Mr.

Speaker, in response to representations by suppliers of rnarine fuel i:ha.t our exisl:ing tax regime is causing a significant loss of local business to mainland suppliers, I am pleased to announce that effective today we are abolishing the one cent per litre marine fuel tax. This measure is an example of the steps this Government is willing to take to ensure that our business community will not be competitively disadvantaged by fact:ors wil:hin this Governrnent 1 s control.

The Newfoundland Liquor Corporation will be asked to gE!nerate an additional $1 rnilJ.ion from l:he sale of spirits and wines, and the NE!U.Jfoundland Liquor Licensing Board will implement a new f E!e schedule. There wi 1.1 bE! no increase :i.n l:he pri.co of bE!E:1r resulting from this Budget. Mr. Speaker, over the past few years, a number of foderally instituted measures have served to diminish substantially our personal income tax revenues . The No. 8 R383

Federal Government, which administers our personal income tax system from the perspective of managing its national tax base, has shown the ind.ination to make us party to tax measures which, while maybe having some merit, are simply beyond our ability to afford. Tax Reform implemented in 1988 has reduced our direct Provincial personal income tax receipts by $20 million annually . Further, the Northern and Isqlated Posts 1 deduction implemented in 1987 has cost the Provincial treasury an additional $20 million a year in foregone revenues. Mr .

Speaker, ·we cannot absorb a $40 million shortfall in personal income tax receipts and still provide a level of essential services which the people of this Province have a right to expect. Unfortunately, the personal income tax system as presently constituted does not give the Province the flexibility to implement a tax regime that reflects our unique circumstances.

Therefore, to ensure that our personal income tax system will again contribute a fair measure to the provis·.i.on of essential services, I am today an no unc ing that the Prov inci al persona l income tax ra te is bei ng inc rea sed by two pe rcenta ge po in ts as of Ju ly l, 1989 . This w ill ph ase i n the rate incr eas e giv ing eff ecti ve ra tes of 61 perc ent and 62 percent respectively for the 1989 and 1990 taxation years.

Because Provincial personal income tax is calculated as a percentage of basic federal tax, the actual increase averages only about one -half a percentage point of taxable income, I would further comment that when fully implemented, most taxpayers still will be paying significantly less Newfoundland personal income tax L384 June 6, 1989 VOL XU than in 1987 . The impact in 1989 on a family of four earning $30,000 a year will bE:1 $33, and $41 for a single taxpayer. Mr. Speaker, we of cour· se cannot: ask only individual taxpayers to shoulder the cost of publicly funded services.

To · thj s end, I am announcing t:hat the .income tax rate for corporate taxable j ncome in excess of $200,000 per year will be increased by one percent age p oint, from 16 perc ent to 17 percent effective Jul y 1, 1989 . At the Saine t.i.tne I am pl ease d to inf or m the House that the small bu siness ta x ral :e on taxable income less than $200,000 will rema in at ten percent and the tax holiday for new small business will be extended for two years for companies incorporated from April 3, 1989 to ·April 2, 1991.

This recognizes the ".importance of small business to the Provincia} economy and ·fhis sector's leading contribution to the creation of new employment opportunities across the Prouince . Mr . Speaker, in addition I have directed officials in the Department of Finance to carry out two studies of our taxation system. The first st:udy results from thE! recent Federal Budget announcment of the intention to implement a nine per cent go ods and servjces tax effective January 1 i 1991. This is of gr eat c oncer n to this Gov ern me nt .

The Federal Go ve rnm ent wil l be inuadin g the ta x roo m traditionally occupied by the Province in our most productive tax base. To ensure that the best interests of this Province are protecb?d, l!JE! 1o~.1.ill be reviewing all aspects of our consumption taxes in light of this threat to our fiscal No . 8 R384

manoeuvrability and thE! additional burden on consumers of the new federal tax. Also, Mr. Speaker, in formuJ.ating our economic recovery plan, the tax impact on the mining sector of the Provincial economy deserves our particular attention. We wiJ.l be undertaking a study of the relative tax burden imposed on mining operators currently active or contemplating developments in this Province with a view to securing a tax regime that will foster the interests of all parties. NEWFOUNDLAND AND LABRADOR HYDRO Mr.

Speaker, we are the owner of one of the most financially sound public utiJities in the country, Newfoundland and Labrador Hydro. While we have no intention of imperiling the financial position of the Corporation, we have concluded that it can be called upon to relieve some of our budgetary pressures. Mr. Speaker, in !:he past, Government has not requested Newfoundland and Labrador Hydro to remit any of its annual profits to the Province. A pr<i.me determinant of Hydro's sound credit rating, however, is the unconditional debt guarantee provided by the Province.

To date, unlike a number of power utilities in other provinces, -Hydro has not been charged a fee by Government . for this service. In view of its contribution to the Corporation's sound financial position, Government has decided that an annual fee, equal to one percent of the total outstanding guarani:oed long bdrm d1?.bt, is appropriate. The fee will yield about $10 million this year .

We have rE:~quested the Corporation to ' L38 s Jum~ 6, l'J89 VOL XU finance this payment out of its annual net income or retained earnings and to refrain from passing the cost on to its electrical consumers through in~reased rates, if at all possibJ.e. The Corporation will seek rate relief only if the payment of the · fee results in Hydro's earning less !:.han i:he bottom of the range recommended by the Public Utilities Board. Government now expends approximately $30 milJion of taxpayers' funds annually l:o subsidize electricity in areas whore uniform rate:~s do no\: permit full cost recovery.

It is our policy that the cost of providing electrical SE!rvice should bE! bornE! by all ratepayers in the Province and not be funded by taxpayers. Accordingly, over the next three years thj s subsidy wi 11 bE! ph as E!d out. The subsidy rE!duct.ion this year will be $10 million. No g e ;,-era l inc rea s e in e 1 e c t r i c i I: y rates will be necessary in 1989 because of this decision, and over t.he next three years, as consumers absorb this cost, the increases will be cumulatively less than ten percent.

Accordingly, legislative amendments will be introduced which will provide that as of April 1, 1989 all the costs of Newfoundland and Labrador Hydro and of the Power DistribuUon District, which are incurrE!d l:o produce and deliver electrical power and energy to custorners, will be recovered wjthin a uniform provinc:i.al pOLIJer .;wd en(~r·gy poJ.icy.

The one exce!ption t.o t:his general arra ng E!lflC:.~ n t re la !:e s to t: hE! spE!Cial circumstancE!S of t.hE! ratepayers who are served fl"orn \:he Labrador grid with E!lE!Ctricity from Churchill Falls, sp,;:,cifically the residents of Happy Valley Goose Bay and Wabush . No. 8 R38S

Mr. Speaker, Government aJ.so plans to provide some relief for electrical consumers serviced by the Power Distribution Districts' diesel systems. These customers are now charged a higher differential rate than other ratepayers when they consume in excess of 600 kilowatt hours per month, reflecting the higher cost of providing this electricity . Government is committed to providing a more reasonable threshold before . the higher differential ratE ! wj 11 apply.

To accomplish this, I am announcing that Newfoundland and Labrador Hydro will increase the level at which uniform rates apply for these consumers from 600 to 700 kilowatt hours per month. PENSIONS Review Plans of Government Pension Mr. Speaker, Government is extremely concerned with the financial state of .i.ts various Government pension plans covering public servants, teachers, uniformed services and Members of the House of Assembly. fhe latest act uar ial re ports on these f our pla ns revenl a t ot al un fund ed liabilit y of $1. 5 billio n.

Thr ee of these pla ns were e val ua te d as at Jun e 30, 1984, an d s haw ed an unfunded liability of $607 million. The teachers' plan, with a liability of $898 mill ion, was evaluated as at June 30, 1987 . The Province's consulting actuaries are now undertaking an updated actuarial review of the Public Service Pension Plan. Later this year similiar reports will be completed for both the Uniformed Services Plan and the MHA Plan, to be followed by another review of the Teachers ' L386 June 6, 1989 VOL XLI Pension Plan in mid-1990 .

It j s our intention that all pension plans will be reviewed at least every three years. Mr. Speakt~r, while the 1987 report has been finalized for the Teachers' Pension Plan only, it is safe to assume thai: the unfunded liability of the other three plans has grown substantially since the last evaluation date. I am concerned that the ProvincE! may have to ma ke substantial de fici ency payments to meet the pensio n obli gation s under !:he i:wo larger plan s. Alread y, Gove rnment is makin g deficienc y paym ents to meet obli gatio ns under the Uniformed Ser vices Pension Pla n and the MHA Pension Plan.

Government estimates that $3.4 miJ.lion will be required to m~:: 'et deficiency obligations of thE!Se plans in 1989-90. The immediate concern with respect to the two larger plans is the anticipated future net cash requirements of the Teachers' Pension Plan . Based on the most recent actuarial report:, I: he Province's actuary has estimated the Teachers' Pension Fund, IJJhich amounted to $91 million at 31 December 1988, will be depletod by the year 1996, unless E!Xisting contribution rates and/or benefit arrangements are changE !d.

From that date forward \:he Pr·ovince would be required to make deficienc y p ayments sim i ldr to th ose al read y bei ng made for the Unifor·me d Services and 1"1HA Plans . Because the number of teachers is so much gr eater tha n Lhe number of MHAs an d unifo rmed ser vices employees, the amount of the deficiency payments would be much larger. Regarding \:he Public Service Pension Plan, Mr . Speaker, th e No. 8 R386

Province's actuary has estimated that, if the present level of contributions and benefits are continued, the pension fund will start to decline around the year 2004 and be depleted sometime after the year 2010. This plan covers approximately 25,000 of the 34,000 total membership in all plans. Mr. Speaker, it is evident that the financial condition of these plans must be addressed · and pension arrangements must be developed which will provide adequate pensions at costs acceptable to Government and plan members.

In this regard, Government soon will be appointing a Commission of Enquiry to rE!View all aspects of the pension program included in the four plans. The Commission likely will have a mandate to review the four contributory pension plans and assess the magnitude of the unfunded pension liability. This will encompass recommending appropriate levels of benefits to provide suitable retirement income comparable to other provinces of Canada at reasonable costs, and a suitable funding progr·am within acceptable budgetary limits.

The present pension organizational structures and operations will be reviewed to permit the Commission to make appropriate recommendations on any matter related to the pension program. Mr. Speaker·, Government cannot permit the financial condition of its pension plans to deteriorate. Government.rnust come to grips with the unfunded liabilities of its pension plans. The establishment of the Commission of Enquiry is the first step in this process.

L387 June 6, 1989 VOL XLI Pension Increase Government will shortly be introducing legislation which will approve a pension increase of 2. 5 percent to all pensioners, effective from April 1, 1989. In addition to Government's four plans, this pension increase wj J 1 apply to for·1ner employees of Memorial University and persons pensioned under Special Acts and Government's Ex-gratia Program. ECONOMIC DEVELOPMENT INITIATIVES Mr. Speaker, we gave the people of this Province a commitment that developing the economy of rural Newfoundland and Labrador would be a priority. We have begun that task.

Yesterday, tue announced the members of our Economic Recovery Team which will help us I<E!ep that commitment. No one is naive enough to think the solui: :ions c"'l.re readily at hand. We bE!liE!UE!, however, solutions can and lAri . ll be found. The Team will draw on the existing strengths and latent potential in all our regions, to replace stagnation and despair with opportunity. The Economic Recovery Team has been allocated $3 million from Current Account to commence this effort. Additional funds will be obtained from the pool of capital ra.isE!d through the Newfoundland Development Savings Bond issues.

In order to complement the work of the Economic Recovery Team, the Newfoundland and Labrador DevelopmE!nt Corporation w:i 1 J bE! making available up to $1~ million to be disbursed in Joan, equity, and venture capital financing to Provincial enterprises during 1989-90, should the funds be needed. The general public will have the opportunity again this year to contribute towards kE!E!ping No. 8 R387

local capital at work here through participating in the issue of Development Savings Bonds. In addition, $7.25 million has been allocated through the Rural Development Authority to provide term loans to small businesses at interest rates of three percentage points below prime. Mr. Speaker, our small business sector .i.s a mainstay of the Provincial economy. This Government recognizes the c~ucial role thJ.s sector must play if we are to secure future economic and rural development .

We already have movad to consolidate the various business support dtvisions of Government into a more focused and cohesive unit to meet the needs of the small business community. We expect that greater access to services and increased local support · to small business will nurture our economic renewal. I am ple.ased to announce that in light of the Federal Government 1 s withdrawal of operational support to the Pasadena and Port aux Basques incubator malls, Government has decided to fully fund their operations with $395,000 provided in 1989-90 for that purpose. Mr.

Speaker, I am pleased to announce that WE! are providing $2 million to fund cash grants to local investors under the Newfoundland Stock Savings Plan and Venture Capital Ta~ Credit Program, in addition to the available Newfoundland personal inc ome ~ax credits . These pro grams enc our age Pro vincial re sidents , .i.n making th eir own inv est ment c hoi ces, to put capital di rec tly int o com pan ies whi ch co ntri bu te to ou r econo my . We will be reviewing these programs to assess how thE•y can contribute 1_388 June 6, 1989 VOL XU to our economic recovery plan . Mr.

Speaker, through an aggressive advertising and promotiun carnpa:ign we are attempting to posi U on Newfoundland and Labrador in the very competitive marketplace for tourism dollars as d distinct destination choice. To further thts effort, I am pleaS E!d to announce an increase of $500,000 in our tourhm marketing budgE!t. Recent indications that a new Tourism Subsidiary OeuelopmE!ni: Agreement might not be forthcoming from the Federal Government are mo st dis appo intin g in vi ew of the si gnifi cant impo rtance of tou rism developm ent jn rural Newfoun dla nd.

Government wtll be en deavour in g to seek Otta wa•s re cons ide ra tio n of this position . Mr. Speaker, the geological survey database developed by the Department of Mines and Energy has been a rnajor factor in increasing mineral exploration in the Province during recent yea rs and has been dire ctl y respon s-.i.ble for a number of si gn ific ant mineral discoveries. Our pr evi ous federal cost sharing has been put in doubt and the existing level of Provincial funding is not suffictent to support a reasonable level of field operations.

I am pleased l:o announ( "' t.i.le are providing an increase of $1 million for survey activities in 1989-90. Mr. Speaker, agriculture has gr' E!al: : potential to strengthen !-:he rural economy. We are prouidi ng $:. million in funding for Lhe Farm Development Loan Board Lo provid E! loans to farmers at prE !ferr ed interest rates. Also , to establish a long term policy and a strategy for developing agriculture, funds have been allocated for a Task Force on No. 8 R388

Agriculture. Mr. Speaker, this GovernmE!nt refuses to let the crisis in the fishery go unchallenged . To assist the Departme!nt of Fisheries in retaining the expertise needed to advise on a course of action and to carry · out product development and other experimental projects, Government is providing an initial allocation of $500,000. Expenditures under the Inshore Fisheries Development Agreeme!nt, cost shared with the Government of Canada, will increase significantly during this second year of the five-year agreement.

Overall, Current Account expenditures on fisheries development initiatives in havesting, aquaculture, processing technology and marketing will amount to. $3. 1 million. Capital Account expenditures on fisheries related infrastructure projects will also increase significantly in the 1989-90 fiscal year. Expenditures on marine service centre expansion and modernization will amount to $9 . 3 tni 11 ion . This u.li 11 inc 1 u de modernization of fish plants in northern Labrador. These initiatives will ensure that the infr·astructure meets the needs of inshore fishermen in particular.

In 1989-90, the Fisheries Loan Boar·d tJJill continue .its support to the inshore fishery through its Direct Loans Program, Bank Loans Guarantee Program, and Bounty Programs to provide interest subsidies on guaranteed bank loans, low interE•s t rates for direct loans, and capital grants for the construction of new boats and the rebuilding of USE!d boats. Under the Direct Loans Program the Board will support an investment L389 June 6, 1989 VOL XLI of approximately $11 million to about $1,000 fishermen for sma11 boats, engines and equipment.

The Canada-Newfoundland Offshore Development Fund is a $300 mj]ljon initiative cost shared on a 75/25 basis by the Federal Government and the Province . To date approval has been given for oVE!r 20 projc~cts valued at $233 tnill .ion from the Fund, including $95 million made available under the Hibernia Statement of Principles. While no specific allocation has been made in the Budget for the MarystotJJn offshore fabricatton facility, it is Government's intention to provide funding as the project is released in conjunction with the finalization of the Hibernia Development Agreement.

EXPENDITURE PRIORITIES Efficiency Measures In 1988, the consulting firm of Woods Gordon undertook a review of the operations of the Department of Social Services anu Pub1.ic Works and Servj ces. The resulting reports have been reviewed and !:he majority of the recommendations have been, or· are in the proCE!SS of being, implemented. The netJJ Department of Works, SE!rViU!S <.~nd Transportation will be increasing efficiency by impletnE!nl:ing an automated security system, and Government's telephone sysh?.m w:i11 be assessed to identify cost saving measures.

Government has accepted the recommendation of the Senior Expenditure Review Committee and its consultants to carry out a systematic reassessment of Government programs. Funding h~s been provided for this purpose to the Treasury Board Secretarial. No. 8 R389

We are optimistic that this exercise will identify further opportunities for savings. The Voluntary Earl y Retirement Program has reduced the size of the public service while minimizing any negative impact on public employees . The reduction in the size of the Cabinet and the senior executive has already occurred with significant cost savings and increased efficiencies . Departmental reorganizations are now being implemented. Our first priority :i.n filling positions vacated as a result of the Voluntary Early Retirement Program will be to reassign redundant employees.

Furthermore, through the budgetary process in this and subsequent years, departments and agencies involved in the Voluntary Early Retirement Program will be required to take appropriate measures to ensure there IJJill be no net cost to Government of implementing the Program. Unfortunately, the self-financing nature of the Voluntary Early Retirement Program implemented in Government makes it inappropriate fo r the healt h ca re sec tor. Fe w positio ns co uld be e limina te d in hos pitals an d nurs in g hom es, the reby mini miz ing any cost sa ving s.

Diffi cu ltie s w oul d b e enc oun te red in re placing the st aff who woul d r etire, ther eb y ca us in g service reductions. Accordingly, Government will not be providing funding ·to offer this program to the health care sector . Should circumstances change, however, Government would be prepared to consid~r any self-financing alternatives put forward by organizations in that sector. Mr .

Speaker, be prudent . this· Government will Similarly, we ask all L390 June 6, 1989 VOL XLI agencies associated with Government and all interest groups to be prudent in their expenditures and moderatE! in their demands, so Government can build the economy and provide Lhe levels of service and opportunity the people of the Province require. Health Care System Mr. Speaker, health carE! servicE!S are vital to any society . Because of difficult fiscal circumstances, however, our ability to enhance the health care systE!HI is limited. Nevertheless, I am announcing measures today to move us in the right direction.

Th is Gov ernment believes that hea lth car e p rogra ms at the commun ity leuel merit special atte nti on . Acc or·d in gly, we will al locate a fu rthe r $1 millio n fo r home car e pr ograms throughout the Pr·ov in ce. Tbis fundin g will provide for the devel op ment of a Prov in cia l f ram ew or k f or se rvice deli very, asses sment and plac ement , as well as the en hanc emen t of dj rec t care to individuals . This will improve the quality of life for many patients by allowing them to remain near their homes and families.

Funding is also SO new personal the Province. personal care residents of facilities to being prouided for care home bE!ds in As well, l:he allowance~ to c h r o n i c. c are cover personal ameniti es is being increa se d immediateJy by 2? percent From $90 to $110 per month. Go vernme nt wi ll be reviewing in detail the recent Report of the Adu isor y Com mittee on Nursing Wo rkf orc e. As an inte rim meas ure , ho wever, Go ver nmen t is providing No . 8 R390

funding for a minimum of 45 new nursing and resident care positions around the Province. A special amount of $3.5 million has been allocated to enable has pi tal s to reopen high priority beds in a number of locations and to maintain and develop key specialty services in regional and Provincial health care facilities . Additional funding has also been provided to commence the orderly expansion of CT scanning services in the Province and to provtde for· significant adjustments in funding for road ambulance services.

This Government is committed to maxirniz i ng health care benefits for the residents of our Province and is prepared to make difficult but necessary decisions. To ensure that the new $20 million, 75 bE•d facility on \:he Burin Peninsula operates at full capacity, in-patient services at the st ~ Lawrence and Grand Bank Cottage Hospitals will be phased out, and the remaining beds at the new has pi tal wi 11 be opened. The Department of Health will be asked to assess the need for and level of primary me!dical services at Grand Bank and St. lawrence. Mr.

Speaker, funding for health capital projects will amount to a total of $9.4 million this year. Funding will be providGd to continue the construction of a modern health care facility at Roddickton which has an expected final cost of $3.5 million. Planning funds have been provided For an upgrading project at the James Paton Memorial Hospital in Gander. While these considerable Province's measures wtll help to health care be a the system, L391 June 6, 1989 VOL XLI Government, in consultation with those involved in the! health care sector, w:i11 identify and address other needs in the months and years ahead .

Construction Mr . Speaker, substantial fund s will be required over future years to provide for t.he cost of water and sewer services to the 309 incorporated municipalities in this Province .

In order to address this need, Governrne ·nt will immediately investigai: E! rH?.W <.'wd innovative methods and technologies which can be adapt ed to this Province's harsh terrain and weather conditions . fhe Department of Municipal and Provincial Affairs .is prii:~sently assessing whether the extension of water and sewer services to unserviced municipalities can best be achieved through a Provincial water and sewer corporation, 1.uhj c h wo u 1 d have res pons i b i 1 i \: y r=- or a 11 such services in the Province, or by some other means.

In \:he meantime, this Administration wjJ.J continue to address l:he most pressing needs through the provision of substantial funding for water and sewer infrastructure this fiscal year. In addition, Government will spend a tot~l of $106 .7 milLl u! J on .ii:s road programs, an eight percen t increase ov12r 1988 ·-89. A total of $30 million is provided For ongoing public · building construction projects. Newfoundland and Labrador Hydro and i. ts subsidiariE!S 1.1.1i 11 have capital expenditures in exces s of $100 million in 1989 distribut ed throughout the Province .

A decision on the nE!Xt rnajor pouJer generation source for the Province will have to be rnade within the No . 8 R391

next 12 to 18 months. It is still Government 1 s objective to accomplish this through an inter-connect]on with Labrador. Mr. Speaker, Government has approved a 1989-90 capital expenditure program of $118.4 million for the Newfoundland and Labrador Housing Corporation (NLHC). This year NLHC will deliver approximately 350 new social housing units to low income families and senior citizens living throughout the Province. In addition, nearly $?.0 million will be committed on a cost shared basis with the Government of Canada for home repair and renovations through over 2,200 grants to homeowners.

NLHC also plans to increase its efforts to provide residential and industrial land assemblies and continue renovation of the Corporation 1 s market rental units. Education Mr. Speaker, Government considers education to be a fundamental element of any long ter·m strategy for economic recovery. Therefore, We are committed to undertaking during the 1989-90 fiscal year a series of initiatives designed to improve the quality of education in the Province.

While the Report of the Task Force on Education Finance, together with a planned assessment of the current school tax syst em, should identify a range of options for ful :ure consideration, it is cl ear that immediate measures are also necessary to address funding of the school syste m. Effective April 1, 1989, operating grants to school boards will be increased from $255 to $265 per student. School Tax Equalization Grctnts will increase frum a 1988-89 level L392 June 6, 1989 VOL XLI of $4 .5 million to $10 million for 1989-90, to help reduce disparities primarily in rural areas with weak tax bases.

The pilot project to deliver advanced mathematics courses through distance educ at io n tethnology will be expanded from 13 to 20 small rural schools during 1989 -90. The funding for the Provincial Teacher Aide Program for severely handicapped students will increase by SO percent to $3.4 million. Bursaries provided to s t:udent:s .in remote communities who must travel to larger centres to cornplEd:e their high school education will be increased from $1,750 to $2,250. Mr.

Speaker. -.in addition to increasing the funding for school operating costs, this Governm ent will substantia lly increase its commitment to school construction from $20 million last year to $27 million in 1989-90 and in eac h of the two following years. A portion of the enriched funding will be allocated each year for capital projects desi gne d to improve accessibili ty for handicapped students . An amount of $2 .5 million of the first year 1 S commitm ent wi ll be ta rget :ed towards school boa~d debt retirement.

This Government is also committed to impr ov ing access to educ at io n at the post-secondary leve l. We will expand the curricul •11n at the Sir Wilfred Grenfell College in Corner Brook to include th i.rd and fourth year courses. Approximately $2 milll on will be provided during . 1989-90 for new post-secondary education facilities . I am pleased also to announce that university courses will be offered at Rurin this year, and that preparatory work No. 8 R392

will commence for the introduction of a similar program to western Labrador next year. This Government recognizes that certain initiatives should be introduced immediately to improve ·access to post-secondary education and make the s y s t:em more r·es 'ponsive to the demands of the labour market. Accordingly, an allocation of $2. 1 million is provided this year to finance new initiatives at Provincial institutes and community colleges. Mr.

Speaker, to furthGr demonstrate Government's commitment to post-secondary education, $2 mi 11 ion is provided to Memorial University to undertake planning for new facility developments and for various other projects . The post-secondar·y ·education system initiatives I have announced today will be costly. Students must help share the burden of these costs. Accordingly, it. will be necessary For Memorial . University, Provincial institutes and community colleges to increase tuition fees by ten percent.

With the co-operation of the Federal Government, approximately $600,000 will be devoted towards literacy initiatives in the coming year. Employment Initiatives Mr. Spc~aker, an evaluation of the Private Sector Employment Program indicatE!S \:hat while it tnay have generated some short term -c~mployment, the objective of providing unemployed persons with a basis for long b:•nn attachment to the labour force is not being realized. Government is L393 June 6, 1989 VOL XLI considering a program which combines education and training opportunities with work opportunities.

The existing Private Sector Employment wi.ll only provide funding in 1989-90 to meet existing commitments. Government will implement a new program this year to assist primarily under-educated social assistance recipients in obtaining work experience. It is our intention to create more meaningful job opportunil:ies .in the private sector for sociaJ assistance recipients thus enabling them to remain in the workforce. This pror;3r'l'lrn tAli ll be delivered on a 75/25 cost sharE!d basi.s, betWE!en GovenllnE!nt and private sector employers with funding of $2 mill'.hll'l provided this fiscal year.

Furthermore, $4.4 million in funding has been allocated for thE• Fed era 1- Provincia 1 Ernp lo ymE! nt Enhancement Program to assist unemployed persons .i.n obtaining meaningful work and receiving career related training. Government remains conCE!rned about the effectiveness of th(~ Cu1nrnunit:y Development Program and intE!nds to study other opLi.ons in th.i.s ar·c~a. We wjll continue to fund tht:! Program in 1989--90, hoWE:!VE!r, w:i.t:h $29 .4 million provided for lhat purpose . The Occupational Integration P rog r·am for· Women irnp l ernE! n t.t!d in 1988-89 is currently under review.

Funding of $250,000 has beE!n provided to continUE! th.is project, but furthe•r funding - w"Lll depend on an evaluation to be conducted early in 1~190. ThE! review will also examine alternative methods of E!ncouraging women to enter non-traditional occupations. No. 8 R393

An intensive youth summer employment program is available under the Federal-Provincial Youth Strategy Agreement with a budget of over $11 million provided for 1989-90. Also, the Provincial Government will provide $900,000 for a student employment program . Mr. Speaker, this Administration is committed to the concept of equal pay for work of equal value and to l:h e im plem enta tion of pay equity for wom en in t he pub lic sector . G ov ernme nt and the maj or public sect or un ions hav e si gn ed a Pay Equ it y Agre emen t wh ic h prov ides . for a co-op era tive appro ach to ach ie vin g pay equ ity for wom en.

The Ag ree ment is bein g implemented by a Joint Pay Equity Steering Committee, which includes equal numbers of union and employer representatives. Regional Co-operation Initiatives Mr, Speaker, there is much unnecessary duplication of services among the mdny municipalities throughout this Province in such arecls as waste disposal , fire protection, municipal buildings, libraries and recreation facilities.

This Administration is studying ways to reduce this duplication, to make th e qu alit y o f se rvic es acr oss rnu nici pa li tie s more equ itable, an d to sp end scarc e Gov ernm ent fund s more eff ecti vel y. On e of the soluti on s bei ng con si dered is the integration of services · in a number of incorporated and unincorporated municipalities, local service districts and cornrnuniti(•s. Appropriate funding has been earmarked to launch this initiative. Marine Improvements L39ll- June 6, 1989 Transportation VOL XI.I Mr .

Speaker, Government is committed to the provision of improved ferry service for Newfoundlanders residing in island com1nuni ties . User- ·s uf Provincial ferries should pay rates equivalent to the cost of utilizing road transportation. This Administration does not endorse a ferry rate policy for island communities which pE!nalizes their residents and hinders their po te nt ia l for ec onomic growth. Accord ing ly, ov er a th ree- year perio d com men cin g O ctober 1, 1989, Governm ent will phase in new lowe r rate s whic h will be appro x.Lrnatel y one-half their current levels.

Effective in the current year, Government will restore the dedicated ferry service to ChangE! Islands, wi.th service to be shared with the Fogo ferry during the winter season . The whole question of year-round, reliable ferry service to Fogo Island will be e:1xamined. Government has authorized the first replacement for the aged ferries on the BR]1 Island service, to be constructed shortly at Mar·ystown. Funding For a second rE!placement vessel is undE!r active consideration.

Social Assistance Increase This government is committed to improving thE! econom.i.c and social well--being of those arnong us who are in need. We ar e currently revie wing our Social Assistance Pro gra m with a view to imp le mentin g changes where appr op riat:e. At t:h .i.s l:ime, .r ·''n please d to anno un ce that a four percent incr ea se ha s been pro vide d for soci al assistance recipients effective July 1, 1989. Other Initiatives No. 8 ln 91J.

Mr. Speaker, health and environmental concerns dictate that we deal more effectively with the costly problem of so 1 id waste disposal. To meet the ever increasing demands, this Government is realigning its present program and is implementing a 60/40 Provincial-Municipal cost shared program for all major projects effective immediately . This initiative wi 11 be funded through the Newfoundland Municipal Financing Corporation. A sum of $2 million has been allotted for the destruction of PCB wastes at Happy Valley - Goose Bay.

These wastes will be destroyed in a mobile high temperature incinerator which is scheduled to be brought into the area later this year . Government will be placing added emphasis on the maintenance and upgrading of our Provincial parks system. We will be initiating general capital improvements to our Provincial parks at a cost of $1 million in 1989-90. These initiatjves are designed to reverse the declining number of visitors to our Provincial parks in recent years. I am pleased to announce that our Provincial historic sites will open for an extended period of public visitations this year.

This extension into the spring and fall seasons is expected to bring very positive benefi·ts · to ·the Province's tourism :industry. CONCLUSION The fiscal plan thRt I have presented to this Honourable House today signals the beginning of a new era of realistic and responsible econo1nic and financial management of the people's L395 June 6, 1989 UOL XLI business. In a few short, but very difficult weeks, LJJe have pul: together a Budget based upon an overriding principle of fairness and balance that recognizes our capacity to provide new opportunities for our people.

The expenditure program I havP outlined l:oday concentral:us on our most pressing social and economic priorities, and begins the elimination of unnecessary and unproductive outlays which we simply cannot afford. Our job is to do more than just put a new face on Government. We have to do a major restoration from \:he ground up. We must. restore our financial strength and flexibility. We must rE!Store thE! economic foundation upon tJJhich LJJe can guild our future.

And most importantly, we must restore \:he confidence of our youth in the ability of this Province to provide them with a meaningful and productive lifestyle. This Government is dedicated to the principle of equa]ity, equality of opportunity for Newfoundlanders and Labradorians within the Canadian federation, and equality of opportunity for all Newfoundlanders and Labradorians in all regions of this Province. SOME HON. MEMBERS : Hear, hear! DR. KITCHEN: Mr. Speaker, I moue debate be adjourned until !:hat t:hE! tomorrow. On motion, dE! bate adj our· ned until tomorrow. DR. KITCHEN: Mr.

Speaker, House that message fr·om No . 8 I wish to inform thE! I haVE! receiVE!d a His Honour, thE! R395

Lieutenant-Governor . MR. SPEAKER: All rise.

The following message is addressed to the han . the Minister of F:i.nance. 11 I, the Lieutenant-Governor of the Province of Newfoundland, transmit estimates of sums required for the public service of the Province for the year ending the 31st. day of March 1990, in the aggregate of Two Billion, Six Hundred and Twenty-Nine Million, Six Hundred and Eighty-Four Thousand Dollars ($2,629,684.,000) and in accordance with the provisions of The Constitution Act of 1867, I recommend these estimates to the House of Assembly. ( Sgd. ) L.ieutenant-Gouernor 11 We will take a few moments distribute documents to all members.

Order, please! to hon. The hon. the Minister of Finance . DR. KITCHEN: Mr. Speaker, I moue that Message together with Estimates be referred to Committee of Supply. the the a On motion, that the House resolve itself into Committee of Supply to consider the Message from His Honour the Lieutenant-Governor, together with the Estimates, Mr. Speaker left the Chair . Committee of Supply MR. CHAIRMAN (Snow) : L396 June 6, 1989 VOL XLI Order, please! MR. BAKER: Mr . Chairman . MR. CHAIRMAN : The hon . the Leader·. Government House MR. BAKER : Mr. Chairman, I move t:hat thE!

Committee rise, report pr·ogre ss and ask leave to sit again . On motion, t:hat the Commit:t:ce risE!, rE!port pr·ogrE!SS and ask leave to sit again, Mr . Speaker returned to the Chair. ·MR. SPEAKER : The hon . the mE!mber for frini l:y Bay de Verde . MR. L. SNOW : Mr. Speaker, the Cornmi tt oe of Supply has considerE!d the matters l:o it referred, has rna de some progress and asks leave to sit again. On motion, report received adopted, Cornmi t tee orderE!d to again on tomorrow. Notices of Motion DR. KITCHEN: Mr . Speaker. MR . SPEAKER: and s .i.l: The hon . t:he Minister of Finance . DR. KITCHEN: Mr .

Speaker, I givE• not iCE! that I will on tomorrow moue that this House resolve jtself into Committee of the Who1e l:o consider certain resolutions t.o amend The Income Tax Act relating to the imposition of a tax on the incoiTJ(! No. 8 R396

of individuals of a tax on corporations. and the the imposition income of I give notice that I will on tomorrow move that this House resolve itself into Co~mittee of the Whole to consider certain resolutions to amend The Tobacco Tax Act. 1986, relating to the imposition of a tax on tobacco. I give notice that I will on tomorrow move that this ·House resolve itself into Committee of the Whole to considE!r certain resolutions to amend The Gasoline Tax Act, 1978, relation to the imposition of a tax on gasoline. MR. BAKER: Mr. Speaker . MR. SPEAKER: The han. the President of the Council. MR. BAKER : Thank you, Mr.

Speaker. I would like to move the establishment of l:he Committees of the House to examine the Estimates of the var'ious departments. This has been done in concurrence with the Opposition House Leader. I move that the Resource Committee contain the member for Carbonear, Cha'irperson; the han. the member for Mount Pearl, Vice-Chairperson; the han. the member for Lewisporte; the hon. the member for Menihek; the han. the member for St.

Gebrge 1 s; the han. the m EHn be r for G r E! e n Bay and t he h on . the member for Placentia, and that l:he follow.ing Heads of Expenditure be referred to the Commit tee: Mines and Energy. Fisheries, Forestry and Agriculture, Development, Environment and Lands. L397 June 6, 1989 VOL XLI The Social Services Committee members: the han. the mE!mber for LaPoile. Chairperson; the hon. thE! member for Humber East, Vice--Chairperson; the han. the member for Eagle River; l:he hon. the member for Fortune Hermitage; the hon. the ITIE!mber for Har·bour Grace; the han. thE! ITIE!ITJber for St.

John 1 s East and the hon. the member for Stephenville, and that the following liE!ads of Expenditure be referred to lhis Committee: Social Services, Justice, Health, and Education. And that the Government Services Cornmi t tee be made up of l:he hon. the member for Pleasantville, Chairperson; the han. the member for Port au Port, Vice-Chairperson; the hon . the member for St. John's South; the hon. the rnernber .

For Fogo; the han. the mE!rnber for Mount Scio -- Bell Island; the hon. the member for Terra Nova and the hon. the member for Bonav is ta South, and that the following Heads of ExpenditurE! be referred to this Committee: Municipal and Provincial Affairs and Housing; Works, Services and Transportation, Employment and Labour Relations, and Finance. I might po'int out to all han. members, Mr. Speaker, that a suggestE•d

schedule of l'nE!eLL119S is attached to the document as it. is circulated. This

schedule is a suggestE!d schE:'dule for the Chairpersons of the Cc11nmit:tees. ThE:~rE! is a cortain amount: of flexibility built in, but the working of the Committees is largely the responsibil:il.y of (:he Chairpersons so appointed. I so move these Committees, Mr. Speaker. Motion, Committees No. 8 that the comprise Es t.ima tes the rnernbers R397

named, carried. MR. SPEAKER: The hon . the Government House Leader . MR. BAKER: Mr. Speaker, I move that the remaining orders of the day do stand deferred and that this House at its rising do adjourn until tomorrow at 2:00 p.m., and that the House do now adjourn. On motion, the House at its rising adjourned until tomorrow, Wednesday, at 2:00 p.m: L398 Jun e 6, 1989 VO L. XLI No. 8 R39 8