May 5, 1998

GOVERNMENT SERVICES ESTIMATES COMMITTEE

The Committee met at 9:00 a.m. in the House of

Assembly.

CHAIR (Wiseman): Order, please!

My name is Ralph Wiseman, I am Chair of the

Government Services Committee. With me this morning is the Vice-Chair, Mr. Jack

Byrne. With him is Mr. Ottenheimer, Mr. French, Mr. Lush and Mr. Sparrow. Mr.

Oldford is unavoidably late. He should be along shortly.

I want to welcome the minister and his staff. The

purpose of this meeting of course is to review the Estimates of the Department

of Finance and the Public Service Commission. The procedure has been that the

minister will have fifteen minutes for opening remarks, if he so desires. The

Vice-Chair will have fifteen minutes to respond, or his colleague, Mr.

Ottenheimer, if he has indicated. We will interchange questions back and forth

at ten minute intervals.

When you are ready, Mr. Minister, you may proceed.

The Clerk will call the head.

CLERK: 1.1.01.

CHAIR: Mr. Minister, you may proceed.

MR. DICKS: Thank you, Mr. Chairman. I really

don't have any opening remarks except to say that I am pleased with the way the

Budget is progressing in the Province. We have been meeting our targets. It has

been a difficult time over the last couple of years with the economy shrinking,

but I think we have reasonable prospects, I should say, for financial success

over the next couple of years.

The major challenges facing the Province will be

declining equalization. Also I think we have a lot of challenges around the

Province due to out-migration, which means that we have to provide services in a

lot of communities that have been shrinking. There are a lot of demographic

problems around the Island and in Labrador.

Having said that, I think there is a lot of

optimism. I think the economy will accelerate substantially over the next couple

of years. Although it won't yield as much revenue as it will generally in the

Province because of the equalization offsets in particular, I believe it is the

time when the Province will be seeing a greater period of prosperity.

I will just note as well that our employment

figures, which are critical to the government, have been improving over the last

couple of years, and it is always nice to take credit for it. I think to some

extent part of that is due to some of the actions we have taken over the last

couple of years, including the HST merger of our Retail Sales Tax with the

federal GST.

Having said that, I would just like my staff to

introduce themselves, starting with Sheila to my right, and I will move around

in a clockwise direction.

MS DEVINE: My name is Sheila Devine and I am

with the Public Service Commission.

MR. O'NEILL: James O'Neill, Manager of

Financial Operations, Executive Council.

MR. BENNETT: John Bennett, Assistant Deputy

Minister of Finance for Pensions and Debt Management.

MR. CLARKE: Robert Clarke, ADM for Tax

Administration.

MR. WALL: Phil Wall, Deputy Minister of

Finance.

MR. DICKS: Thank you, Mr. Chairman, that's all.

CHAIR: Mr. Ottenheimer, do you want to respond?

Or you can go into questions. It's your choice. The Vice-Chair has indicated

that you are the critic, he would prefer that you did (inaudible).

MR. OTTENHEIMER: Thank you, Mr. Chairman. Mr.

Minister, in your few opening comments you spoke of, I guess very briefly, the

changed role in terms of RST and now the federal role obviously that is played

under the HST implementation.

When we look at, for example, the Related Revenues,

and this is on Roman numeral ii at the very beginning of the Estimates, under

Provincial Taxation we see Personal Income Tax.

MR. DICKS: Sorry, Mr. Ottenheimer, (inaudible),

could you use to the page number as well?

MR. OTTENHEIMER: It is Roman numeral ii, almost

at the very beginning under Statement II, Comparative

Summary of Current and

Related Revenues.

MR. DICKS: Yes.

MR. OTTENHEIMER: When we look at Provincial and

then under Taxation, Personal Income Tax, we see a figure of $627 million and

Sales Tax, $450 million, for a total of over $1 billion. As I read it, these are

monies received - largely this is a federal role for both those categories. So

what we have here are significant amounts of money which are now essentially

federal jurisdiction.

I am just wondering, with the shift in terms of

monies being received by the Province, particularly over the last year with the

implementation or the changes in sales tax provisions, what changes have taken

place in your department to reflect such a dramatic shift in the way monies are

collected, and the change in the role vis--vis the Province and the federal

government?

MR. DICKS: Yes, let me respond. First of all,

these are still provincial jurisdiction. What has happened is that in both the

personal income tax and the sales tax the federal government administers and

collects it at the present time. We had approximately 150 people working in tax

administration. As a consequence of the changeover to the HST system, which was

the only relevant change in terms of personnel, because the personal income tax

has always been collected by the federal government, I guess, going back many

decades, but as a consequence of that the federal government absorbed about

seventy of our employees. Bob, what is the current number of employees we now

have?

MR. CLARKE: Eighty.

MR. DICKS: Eighty, so that is roughly it. We

had close to 150, we now have about eighty. A number of those are contractual

because they are still occupied with doing the assessments and collections under

the Retail Sales Tax. That is the main administrative change in our tax

administration as a consequence of the merger of the two taxes.

We probably have about thirty contractual

employees, and after we finish collecting the RST we will be town to about fifty

people. Having said that, it won't happen overnight. We are still trying to

collect school tax from the change that occurred in 1991 or 1992, was it, Bob?

1992. Tax collections services have a way of persisting, to the disappointment

of many taxpayers.

MR. OTTENHEIMER: You just mentioned the RST

wind-up. How is that progressing and what sort of termination date do you see?

MR. DICKS: Probably I would ask Bob to respond

to that. I am not really current on that. Mr. Clarke.

MR. CLARKE: We expect to finish down-sizing by

the end of this fiscal year. That will mean collecting receivables and doing

audits.

MR. DICKS: I think Mr. Ottenheimer's question

was directed to when we see the total effort, all the money being collected, as

well as when we would not need the personnel to do it, Bob. Do you think we will

have it done by the end of this year, or is that going to be a three- or

four-year effort?

MR. CLARKE: The bulk of it will done by the end

of this fiscal year.

MR. DICKS: Yes.

MR. CLARKE: Of course, it will follow on into

subsequent years.

MR. DICKS: I should say what we do each year,

in the case of school tax, for example, and I hate to say that we will all be

finished up for this year. I would probably find that overly optimistic. In the

case of school tax what we do each year is access the amount we are collecting

and the cost of it. Last year, for example, we collected about $2 million, and

the cost of collecting was about $800,000 for the people we had employed.

MR. OTTENHEIMER: In school tax?

MR. DICKS: In school tax last year. I had a

little surprise. I came in one morning and I had all these phone calls. I found

the department had sent out 35,000 wage attachments for school tax. It caused a

little bit of an uproar but we did collect a substantial amount of money as a

consequence.

MR. OTTENHEIMER: The reason I asked the

termination date is because you mentioned school tax. It was in 1991 and 1992,

of course, when the whole arrangement with respect to the collection of school

taxes was taken over by the department. Here we are some five or six years later

and we are still collecting school tax. I guess my question to Mr. Clarke is:

What is the reason for the optimism in terms of having the RST procedure

terminate within a year, when we see school taxes and its collection taking some

five or six years.

MR. CLARKE: The school tax was a bit of a

problem. We had about 157,000 accounts and a lot of these accounts were not

valid. We had to try and establish a valid receivable. That took quite a while.

Whereas in sales tax we had more people and we know the receivables are valid.

MR. DICKS: The number of accounts is more

limited as well. I think we had about - was it 16,000 accounts, Bob? The regular

remitters were in the range of 8,000, multi-remitters?

MR. CLARKE: In sales tax?

MR. DICKS: Yes.

MR. CLARKE: Yes.

MR. DICKS: So you have a more limited number to

deal with and it is a more identifiable segment of the population. Having said

that, whether or not we will finish it all by the end of the year I suspect that

may be a little optimistic. Bob is right, I will say.

MR. CLARKE: Well, there will be receivables

carrying into the next year but the bulk of it should be taken care of this

year.

MR. OTTENHEIMER: I am just wondering, on the

copy of school taxes, do you have the breakdown? For example, I know we are

going back a few years but obviously it is a continuing process. Do you have the

breakdown as to, for example, the first thirty days after wind-up and then the

first sixty days? Because what I am wondering is here we are five or six years

later and we are still in the process of collecting school taxes. The procedure,

by and large as I see it, tends to take care of itself.

For example, in a real estate transaction a law

firm must request a school tax clearance. That is something which is done

largely through the efforts of a third party. I understand there are set-off

provisions as well. For example, if an individual receives or ought to receive

or is supposed to receive monies from government and there are school taxes

owing, there is a set-off provision. Through collection procedures available to

third parties a lot of the work, it seems to me, is being done, and here we are

five or six years later. What I am wondering is what are the figures - thirty

days after wind-up, sixty days after wind-up, ninety days after wind-up -

compared to what we are collecting today? Keeping in mind that there are other

mechanisms available to in fact collect monies which are owed government. Do we

have a breakdown of that?

MR. CLARKE: We had a breakdown. I know back in

1992 we collected about $8 million to $10 million in the first year and it has

declined since then. In 1996-1997 we collected $3 million and in 1997-1998 $1.7

million, and this year we will probably collect $1.2 million to $1.5 million.

MR. OTTENHEIMER: Has the adjustment been made

for the collections cost? The minister just mentioned that I think there was

some $800,000. That figure takes that into account, does it?

MR. CLARKE: These are revenue figures I just

mentioned then. The expenditure figures have come down from $1.5 million down to

$350,000 for this coming year, so we are still collecting $3 for every dollar

spent in school tax.

MR. OTTENHEIMER: Is that including those other

collection procedures which are available?

MR. CLARKE: No. That is the total -

MR. OTTENHEIMER: That is the total.

MR. CLARKE: - collected which will be from your

third party demands.

MR. OTTENHEIMER: Let's break it down further.

Do you have some idea of what the cost would be, or the benefit to government,

when one deducts those procedures which are taken into account and would take

place automatically whether or not there is a school tax collection avenue

available? Do we have a breakdown of that figure?

MR. CLARKE: We do not have a breakdown of what

would be collected other than through interceptions or from real estate

transactions. It could be fifty-fifty. The method that you outline is the

easiest way to collect. Other than that we have to attach wages or somebody's

bank account, that type of thing, which is difficult because there is a lot of

small accounts. You do not necessary want to take a $30,000 machine for a $300

balance. It is more difficult to collect that way.

MR. DICKS: I should say wage attachments have

been our most successful way of collecting this. Remittances from third parties

are most successful in case of commercial. John, I am not current with the

practice - I have been out of it now since 1989 -, but is it necessary now to

obtain a school tax clearance when an individual buys property?

MR. OTTENHEIMER: On a real estate transaction.

MR. DICKS: On a real estate transaction.

Because you only had to do that formerly for commercial school tax because that

was the only one that attached to property at the time.

MR. OTTENHEIMER: It is my understanding it is a

general requisition on closing. I guess, Mr. Clarke, you don't foresee that same

sort of time frame in terms of RST collection as we are now witnessing in school

tax collection.

MR. CLARKE: No, it definitely won't be, because

we know the balances are valid and we have a trained staff collecting. We have

audit assessments being set up as we wind down, but the collections will

gradually wind down. This could go on for several years but it is not going to

be a major problem.

MR. OTTENHEIMER: This is a question of a

general nature, Mr. Minister, and it has to do with numbers. Again, you referred

to it earlier in terms of the total number of personnel in the department.

Approximately ten years ago the total number of personnel within the Department

of Finance was 326 employees, according to my rough figures here. The year

1998-1999 shows approximately 180, so we see a significant reduction, almost 50

per cent, in the total personnel within the Department of Finance, yet we see an

increase in senior personnel within the department.

For example, ten years ago I believe there was one

Deputy Minister and two Assistant Deputy Ministers. Today it is my understanding

there are three or four ADMs in the department. I wonder how we rationalize

that. We see a significant reduction in the overall personnel within the

department. We now have approximately one half of what it was ten years ago, but

yet the department enjoys the services of four Assistant Deputy Ministers and a

Deputy Minister.

MR. DICKS: Just let me respond first of all.

There was actually two deputy ministers some years ago. There was a Controller

General which was a DM position, that was Bernard Carew, I believe. Gilbert Gill

was there I guess about ten years ago roughly, and there were three ADMs at the

time, so actually we have one less senior executive position.

The Department of Finance is a little different

than most departments in the sense that you have people with very high skill

levels. If you just look at the amount of money we administer and collect we are

responsible for almost $3.5 billion worth of money that comes in each year, and

the handling of it. You cannot really hire someone for $20,000 and say: Look,

here is the money, now make sure it all gets handled and collected properly and

so on like that. It requires a very high level of financial adminstration.

If you compare what we pay our senior people with

what you would get in a corporate sector we are far below it. Just check

Newfoundland Telephone, for example, and see what the wages for a VP there are.

Check the wages of the controller down at Fortis for example. Most of these are

in the $200,000 range. We are not paying that to any of our ADMs who exercise

far greater monetary authority.

If you look at some of the figures, what we

administering in sinking funds alone, or going to market, we require people to

do very complicated analysis. We have a fair amount of foreign debt. Every time

it comes due we have to determine whether in the long-term, given the foreign

currency exchange risks, given the differences in interest rates, given the

difference in fees - we had to do this analysis on the Swiss issue twice last

year. We decided to do one in Switzerland and one in Canada. Very fine margins

to determine where you are better off borrowing. We administer a $390 million

treasury bill program that comes due every ninety days, meaning the amount of

pure fiscal management in the Department of Finance is incredible, not really

known to the general public.

What really concerns me is that I think given the

financial responsibility we are very thin on the ground. We have some people

with very specialized knowledge, but we have one of him or her. For example, how

many people do we have in the pensions right now, nine?

WITNESS: (Inaudible).

MR. DICKS: For instance, debt management. We

have nine people to manage all the debt and that sort of thing. We have some

very good people but we do not have a lot of them, and I would be very concerned

if we lose one or two of them. They are very hard to replace.

The other thing I should mention is out of the four

ADMs we have, one of them is Beverley Carter who moved from Executive Council

when we merged the economic analysis, the people that do up the economy and so

on like that. There was a group over in ITT. Bev Carter was in Executive

Council, so they just put that function in our department. Essentially we have

one less DM than we did ten years ago and we still have the same number of ADMs,

one moved from Executive Council. In fact, when that was done, I think ADM Lorne

Spracklin retired at the time, so in effect overall there were two less ADMs in

those - there is one rather now where there were two.

I do not really have a concern about the executive

of the department when I look at the amount of money we handle and the

responsibilities and the type of decision making. We need very high level people

to handle that kind of thing.

MR. OTTENHEIMER: I certainly know, having dealt

with your staff, we are talking about top-notch, first-class individuals. That

isn't the issue. Again, I do not think my question has been answered, because

again, some nine or ten years ago, we had double the staff. You know, double the

Indians and half the chiefs, as it were.

MR. DICKS: (Inaudible) in terms of the budget

we -

MR. OTTENHEIMER: Maybe I could word my question

differently. Do you have a breakdown perhaps from a supervisory point of view?

We have four Assistant Deputy Ministers within your department. How many

personnel would each Assistant Deputy Minister be responsible for?

MR. DICKS: I can answer your question. I can

get that information for you, but I think that is a wrong approach to it, if you

do not mind me saying so. The difficulty in government is that the way the

system is structured they use line management terms for what are really

professional qualifications.

For example, if you look at the Department of

Justice we have an Associate Deputy Minister and we have an Assistant Deputy

Minister to whom we pay - the Associate Deputy Minister in effect does not

really supervisor anybody, but is a lawyer with very high level skills and who

is given that position in recognition of that. If you want to critique the

government system, and I do, I think the trouble is the terms we use.

For instance, the directors, say so-and-so is a

director, but he or she only directs two people only directs two people.

Therefore we should have less directors. That may be the case if you think in

terms of a line management structure, but when you think in terms of the

compensation system for people with very high level skills you need to have a

certain salary level. Unfortunately the way the HAY system is structured - and I

am one of its worse critics - it sets up that type of system. Now you can call

them something else, but the point is you still have to pay people at a certain

level regardless of the number of people they direct.

If we wanted to hire someone to manage and

supervise the management of pension funds we can't hire a manager and pay them

$40,000 or $50,000. It would be irresponsible for us to do it because you would

not get a person with the talents to do it. We may have some people who may only

supervise twenty people or nine people, but at the same time the type of person

you need with the type of skill sets and educational level is not someone you

are going to get at an entry level position. I think the problem with it is that

our terminology in government is deceptive, and that a lot of the positions and

the salaries that come with them are not really given solely from line

management - the number of people you manage -, but more to do with the skills

you need and the compensation levels.

I agree with you in terms of calling people

directors, ADMs or whatever. I would be happier to call them something else and

set up a line supervisory authority, but whatever you call them you still need

to have an appropriate salary level. In fact, my concern in recent years - and

it has not been the case, but because we have had a long period of wage freezes

in the public sector - is I think a lot of our senior executives are underpaid.

My concern is that as the economy expands we are probably going to lose a lot of

people who are not going to be easily replaced in this economy. It's not

happening yet in government, but if you look at the IT sector we are losing all

kinds of people. The trouble is the more we lose the more we lose because they

get down in the States and they are paid a bonus for people they can recruit, so

they are trying to recruit back here.

We have to be very careful. We can be a little

niggardly about it and say: You are overpaying this one, you should not have so

many directors and so on. The consequence of that, whether you call them

directors or choose another term that does not imply line management authority,

you are going to lose some very high level people who cannot be replaced.

CHAIR: Thank you, Minister.

MR. DICKS: Thank you, Mr. Chair.

CHAIR: Mr. Oldford, do you have any questions?

MR. OLDFORD: I have a question here. If you

could go to

Section 2.1.02 on page 35, Crown Agencies - Recoveries, please.

MR. DICKS: I'm sorry, 2.1.02?

MR. OLDFORD: Yes, 2.1.02, page 35. Last year

you budgeted $46,800,000. The revised figure is $16,800,000. This year you are

anticipating $69 million. Can you tell me where the bulk of that would come

from?

MR. DICKS: That is the Hydro dividends that we

have been getting in each year. What has been happening is we did not need the

revenue last year so we moved it forward into this year.

MR. OLDFORD: It is just Hydro?

MR. DICKS: Yes. I can give you an exact

breakdown of that if you like. It is the Hydro regular dividend of $34 million

this year. We estimate that will be higher than it was last year, so that is an

absolute increase from about $12 million last year. There is a special dividend

this year of $15 million, and the CF(L)Co pass through of $20 million. That

gives you a total of $69 million.

The reason that the $34 million is high - Phil is

just pointing it out to me and it's probably a point that needs to be made - is

that when we made the deal with Hydro Quebec on the Lower Churchill, part of

that was we had the immediate recall of the 130 megawatts of power which we

immediately sold. I think the gross was around $36 million. The net from that

after - because we own two-thirds when it is in the low twenties - so that plus

the $12 million regular dividend gave us the current $34 million that we are now

getting in Hydro dividends.

The additional $22 million or so is a direct

consequence of the Lower Churchill agreement with Hydro Quebec that we are

working on at the present time, and we have a special dividend that we have been

demanding from Newfoundland Hydro. It would be nice if we could get them from

Hydro Quebec as well. It is $15 million each year.

MR. OLDFORD: Money from agencies like the

Newfoundland and Labrador Liquor Commission, where would that be, where would

that show up in the Budget?

MR. DICKS: Newfoundland Liquor Corporation?

MR. OLDFORD: Yes.

MR. DICKS: That is in current account revenue.

If you go to page Roman numeral ii that Mr. Ottenheimer referred to, if you look

under General Revenues, the second category, the second large group from the

top, you will see Newfoundland Liquor Corporation, $81.2 million.

MR. OLDFORD: Thank you, Mr. Chairman.

CHAIR: Mr. Byrne.

MR. J. BYRNE: Thank you, Mr. Chairman. Before I

get into some of my notes, on the topic alone on page 35 you referred to

Newfoundland and Labrador Hydro. Can you tell me much money you have been taking

out of Newfoundland and Labrador Hydro over the past few years and how much you

are planning on taking out this year?

MR. DICKS: This year we plan to get $69 million

out of them. Last year I think we took $16.8 million out. That was the regular

dividend of $12 million and the CF(L)Co pass through of $4.8 million.

MR. J. BYRNE: Newfoundland and Labrador Hydro

itself.

MR. DICKS: Yes. Because CF(L)Co's dividends

come through Newfoundland and Labrador Hydro which owns two-thirds of it and

then it comes through the Province. It actually came to us from Newfoundland and

Labrador Hydro as $16.8 million.

MR. J. BYRNE: Last year.

MR. DICKS: Last year. There was also another

guarantee fee of $11 million which is not in our Estimates, rather, it is in

Consolidated Funds. In other words, we charge every group out there that has a

guarantee from government a 1 per cent guarantee fee, so we have guarantees at

Hydro roughly in the range of $1 billion or so. We collect an $11 billion

guarantee fee. It does not show up here, but in terms of charges to Hydro, that

is one of the guarantee fees. Well, the guarantee fee they pay is separately

accounted for than the general dividends we receive from them.

MR. J. BYRNE: Just a few years ago you were

talking about privatizing Newfoundland and Labrador Hydro.

MR. DICKS: I was not talking about it.

MR. J. BYRNE: Your government was talking about

it.

MR. DICKS: Yes, when I was Speaker.

MR. J. BYRNE: Whatever. Your government was

talking about it and most of the Cabinet ministers who are there now were there

at the time. Now you are taking money out of it each year. How long before we

get to a point where Newfoundland and Labrador Hydro is going to be at a point

where you can say it is not a moneymaker anymore? Because if you are taking out

this kind of money it has to be affecting the bottom line for that Crown

Corporation.

MR. DICKS: Not really. I do not think it will

ever reach the point where Newfoundland and Labrador Hydro is not a money making

corporation. It is a monopoly. It charges on the basis of an interest cover. In

other words whatever is -

MR. J. BYRNE: It has debt too.

MR. DICKS: Pardon me?

MR. J. BYRNE: It does have debt, you know.

MR. DICKS: That is how its returns are

calculated, in fact. It needs an interest cover that is basically calculated on

the size of its debt. I do not see a point at which Newfoundland and Labrador

Hydro will not return money to the Province. In fact if the Churchill Falls

agreement goes through, which we now have, it will yield substantial revenues

for the Province in the range of billions of dollars. It will be a moneymaker

for the Province.

MR. J. BYRNE: In your opening remarks you

talked about the decrease in equalization payments. That is partly due I suppose

to out-migration and what have you, the numbers are down.

MR. DICKS: There are a number of factors.

MR. J. BYRNE: Yes, I know there is a number of

factors, but to continue for a second. We hear the term these days, structural

deficit, and the Province will be facing it in the upcoming budget, probably in

the next few budgets. Some of that is probably related to the decrease in the

equalization payments; the one-shot deal that I think was $50 million from the

privatization of the South Coast transportation ferry system - you have so much

money there that was utilized to help balance the Budget; money from Hydro to

help balance the Budget. There is another one. Wasn't it Term 29 that you have

dipped into that won't be there in another year or two. Maybe it is not there

now. I am just wondering how you are planning on facing all of these one-shot

inputs into the balancing of the budgets, and how you are going to handle that

in the next year and the year after.

MR. DICKS: The same angel must be sending you

the same nightmares at time. You identified a number of factors and so on. The

money we had for the South Coast ferry service was the year before last when Mr.

Baker was finance minister and that was in the Budget, I think, we brought down

in 1995-1996. We did in fact balance the Budget that year. We had to take some

measures at mid-year because we were about $70 million down. We had about a $35

million increase in expenditures and a $35 million loss in equalization in the

fall and we took measures to correct that.

Now to a structural deficit to which you refer. All

a structural deficit is, to my way of thinking, is you have these many fixed

expenses and you have an income shortage that won't meet them. You can do one of

two things. You either expand your revenues in some fashion or you shrink the

size of your governmental structure. We had Program Review last year, and a part

of that exercise was to bring the size and the cost of government in line.

Having said all that, what you do each year in the

budget is tinker with things. We gave the Department of Health, for example, a

frozen budget of around $906 million. By August last year, three or four months

into the fiscal year, we had to give them another $24 million, and this year we

gave them another I forget how much, but up around $950 million. You have to

respond to needs as they arise.

With respect to some of the one-time payments we

have, Term 29 is being phased out, as you know. We expect the economy will grow

to meet those revenue shortfalls. Last year we had some shrinkage in the

economy, but at the same time retail sales grew by about I think 6.9 per cent or

5.9 per cent. Anyway, in the range of 6 per cent. We expect that over the next

several years, given what is happening, the economy will grow and we will make

up those revenue losses.

MR. J. BYRNE: You have to pray it does.

MR. DICKS: That does not hurt, (inaudible)

exercise.

MR. J. BYRNE: Something popped into my mind

that time. With respect to the departmental salaries in your booklet here, just

out of curiosity I have been going through some of this. I see some of the

departments with the Executive Support, and the critic for finance touched on

this, with respect to the numbers of people. I do not know if this should come

under the Public Service Commission. You take for example in the Department of

Government Services and Lands it is $543,300 for Executive Support, the

Department of Education is $744,800, and the Department of Finance is $603,100.

You would think each department I suppose would have similar costs in Executive

Support. Why such vast differences in the departments at that level?

MR. DICKS: Just let me say first of all that

when you look at salary figures for this year versus last year, you have to

remember this year we have an extra pay period.

MR. J. BYRNE: That is not the point.

MR. DICKS: Okay, but that does increase the -

MR. J. BYRNE: It's that way for every

department though, isn't it? Wouldn't that be for every department to have an

extra pay period?

MR. DICKS: Yes, that is -

MR. J. BYRNE: I am just wondering why there are

such vast differences between departments for Executive Support in that one

subhead.

MR. DICKS: From one department to the next?

MR. J. BYRNE: Yes.

MR. DICKS: Some people have more executives,

other people have less.

MR. J. BYRNE: Why?

MR. DICKS: Size of departments, type of

responsibility. You have some small departments in government in terms of the

size of their budget. Some have larger. Some have more ADMs and so on. Probably

the better place to look at these things would be in the Salary Details. That is

where you can probably make a more valid comparison, as between different

departments. I am not making justification, but in general principles a

department with two ADMs is going to have a smaller executive support budget

than one with four ADMs.

MR. J. BYRNE: Along the same lines, there has

been quite a cut over the past few years in the civil service, apparently. I do

not know what the numbers are, I am wondering. When I walk through the

Confederation Building - I know a lot of people went out the door - but I have

seen a lot of new faces around. I understand that, for example with the

Department of Education, and other departments, normally over the years the

Public Service Commission would have to do the hiring of anybody in the civil

service. At certain levels of course they would not go through the Public

Service Commission, but now apparently that policy has changed and the

departments themselves can hire without going through the Public Service

Commission. Can you explain why that policy has changed and what part the Public

Service Commission is playing or should be playing?

MR. DICKS: Let me speak to it first and then I

will ask Sheila to respond. We had a fairly substantial Public Service

Commission. One of the critiques that we did during Program Review was twofold:

one was what the proper role of the Public Service Commission was, whether or

not it should be doing the hiring, or whether or not it should perform more of

an audit function on the departments.

MR. J. BYRNE: Wouldn't that be covered under

the Act though, what the Public Service Commission's responsibilities are?

MR. DICKS: Yes, that is right, but the question

is how you implement that policy. The second aspect of it was given the fact

that we had substantial down sizings and we would not have the type of expanding

government economy we had through the 1970s and 1980s, there would not be a

great deal of hiring.

One of the critiques I heard in here last year or

the year before was why we had thirty-six people I think it was, Sheila,

something in that vicinity, working at the Public Service Commission when we

were laying people off and not hiring anybody. That was a criticism we

considered. When we looked at it we said: We have personnel people in the

department. Why are we duplicating that? The hiring probably could be done and

should be done at the departmental level. As you know, in the past, the type of

hiring review boards had someone from the department, someone from the Public

Service Commission. I think, just in response to it, Sheila might wish to expand

on that as well.

MS DEVINE: The Public Service Commission Act of

1973 is still intact. It still gives authority and responsibility to the Public

Service Commission: the responsibility for insuring that any hiring into

permanent positions in the public service is done according to merit principles.

Basically that means fairly. The act does provide for a delegation to

departments, and in fact since 1973 there has always been a small amount of

delegation.

About a year ago we did, in relation to Program

Review and some discussions with Executive Council and so on, decide to go with

basically a full delegation. As a result what we did was we signed delegation

agreements with twenty-six departments and agencies, giving deputies and CEOs

the responsibility to carry out the authority of the Public Service Commission

Act. We still retain, however, the responsibility to audit what departments and

agencies are doing in relation to the legislation. In fact, last year we did a

complete audit of every department and agency with delegated staff.

MR. J. BYRNE: Just one more question on that

topic before I finish. The minister gave the reason as to why it was done. It is

because of duplication within the Public Service Commission and personnel within

the department. Now it comes back to policy. If you are talking about the Public

Service Commission, which was set up for fairness and balance with respect to

hiring in the public service, if there was duplication within the departments

themselves - and this is back to policy, to the minister - why wouldn't the

department just say: We will hire through the Public Service Commission and we

are after having untold thousands of people let go out of government. If you

have duplication, why wouldn't you let it stay with the Public Service

Commission and deal with the people within the departments, just for the

appearance, if not for anything else, of fairness in hiring in the civil

service?

MR. DICKS: I suppose there are any number of

ways you can do things. In this case, the general view of government, including

the advice of officials in departments, was that it should be done in the

departments. In a lot of cases you are hiring people with certain expertise. For

instance, suppose you wanted to hire a geologist, a mining engineer, a lawyer or

someone like that, the public service representative was often there to insure

that the criteria set by the Public Service Commission was met. The specialized

knowledge as to who the better candidate was, in a lot of cases, or say a type

of social worker - take any particular discipline -, you often had to rely on

the departmental representatives for that.

What the real role of the Public Service Commission

is is to insure that everybody has equal access to government jobs and that the

decision is made fairly; but the detailed knowledge as to who has the best

skills sets often comes from the people who have that experience within the

department.

If I can just say on another side, the other thing

we did as well was we delegated a lot of authority from Treasury Board. We used

to require every department to come to Treasury Board for numerous things, if

you need to get a little $500-grant approved or something. That was all pushed

out into the departments as well, so we perform an audit function. What we are

trying to do is to push decision making down to the appropriate levels in the

department, as opposed to have centralized agencies that make all the decisions

for departments. If we are going to have managers and executives you really have

to make sure that they make the decisions and that they are accountable for it.

If they do not make them, it is very easy to say: It is the Public Service

Commission's fault, it's the Treasury Board's fault, or someone else's fault. It

is a matter of the type of government you want in the Province.

CHAIR: Thank you (inaudible), Mr. Byrne.

CHAIR: Mr. French.

MR. FRENCH: Minister, I would like to go back

to some of the smaller amounts that are in there and find out what they are all

about.

Under Salaries in 1.1.01, the Minister's Office,

then Transportation and Communications, with respect to this heading, why was

the Minister's Office over budget by $41,500?

MR. DICKS: Because the initial amount of $3,500

was really unrealistic. That was too low, and I did not notice that was there

until after the Budget went through. Last year we had an awful lot of major

issues. For instance we had equalization, on which we were in Ottawa and had a

lot of meetings. We had Voisey's Bay. We had the privatization of the Labrador

ferry services - last Good Friday I was in Ottawa cluing that up - so there were

a lot of unforeseen things. There was hydro, Churchill, Inuit land claims, tax

harmonization. There was a lot more travel.

I would have been happier if the figure had been

closer to $3,500 than it was to $4,500 because a lot of the travel was

inconvenient and at short notice. You will notice from the other categories, if

you look at page 37, for example, under Tax Policy, we originally budgeted

$27,600 and the amount spent was $60,000.

If you look at Transportation and Communications,

under Fiscal Policy, and these people were working with me on tax harmonization,

just one area of it, went from $38,500 to $45,000. If you turn over the page,

Economics and Statistics again was up by $5,000, from $40,000 to $45,000; and

Project and Program Analysis, which were the people working with us on Voisey's

Bay, went from $20,000 to $40,000. It was a busy year for Finance, and this does

not always occur. Really, in a normal year, I would expect that my travel in

Finance would be in the range of $20,000 to $30,000, not $45,000. It is just one

of those things that occur, but the department overall was on budget and we made

adjustments elsewhere to take account of that.

MR. FRENCH: Of the $45,000 spent in the

1997-1998 fiscal year, how much of that was for travel?

MR. DICKS: Forty-five thousand. That would

include plane fares, ground transportation, hotels, normal things that come

within that.

MR. FRENCH: Could we have some kind of an

estimate as to how many trips were taken, where they were, for what purposes,

that type of thing?

MR. DICKS: I think there is a detailed list

done up that has been forwarded to, I think, Mr. Byrne. I sent that information

to him.

WITNESS: (Inaudible).

MR. DICKS: The Freedom of Information Act. That

provided all of that information.

WITNESS: (Inaudible).

MR. DICKS: Yes, so there is no problem

supplying it.

MR. FRENCH: In .06, Purchased Services, again

can the minister explain why the Purchased Services were over-budgeted by

$18,600? What was purchased for the $20,000 spent in the 1997-1998 fiscal year?

MR. DICKS: The two go together. The more you

travel, often the more related expenses you pick up. If you have to go to a

meeting, you are often required to furnish coffee, refreshments, meals, things

like that. A lot of the meetings you have are, unfortunately, over lunch times

and in the evenings and so on like that. That is the sort of thing Purchased

Services covers in this subhead.

MR. FRENCH: So the $20,000 would actually have

been spent for that?

MR. DICKS: Yes, that is right. What you would

find, I think, in most departments is the correlation between the two. The more

the minister is required to travel, often the more Purchased Services increases.

The less you are required to travel, the less need you have for that in most

part.

MR. FRENCH: Again, on page 33, expenditures on

Salaries are anticipated to increase by $29,600. Why would that be?

MR. DICKS: That is our twenty-seventh pay

period this year. We normally have twenty-six.

MR. FRENCH: The department was over-budgeted

again on Salaries by $36,600.

MR. DICKS: I am sorry, $36,600?

MR. FRENCH: Yes.

MR. DICKS: Is this in 1.2.01.01?

MR. FRENCH: Yes.

MR. DICKS: I don't think it is $36,000. I think

it is about $7,000 is it? $573,500 minus $566,600, is that the -

Oh, you are looking at the bottom amount there are

you?

MR. FRENCH: Yes.

MR. DICKS: That is the Total: Executive

Support. That does not include only Salaries. It is also the additional

Transportation and Communications in Executive Support, which is one I did not

point out for $28,465. I don't mind answering the question, but I am just not

sure where the $30,000 is coming from.

CHAIR: Bob, are you on the bottom line or are

you up in Salaries?

MR. DICKS: Because I think it is actually over

$50,000 we were over budget in this area.

MR. FRENCH: Transportation and Communications

were up, I guess, $36,000 -

MR. DICKS: Yes, $36,600. That was the same -

MR. FRENCH: We budgeted $28,400 and we spent

$65,000.

MR. DICKS: I answered the earlier question of

why Transportation was up. I pointed out some of the other portions of the

department that had increased Transportation and Communication expenditures.

That was true of the Executive as well. Most of the discussions we had, for

instance on tax harmonization, required a lot of meetings in Ottawa. Fiscal

policy, Voisey's Bay; a lot of our people have been travelling an awful lot to

sort of bring these projects together - Churchill Falls and so on.

So inasmuch as the department did not budget

sufficiently for the travel that I needed to do last year, the same was true of

the Executive and the other people involved. So when you get into these sorts of

things - the Labrador Agreement, for example - things like that required a lot

of travel to meet with officials in Ottawa. We have had to go to meetings with

Voisey's Bay people in Toronto and other places. That is the reason their travel

was up, the same reason mine was.

MR. FRENCH: Okay, if we go to page 34, 1.2.02,

Information Technology was up by some $210,000. Why would that have been?

MR. DICKS: That is the general amount that is

put in our department for computers and so on. I will let Mr. Bennett answer

that. He is the ADM responsible for the IT.

MR. BENNETT: Yes, if I could, the $1 million

figure there is for a new information management system that they are putting in

over all government. The $200,000 was to upgrade the technical support for the

auditing group that are going out and doing the old RST returns. It is about

$200,000 worth of laptop computers and related equipment purchasing.

MR. FRENCH: Okay. In 1998-1999 we are going to

spend another $1 million in Information Technology. What are we going to spend

that on?

MR. DICKS: I am surprised we are only spending

$1 million.

MR. BENNETT: Basically that is a fairly large

comprehensive financial management system that they are putting in as part of

the government-wide system. That is being developed, and we are hopeful that

this will be the last year that will be (inaudible) implementation by the end of

this year.

MR. FRENCH: Who is that being developed by? Is

that being developed in-house or are we hiring somebody outside?

MR. BENNETT: It is a combination. It is being

built in-house but basically by the Newfoundland Information Services as part of

that particular arrangement that we have with that agency. Part of that

divestiture we did for Computer Services, and we still maintain their services

for a period of seven years. That is being done with their staff.

MR. FRENCH: That is the company that was bought

by Newfoundland Tel, or Newtel, or whatever you want to call them now.

MR. BENNETT: That is correct.

MR. FRENCH: So we are going to spend another

million dollars this year?

MR. BENNETT: Yes and, like you said, that is

(inaudible).

MR. DICKS: If I might intervene, and I do not

know if you are asking the same question, the actual amount that we are

committed to spend at NIS over the seven-year period is about $17 million -

$17.4 million or $17.8 million, somewhere in that range - each year.

What we decided - Treasury Board, which is a

different part of the Estimates as you know - each year, is where that money is

best spent. The IT budgets of some of the departments are substantial because

they are trying to put new systems in to manage information and so on.

One of the phenomena, as you know, with most of

this stuff, is that as soon as you buy it, it is outdated. The useful life of

most computers these days is probably in the range of about eighteen months,

depending upon what type of programs you are running on them. There always seem

to be new and better products that require - you know, you have Windows 95 and

you have Windows 98, and each one is an improvement on the other. Then, if you

need certain forms of software, it is geared to run only on the latest system.

So you move from a 286 to a 386 to a 486 to a Pentium, and the Pentium 120 to a

Pentium something else.

It is challenging but the simple fact is that there

are tools of the trade that wear out, as much as a carpenter replaces the tools

that he uses from time to time. It is a new concept for us all, but

unfortunately it is a major expense to government.

MR. FRENCH: In .02 Revenue - Provincial, there

is $75,000. What is the source of that?

MR. DICKS: Is that a charge (inaudible)?

MR. BENNETT: If I may. Yes, that is the credit

that is received from the pension fund. The postage of the pension fund is paid

by the fund, initially by the department and recovered from the pension fund. So

that basically relates to the postage which is included as part of

Transportation and Communications in the figure above of $210,400 and it is

1.2.02.03.

MR. FRENCH: In Government Personnel Costs, the

Salaries are going from - well, they were budgeted at $3 million, they came in

at $2.564 million, and now in 1998-1999 we are going back up to $3,827,500. Why

would that be?

MR. BENNETT: I can only answer generally but I

do know they have resolved a lot of the pay equity issues, part of the

negotiations of how to implement the programs, and this represents their

anticipated expenditure this way for pay equity. It has all been done by

Treasury Board as part of the collective bargaining process.

MR. DICKS: These are not personnel per se,

these two categories. These are the benefits we pay on behalf of the employees.

I will answer your question maybe a little indirectly, but if you look at the

line below it, Employee Benefits, $26,290,300, it is now going to $28,319,200.

That is as a result of the CPP increases. That is the amount that we pay out to

the Canada Pension Plan and Unemployment Insurance. Both of those have gone up,

as you know, by a quarter of a percent. If you look at the Salaries, that is the

amount of pay equity.

Last year, as you know, there was an issue around

pay equity, how much we were (inaudible). We budgeted $3,634,600 and it actually

cost us $2,564,600. This year it will be $3,827,500.

I can give you a breakdown of the Employee Benefits

if you like. CPP this year will cost us $6,246,000. That is an increase from

$5,600,000. Unemployment Insurance is going up from $8,600,000 to $9,127,000.

These are increases we bear as much as any other employer. Group insurance,

interestingly, has gone up from $5.9 million to $7.1 million. Health and

post-secondary education tax is in here as well - this is the payroll tax - it

moved from 4.9 to 5.7. Why, you ask? I do not know. I am wondering why myself.

Travel insurance is in there, and a few other small amounts - $5,000, $4,000,

$29,000 - but the vast bulk of the second one is due to the increases in the

general payroll tax in the country.

MR. FRENCH: Before I pass on to somebody else,

I have a question which I have to ask. I asked it in committee last year. I was

promised an answer but I did not get it. I placed the same question on the Order

Paper in the House of Assembly and I did not get it answered, so I am going to

ask again today.

When the Chairman of the Newfoundland and Labrador

Liquor Commission was hired, I asked for his hours of work; what his contract

was; how many hours he was required to work a week; how many hours he did work

in the first six months of his employment with the Newfoundland Liquor

Commission, and I have not received an answer to that question. There are some

weird and wonderful stories going around, so I am going to ask the same question

today and I am going to ask that I receive an answer. I have tried twice before

and it has not been answered so I am going to ask that question again.

I got elected in 1996, I am going to be here until

the next election and hopefully there on, so expect from this member here that

until I get that question answered, every year that we meet I am going to ask

the same question because I want an answer.

MR. DICKS: Well I can answer it for. I don't

recall you asking the question, Bob. I remember that you did ask a question in

the House, which I answered, on the president's travel.

MR. FRENCH: No, the one in the House, Mr.

Minister, was placed on the Order Paper and I never, ever got an answer. I was

told here last year in committee that it would be supplied to me in writing. I

am asking - that I would get it in writing.

MR. DICKS: Well, I can give the answer right

now. The President of the Liquor Corporation is not a contractual position. It

is an appointment, at pleasure, by the Premier of the Province inasmuch as all

the executive of government hold office in the same fashion. There is no

required number of hours per week. The executive work full time for the

Government of Newfoundland and Labrador. Some weeks they get vacation the same

as everybody else, depending on the number of years, three to five weeks.

Mr. Lush was with ENL before he was a VP, and he

was a teacher before that, so I expect, given his whole government service, it

is probably in the range of four or five weeks. The number of hours a person

works a week as executive far exceeds - in virtually every case that I know of -

thirty-five to forty hours per week.

To answer your question, we don't keep track of

people the same way. If you are an executive you don't punch a time clock when

you come in at 9:00 a.m. and you don't punch a time clock when you leave at 5:00

p.m. I wish they did because in many cases, unfortunately, there is a sense

outside of government that it is a pretty slack job.

My frank assessment, from the official I had the

pleasure to work with, is we have people who work very long, hard hours and get

very little credit for it. They would be much better paid outside had they done

the same thing. That is as true of Mr. Lush as anyone else.

The difference at the Liquor Corporation is that it

is a different kind of business. A large part of what people do there is meet

with suppliers and so on. For instance, if you have a dinner obligation with an

employer or somebody who supplies the corporation, or a luncheon, is that a

meeting or not? Is that work or not? Most often when you are into these things

you would as soon be at home having a tomato sandwich, in most cases, but we

don't keep track of our executive. There is no one in government, if you say:

What is Phil Wall's or Bob Clarke's or Sheila Devine's contract? We don't have a

contract with them per se. They are hired and they are expected to do their job.

If they don't do it, frankly, they are not around.

I don't know if that answers your question, Bob,

but we don't require executive to punch in and punch out.

MR. FRENCH: No, I don't expect them to punch a

clock but I would like to know what his hours of work were the first six months

that he was there. I would like to know what his holidays were, the six months

that he was there, and I would like to know what salary he was paid.

MR. DICKS: Well, sure. The salary is in the

range of $100,000 or so, I think, for the President of the Liquor Corporation.

We will find out the information for you, and I will find out how many... You

want to know what his salary is and how many vacation days he took during the

first six months?

MR. FRENCH: Yes, during the first six months.

MR. DICKS: And normal hours of work?

MR. FRENCH: Yes.

MR. DICKS: Okay, yes. We will get that

information for you.

MR. FRENCH: Okay.

CHAIR: (Inaudible) if you have information

otherwise, you should give it to the minister.

Anyway, Mr. Lush? Okay, Mr. Ottenheimer.

MR. OTTENHEIMER: Thank you, Mr. Chairman.

On the issue, Mr. Minister, of Transportation and

Communications, just briefly, in response to a question from Mr. French you

indicated that the 1997-1998 revised figures reflect, I guess, the activities of

last year.

MR. DICKS: Yes.

MR. OTTENHEIMER: However, in the Estimates for

1998-1999, for both the Minister's Office and Executive Support - found on page

33 of the Estimates - we see only a slight reduction in anticipated costs with

respect to Transportation and Communications.

Last year was special. Last year there was a lot of

activity which according to you, Mr. Minister, warranted a significant increase

in those costs. Why have those costs essentially remained the same with only a

slight reduction for next year?

MR. DICKS: As I said earlier, the amount that

was budgeted for me was inadequate. I mean, $3,500 is just unrealistic for

anybody who is going to be Minister of Finance; but do not forget that a lot of

the things I mentioned still continue, like the Voisey's Bay project. I think we

have settled the Inuit land claim, it is up for vote on the MOU, but now we are

into it with the Innu to try to get that settled so we can go ahead with the

Churchill Falls project. The Churchill Falls project is still there. That

involves a lot of high-level review at the Department of Finance.

Most of the work done on determining what the

revenue yields to the Province is done in the Department of Finance. We also

have the issue of the mining tax with Voisey's Bay, what one we are going to

implement, so a lot of major issues are still holding over. That is the reason

we anticipate that the demand for travel will be in that range this year.

The other big issue we have, frankly, is that in

1999 we have a review of the equalization. If there is a single issue that is

going to speak to the economic well-being of the Province over the next several

years it is going to be whether or not we get a better deal on equalization. So

there are a lot of officials' meetings coming up over this year, and some

additional ministerial meetings, to try to iron that out.

We have been trying to negotiate, frankly, a higher

floor. I think Mr. Byrne alluded to one of the problems we have in the Province,

out-migration. One of the most difficult consequences is that your equalization

is determined by two factors, essentially. One is your economy relative to the

federal one, and then it is allocated per capita. We are getting hammered in

Newfoundland because I think we are the only part of the country that has

dropped in population.

As of the 1996 population year, if we had to get to

the level that the rest of the country had increased with on average we would

need to add back 8.2 per cent of our population. We declined, I think, by 3.6

per cent. The rest of the country had increased by 4.6 per cent over the same

period. That was an average, now, (inaudible) looking at places like Alberta.

What we are trying to do is to persuade the federal

government to set a floor on equalization so that if your population drops below

a certain level over a certain period of time, you do not have that full impact

coming against the Province. That is one of the reasons we lost substantial

equalization last year.

We raised it at the ministers' meeting we had, I

think it was in February, in New Brunswick. We were due to have a ministers'

meeting in Winnipeg this month, I think in May. It will not come off probably

until some time in June or July. The officials are actively pursuing it because

the ministers agreed to the principle of an equalization floor, but now we have

to try to hammer them into getting something that is workable and reasonable and

hopefully favourable to the Province. I expect that is going to require a lot of

meetings, and that is probably one of the main reasons we have put a little more

money in there.

MR. OTTENHEIMER: During these meetings, Mr.

Minister, for example, if another minister or another member were to accompany

you or your staff or your officials - those related costs - is this included or

would this be specific to the department with which the other minister is

associated?

MR. DICKS: The officials are accounted for

separately. If a member accompanies me, I do not know if that comes out of my

budget or someone else's. Do you know offhand, (inaudible)?

WITNESS: (Inaudible).

MR. DICKS: I do not know. I would have to check

on that because Mr. Walsh accompanies me from time to time on these ministerial

meetings. Whether or not that is in the $45,000 I had last year or one of the

others, I do not know.

WITNESS: (Inaudible).

MR. DICKS: That is in my $45,000, I am told, so

that is a part of the reason mine was higher as well, because Mr. Walsh has been

very helpful on a lot of those issues. In fact, where we had the agreement on

the equalization floor was a meeting I did not attend. I think I had to be at

one of the Voisey's Bay meetings or one of the - where was I? I was in Ottawa, I

think.

WITNESS: Yes, you were in Ottawa with the

Premier.

MR. DICKS: I was in Ottawa with the Premier on

the Lower Churchill agreement at the time, so Mr. Walsh went in my place. That

is where he helped persuade -

MR. FRENCH: You say you were in Ottawa with the

Premier. Would all of the expenses, if it was dealing with finance, say the

Premier's expenses, or if the Minister of Justice went, would that come out of

your allocation?

MR. DICKS: No.

MR. FRENCH: It would just be yours?

MR. DICKS: These are mine. The Premier's would

be charged to his account, the Minister of Justice would be charged to his

account, and the Minister of Mines and Energy would be charged to his account.

The only thing that would be in mine is Mr. Walsh's travel as well.

MR. FRENCH: I just wondered, if any minister

travelled with you on finance business, if his expenses would be covered by your

department or by his own.

MR. DICKS: By his own. The difference between

the ministers - each minister has a separate vote for Transportation and

Communications; the members do not. If they travel at a minister's request, or

accompany a minister, then of course it gets charged to the minister's vote

because members do not have that, except in the House of Assembly there is a

vote as well.

MR. FRENCH: Thank you.

MR. OTTENHEIMER: Mr. Minister, there was some

discussion a few minutes ago on the Information Technology, under Administrative

Support. Again last year we see a revised figure of $1.2 million, and again this

year a budgeted figure of $1 million. These are significant amounts, significant

costs. I guess my question would perhaps be to Mr. Bennett. For such an

incredible cost to the taxpayer, how is it being received? What is the response

by your staff, and by various officials within the department and within

government generally, as to the success and effectiveness of such an

expenditure?

My next question - I have heard reference to the

Oracle package - is this specifically what we are talking about? Is that the

name on this particular program?

MR. BENNETT: Yes, that is correct.

CHAIR: Where are you, John?

MR. OTTENHEIMER: It is just a general question.

MR. BENNETT: (Inaudible) this particular vote.

As you know, the FMIS system, if I can use the term - the management system of

government, of course, is separate and distinct from the purchase of computer

hardware, laptop computers, which are far more portable, which is one of the

concerns. I am going to defer that a bit, as to the usage and the reaction of

staff, to Mr. Clarke because it is in his area essentially that a lot of the

upgrades were done.

As far as the other system, of course, it is a

mainframe system which is far different and is a project of fairly significant

cost. The $210,000 basically is the personal computer business, which is the

laptop computers and all the support packages which help people move through the

system and do audits and complete audits in a far more efficient basis in the

offices of potential clients.

Bob, maybe if you could follow up on that.

MR. CLARKE: The only part of this would be the

$200,000 for laptop computers. That is the only area that we have had any

expenditure on out of tax administration. The new government accounting system

is really government accounting, which is Executive Council.

MR. BENNETT: If I could follow up on that, as

you know there are two elements to this. The first one, Newfoundland Information

Services, for solutions, is a contract arrangement now with government. It has a

mainframe computer, which is a huge computer system, of which it handles a lot

of the major computer support systems of government, and there is a new

financial management system going into that. That is sort of a relationship

between the government accounting group and this particular organization, which

used to be the old NLCS, Newfoundland and Labrador Computer Services.

The $210,000 that Bob alluded to - Mr. Clarke - we

are also upgrading the same way with the new Oracle package, and upgrading the

hardware support in all the other aspects of our operations. It is far more

efficient and it has far more flexibility, which is the greatest thing. In the

branch that I administer, the introduction of these upgraded systems is going on

now and the training support in the pension area has just been completed. In

some of the other areas it is just starting.

What it does is allow greater flexibility of

reporting in the applications of bar charts. The graphical displays can be done

far more efficiently, quickly, and on a more timely basis, which unfortunately

our minister requires, than the old systems which he probably -

WITNESS: (Inaudible).

MR. BENNETT: I can only speak for one, Sir.

There is a very positive, I guess, response from

staff that we are finally upgrading a lot of these old computer systems that we

have, and it will be a process that will be continued over the next couple of

years.

CHAIR: Okay.

MR. OTTENHEIMER: Do I have more time?

CHAIR: No, you do not have it but we will let

you. How many more questions do you have?

MR. OTTENHEIMER: Two or three.

CHAIR: Two or three?

MR. OTTENHEIMER: Two.

CHAIR: Two. Okay, short questions and short

answers.

MR. OTTENHEIMER: Thank you, Mr. Chairman.

A question on the Public Service Commission, Ms

Devine. Maybe you could give me some insight with respect to the Employee

Assistance Program and other employee support services. I understand that is an

integral part of the Public Service Commission and I am wondering specifically

what energies are put into that aspect of the role of the Public Service

Commission. How extensive is, in fact, the Employee Assistance Program through

your offices? And, can you give some idea, approximately, as to the numbers of

individuals who would benefit from such a program which is given through the

Public Service Commission?

MS DEVINE: The Employee Assistance Program, as

you may know, is governed by the labour management agreement between government,

the Management Association and NAPE. Last year - the stats I have for you -

there were 424 employees, individuals, who participated in that program.

That program also does policy and provides a

support on critical instant stress debriefing, which is again a critical instant

in the workplace where we go in and try to help the employees. There were 151

individuals who participated in that particular aspect of the program. As well,

the program offers workshops related to change and stress in the workplace, and

I would say that there would be about 900 employees in all who had participated

in that aspect of the program.

The program is operated by two professional staff

and your key coordinators - one permanent, one temporary - with one support

staff, who provide that service throughout the Province.

MR. OTTENHEIMER: It is an ongoing program,

presumably?

MS DEVINE: Yes, it is. Right now the program is

being looked at in terms of its role and mandate under public service reform,

and one of the things we would hope is that the program may change from one of

being reactive to being proactive in trying to help people prevent problems and

stress rather than react to stress once it occurs. So again we have been asked

to come forward with recommendations around the program in terms of that aspect.

A lot of the service is contracted on a regional

basis. With only two staff, what we do is, the two staff do the initial

assessment and then any referrals for counselling and so on, whether it is drug

related or gambling addiction, or whatever the particular issue is for the

employee, a lot of that is contracted out to individual, professional

counsellors in each region.

It is a very small program with a very small budget

but again, in our view, from the Commission, a very strong mandate.

MR. OTTENHEIMER: Understaffed, in your opinion?

MS DEVINE: Yes, but again we have endeavoured

to contract as much as possible. Because again what we do find on a regional

basis is that people often prefer to go to someone within their own region.

Again, we have been fairly successful in using individual, professional people

in communities to provide the service.

MR. OTTENHEIMER: Mr. Chairman, just one more

question for the minister?

CHAIR: Okay.

MR. OTTENHEIMER: Thank you.

I understand the Department of Finance has offices

in Corner Brook. Could you please indicate the number of personnel in the Corner

Brook offices, and essentially what the role of the department's office in

Corner Brook entails?

MR. DICKS: There are sixteen people at the

office in Corner Brook. There are people who essentially, the majority of those

people, are tied up within collecting RST. We also administer now, as you know,

the tobacco tax, gasoline tax, and so on. Probably Bob can give you a little

clearer idea of how many people are engaged in each of those areas.

MR. CLARKE: Most of the people in Corner Brook

are temporary employees who are doing sales tax audits and collecting sales tax

that is outstanding.

MR. OTTENHEIMER: Is this a reduction in the

number of staff or, where the personnel are essentially temporary, does it

fluctuate from year to year? What has been the pattern?

MR. CLARKE: Well, there was an office of

permanent staff there of about eighteen. We are down to about maybe four

permanent and the rest temporary.

CHAIR: Okay, Mr. Ottenheimer?

MR. OTTENHEIMER: Is there a comment being made?

MR. DICKS: I think the comment would be that

when the RST is collected the office will be much smaller in size. The people

who were there were absorbed by the federal government, went over to the feds.

We had about eighteen of them, and virtually all of those... The ones who stayed

were mostly people near retirement who wanted to finish up in Newfoundland.

Because there were a lot more possibilities - something like 45,000 people work

for Revenue Canada, so there were a lot more opportunities with the federal

government - for the most part, people who were younger took advantage of it.

People who were closer to retirement had to think about it because there was a

pension issue there. The permanent staff would probably be in the range of about

four people when we are finished.

CHAIR: Thank you, Minister. Mr. Lush?

MR. LUSH: I want to ask a general question

about collective bargaining in the minister's capacity as President of Treasury

Board. I think he announced some months ago the rate of salary increase that the

government was prepared to give for this year and for somewhat into the future,

the next couple of years. I wonder if the minister can indicate as to which

groups of bargaining units have accepted the government's offers, or which ones

are settled, and which ones are now ongoing, and what is the status of these?

MR. DICKS: I will try to remember them all.

We have settled with most of the NAPE unions; the

hospital support staff have accepted. The only two that are outstanding right

now that I can recall are - there are three groups - some of the school boards.

About four out of the sixteen, I think, have settled, and we settled some of the

others. So it looks like, I guess in the long run, that probably most of NAPE

will accept. The ferry workers, I am told, are looking at it again, as are the

workers at the Liquor Corporation, both of which groups had voted to strike. The

collective bargaining is going reasonably well.

We still have not settled with a lot of the CUPE

bargaining units, particularly some of the hospital support staff. The

(inaudible) for example, is one of them. We have not settled with the nurses'

union yet, but I think we have settled with Allied Health Professionals. The

doctors are not a union per se but we are negotiating with them, and the

teachers as well.

The largest representative of employees in the

Province is NAPE, and we have pretty much come to an agreement with NAPE in most

of the bargaining units. CUPE is still out there, nurses, teachers and doctors,

in terms of salary agreements that we have. We are getting there.

MR. LUSH: So within the rates offered by

government, are we pretty much staying within that range?

MR. DICKS: Yes. We will not agree to any

additional amounts outside what we have set out; we just do not have the fiscal

capacity. The 7 per cent that we negotiated over three years will be the

agreement with all groups or else we will have strikes. We cannot (inaudible)

salary packages. There are other issues, different collective agreements, and I

do not want to say too much about bargaining at the table.

Like everybody else, most people would rather have

more and so on, and people have different rationales for it. You can understand

some of them, but the other issues are still things like job security, hours of

work, temporary versus casual employees and so on, so there are a lot of

different issues at the bargaining table. The reason people sometimes reject

agreements is not always salary but it has to do with other issues, particularly

job security in certain bargaining units, but we are working them through and in

most cases we are resolving the critical issues to people.

MR. LUSH: What is happening with respect to the

increase to pensioners? I know that you alluded to that in your Budget Speech,

and I wonder if you want to give some further clarification on that again.

MR. DICKS: I remember answering a question from

Mr. Ottenheimer. To me, it is a question of public policy. The pension funds do

not have the money to pay any increase to existing pensioners. If the pension

funds were in surplus, if you had an extra 10 per cent in there, you could very

easily justify paying some amount out to your retirees or to reducing the

premiums of current people who are contributing to the pension plan. We are not

in that happy position. The Government of Newfoundland is the only employer in

the Province that is able to have a pension fund that is underfunded, and we all

know the reasons for that. It is historic. All of us around this table who

represent governments of the past and current are somewhat to blame.

About 1980 a separate pension plan was set up for

most of the public service employees, and in 1990 some substantial changes were

made. Unfortunately, the position we now find ourselves in is that in order for

us to give a pension increase to people who are retired - an indexed increase or

2 per cent or whatever the case might be - we have to take money out of general

revenue to put in the pension plan. Because if we pay it out of the pension plan

we are further jeopardising the integrity of those - I mean, the public service

pension plan is only about 44 per cent funded, the NLTA pension plan is only 17

per cent funded, and if you start paying increases out of that, there is no

money there to pay it.

The other issue is that we have said to the unions

that we would be prepared to look at indexing if you want to negotiate it, but

they are not interested in negotiating it, either for themselves or the future.

So you have a situation where public service pensioners have not paid for

indexing. Ninety-five per cent of the pension plans in the Province do not have

indexing, so the issue, when you get through all those considerations, is this:

Are we prepared to tax other people on fixed incomes, other pensioners, people

who have retired from fish plants on fixed incomes, people who have been in the

private sector and had to provide for their retirements through RRSPs, people

who have retired from mills, people who have retired from vessels and so on, who

are on fixed incomes - and that is, by far and away, the majority of people - in

order to give public service pensioners an increase? I think it is bad public

policy to do so.

A pension plan is a fixed benefit, it is something

you contribute to, and I don't think people should expect that if they did not

contribute for indexing that they should receive it. It is a gratuitous payment.

In order for us to do it, we have to levy taxes on other taxpayers to provide it

and I just don't think it is equitable. I don't support that concept.

MR. LUSH: I understand that, and I think that

most people accept the fact, particularly in the private sector, that you don't

get an increase to your pension. You get what you paid into it. If you paid into

RRSPs you get precisely what you paid in, or if you paid into some other kind of

pension plan, particularly with private enterprise. For some reason or other

there is this perception with government that you are entitled to receive, or

people have a level of expectation that there is to be an increase in the

pension plan. How do we correct that?

I understand quite well what the minister is

saying; one expects to get from a retirement plan what you paid into it, but for

some reason or other there is a different level of expectation, certainly in

this Province, with respect to public pensions.

MR. DICKS: I think the expectation is only

there with the pensioners. If you go out and ask the general public, should we

give public service pensioners a gratuitous increase when the pension plans are

underfunded, when they have not contributed for it...

I will tell you two things. One is, my mother is a

public service pensioner. It affects my family directly. My grandfather retired

from the Newfoundland Railway in 1947. When he died in 1974, he was getting the

same pension he did in 1947. So we all have to provide for our own retirements.

To the extent that we don't or are unable to, we have other social programs that

pick that up. We have old age pensions, we have guaranteed income supplements,

we have social services. So the concept that because you worked for the

Government of Newfoundland you are entitled to a gratuitous increase, I cannot

see any justification for it, particularly when a lot of people who are drawing

pensions are drawing pensions far beyond what they should be drawing, given what

they contributed.

The teachers' pension plan, for example, people

contributed 3 per cent for a pension plan that is probably worth 8 per cent, 9

per cent, or 10 per cent. You just simply cannot justify it, to my way of

thinking. Other people may see a rationale, but I think one of the most

inequitable things we could do is to tax people on fixed pension incomes to

provide increases to another select group of people who happened to work for

government. If we are going to take pension increases... I can see doing

something for all old age pensioners - that I can understand - but to do it

solely for government employees I think is unfair and inequitable government

policy. I do not think we should do it.

CHAIR: Okay, thank you, Minister. Thank you,

Mr. Lush.

Mr. Byrne?

MR. DICKS: Sheila just made the point that the

federal one is indexed, but the federal government people contribute more to

their pension plan. They have a higher pension increase. In fact, I think they

are - where are they now? The federal pension plan is in surplus, for example. I

think, in fact, some of them they have actually decreased because they are in

surplus.

MR. LUSH: Talking about the indexing, you

mentioned that it seems as though the unions - if I understood you - don't want

indexing?

MR. DICKS: I think we made a proposal, and I

may be wrong on the figures, but at one point when this issue came up - it came

up several years ago - we looked at it. In order to provide indexing to us all

when we retire, I think we would have to contribute about an extra per cent

right now and that would cover indexing. The cost of indexing to the pension

plan right now is about $2 million if we gave a 2 per cent increase. In order to

fund that we would have to put $20 million in the pension fund out of general

revenue.

The other side of this is that if we all

contributed 1 per cent of payroll and the government matched it, you would be

putting in about $34 million a year - our payroll is about $17 billion - so you

would be able to pay out the money to the pensioners who are out there and the

people who will eventually retire. One percent would probably give you an

ability to index all the pension plans, but that is not one of the things at the

negotiating table. That does not come up.

MR. LUSH: I just want to - because I cannot

believe that the unions of this Province would not, on behalf of their workers -

and I refer specifically to the NLTA - I cannot believe that they would not want

to negotiate an indexed pension plan. I think the unions are shirking their

responsibility not to negotiate an indexed pension plan. To not do so, to me, is

manifestly stupid. That is not blaming the government. Obviously the government

cannot do anything about it because if the unions do not negotiate it, quite

obviously we are not going to give it. It seems to be a complete shirking of

responsibility for unions in this day and age not to have done that for their

members.

MR. DICKS: If I can just say this in response.

Part of it may be - and I do not want to lay blame on anybody, you are trying to

explain your own rationale - with the unions that it was not necessary in the

past, because government did it gratuitously. When you get down to making very

tough decisions about a limited amount of money and where you can do it and

where you cannot do it, and you have to raise taxes in order to grant benefits,

I think one would hope that once it becomes absolutely clear and it becomes

government policy not to grant indexing or similar increases, then I think

people should look seriously at it.

The other thing you have to remember is that

pensioners are not union members. Once you retire you are not a member of the

union. It only speaks for current members. One of the problems we have with the

NLTA for example currently is that I am not sure if they can negotiate on behalf

of their pensioners when it comes to trying to solve the difficulty we have

there.

It is complex, but as you say, Tom, I think there

is a good issue there. We would like to look at it but we can't do it without

proper funding in place.

CHAIR: Mr. Byrne. Now, I have to leave for a

couple of minutes. You will be okay, will you?

MR. J. BYRNE: I will survive. Thank you, Mr.

Chairman. I want to get back to the information technology again. If you go

through each department you will see, and sometimes in various subheads within

the same department, money for information technology. I have asked this pretty

well these past five years since I have been here on these committees. Does

anybody have a handle on how much money is actually being spent on information

technology?

MR. DICKS: Yes.

MR. J. BYRNE: The reason I asked that is this.

You mentioned something earlier with respect to the idea that in eighteen months

the computers and whatever are out of date, and so have you. There has to come a

point in time when you have to say: What we have will suffice for x number of

years, it's doing the job. Especially in light of the fact that when you walk

through some of the hospitals in the Province you can see even the general

cleanliness is not up to what it should be. I am just wondering about priorities

here. What is the actual figure in information technology with respect to

equipment, hardware and software that will be spent in the Province, say in this

coming year?

MR. DICKS: It is in the range of about $18

million in government.

MR. J. BYRNE: Eighteen million dollars.

MR. DICKS: We have generally been spending

roughly what our commitment to NISL or whatever it is called now is.

MR. J. BYRNE: Yes, I am getting into that next.

About $18 million is being spent on computers each year in the Province. It

seems high to me, I have to say, after looking at it for five years. If you are

spending an average of $18 million, that is $90 million these past five years,

and I would say it has been decreasing.

MR. DICKS: If I can just make a point. It is

hard to fathom, but if you look at most large corporations, IT is to the point

where you know you have a Chief Executive Officer, you have a Chief Financial

Officer, and now they have a CIO or something, Chief Information Technology

Officer. Fortis, for example, just went out and hired a guy from Ontario to be

their chief - it is to the point where if you are running any major operation,

all this thing with networks and keeping up to date can be very detailed.

MR. J. BYRNE: I understand.

MR. DICKS: We are not the exception. We may be

proportionally for a business, and I use it loosely of course, but at this size

we are probably spending less than what many other businesses this size would

do.

MR. J. BYRNE: I am just thinking about $18

million -

MR. DICKS: It is a lot of money.

MR. J. BYRNE: - and priorities, that is all.

This gentleman on the end mentioned $200,000 for laptop computers. Can somebody

tell me how many laptop computers were bought for that and who gets to use these

laptop computers? I know what they will be used for, but would they be permitted

for personal use and what have you?

WITNESS: I am not sure how many laptop

computers we have, but each one of our auditors will have one. They use those

when they are doing audits.

MR. DICKS: In the field.

MR. J. BYRNE: Field audits.

MR. DICKS: Can I just answer? What happens is

this. You can have someone go out and make detailed notes on each thing like

this, or what they can do is when they are doing it with a laptop they input the

information directly. The theory is, and it's one I accept, that if the person

has the appropriate tools to do the job they can work more efficiently with it.

What you face is this: do you get them to copy down all the information, come

back, duplicate it, or do it on the spot? It made sense to us to equip them with

laptop computers to do the work in the field.

MR. J. BYRNE: To continue on -

MR. BENNETT: I don't want to leave the

impression, because I think I probably did, that these were solely for the

purchase of laptops. I agree with you, that is a lot of laptops. What it is, is

part of a deliberate plan to upgrade all the computer support systems in the

full departments. Laptops were a major example of an upgrade. Two hundred

thousand dollars was in there, but there were also other computers that went on

secretaries' desks and other support people as part of the general upgrade of

the IT system in the department.

MR. J. BYRNE: Thank you. With respect to the

new company, when you privatized Newfoundland and Labrador Computer Services, I

have some questions. Government certainly used to utilize NLCS over the years.

The University is one example, and the Howley Building on Higgins Line with

respect to calculations for geodetic surveys and what have you, and other

departments, are other examples. Is there any study being done and an analysis

of the cost that we are paying for that service now compared to what it was

prior to it being privatized? Is it costing us more per hour now than it had

been?

MR. DICKS: Yes. Part of the agreement with NISL

requires an audit each year of what they are charging and the work doing done.

That is done every year and the results are satisfactory. We check to make sure

we are not being overcharged and we check to make sure that the rates are

competitive. If you presume that the work that is being done is necessary - now

maybe we should only spend $1 million a year on IT rather than $20 million. The

consensus of opinion is that a lot of our systems are outdated and have to be

upgraded even before the year 2000. The work that NISL is doing is necessary and

the rates they are charging are fair rates.

MR. J. BYRNE: With respect to the privatization

itself of NLCS, my understanding is that there have been yearly reports done of

the agreement, the benefits package and what have you, but government has not

verified the reports that have been submitted over the past three years. Has

that been done since the Auditor General's report was submitted? What I am

asking is: How do we know if the benefits that were agreed upon, and the

industrial benefits package, were actually met?

MR. DICKS: Yes, in fact, that has been. There

was an issue raised in the Auditor General's report. In fairness to the Auditor

General she conducts, and her officials, an audit that was (inaudible) point in

time. I answered the question for Judy Foote who was not in the House, she was

away at the time, and I got the information. That part of it is monitored by ITT

which had done the privatization.

The results of that, there were two or three

different aspects to it. One was that NISL had to produce a certain number of

jobs and they had to subcontract a certain amount of work. They have surpassed

both those things. I supplied the information in the House and I can get that

again for you. In fact, I had a letter from Frank Davis, who is the head of it.

I will get that information again for you.

MR. J. BYRNE: I know that, yes.

MR. DICKS: Anyway, as regards to NISL, they

were supposed to add something like thirty jobs. They have actually employed

about eighty people or something like that, so they have really grown.

The part of it that was not done and that we are

negotiating with and for is Andersen Consulting, which is the largest consulting

group in the world. They recently went through a split. They were going to put a

centre of excellence or something like this in the Province for about $2.5

million or $3 million. They did not do it because what happened is they

basically got out of that end of the business. They have been back to us saying:

Look, we are prepared to give you x millions of dollars worth of work. We are

negotiating with them as to what a suitable replacement for that would be. Now

there is no doubt that Andersen Consulting did not meet their part of the

agreement, because this was supposed to be a joint venture, and I think Andersen

Consulting had 10 per cent.

MR. J. BYRNE: Sigma too, wasn't it? Sigma was

involved there?

MR. DICKS: Sigma or something like that, yes.

That is the only part - just to finish the answer - that was not completed, and

we are negotiating as to what a suitable replacement for that would be right

now.

MR. J. BYRNE: With respect to the privatization

of Newfoundland Hardwoods, and I have asked you questions in the House on this -

MR. DICKS: Yes. I have answered three times, I

think.

MR. J. BYRNE: You may have answered but some of

the answers we get sometimes are answers, but... Anyway, Newfoundland Hardwoods.

You were supposed to receive $7 million and you are short $1.4 million. Have we

actually received that money, yes or no? Because when you got up and answered

that you talked about tanks and what have you. To me, you left me with the

impression that we may be stuck somehow for that money.

MR. DICKS: No. My recollection is we were

supposed to receive $7 million, which was the estimate, and we got $5 million,

right? Whatever the amount was we did receive. There were some questions about

the cost and consultants and that kind of thing.

MR. J. BYRNE: Yes, that is right.

MR. DICKS: I gave you a list of those. I think

one of the questions you had was why the consultants were estimated to be

$30,000 and they were $900,000, something like that. What happened was they got

into it, and of course where they were using creosote and so on, and with

current political thought and social thought where it is, we got into an

environmental assessment that cost us many hundreds of thousands of dollars.

MR. J. BYRNE: Why should we be paying for that,

though? Why should the Province be footing the bill? We received our $7 million,

why should we have to pay? It does not make sense to me.

MR. DICKS: Anytime you privatize something it

is a matter of negotiation. Maybe you can say it could have been better

negotiated, I do not know, and that is a matter of conjecture. I was not part of

it at the time. The difficulty you have is that legally the person who is

selling has a responsibility to insure that it meets environmental standards,

and to the extent that it does not you are required to meet that cost.

For example, that is why we are into an argument

with the American government down in Argentia. We got $84 million for this

because when they gave it to us there was all this pollution. We had an argument

with them on Stephenville. They recently found all these tanks. It is a

principle of law. In Newfoundland Hardwoods' case it works against us. On the

other hand, if we have gotten substantial amounts of money it is because people

that we have acquired property from did not leave it in proper environmental

shape.

MR. J. BYRNE: With respect to Newfoundland

Hardwoods also, and this is one I really cannot see how you can answer, but you

did, with respect to the 10 per cent net profits that are supposed to come to

the Province. In 1996 there wasn't a financial statement, and in 1997 they had

not received it, so how can you tell if we got 10 per cent of the net profits if

we do not have financial statements?

MR. DICKS: Well, we did. They were waiting on

the 1997 statement. When the Auditor General did her report she said 1996 and

1997 were not in. When I checked with the department they had received the

statement and we did in fact receive some monies for them. My recollection was

$30,000 or $70,000, something in that range. I gave the information in the House

one day. I can get that for you again. We did receive the 1996 statements and

what the figures were. We did get something in that range.

MR. J. BYRNE: I am going into the Estimates

themselves here now. On page 35 -

CHAIR: Your time is up, Mr. Byrne.

MR. J. BYRNE: Alright, I will wait.

MR. DICKS: With leave, Mr. Chairman.

CHAIR: I will give you five minutes. Then we

will revert to Mr. Sparrow and then to (inaudible).

MR. J. BYRNE: Page 35, Debt Management

2.1.01.01, Salaries. Last year you budgeted $561,300 and you spent $557,000 last

year in revised, and it is going up to $598,400. Is that going to be a new

employee there or what?

MR. DICKS: Let me see, I can tell you my note.

We have fourteen permanent positions in the department and there is an extra pay

period this year, which increases it by $37,000.

MR. J. BYRNE: On page 36, Pensions

Administration, 2.1.04.05, Professional Services.

MR. DICKS: Just a moment now. 2.1.04.05,

Professional Services.

MR. J. BYRNE: You had $90,000 in, you spent

$65,000, and you are up back to $90,000. If you only spent $65,000 why do you

have a budget of $90,000 this year? What services is that for?

MR. DICKS: Are you reading from 2.1.04.05?

MR. J. BYRNE: Yes.

MR. DICKS: The projected revised I had was

$80,000, was it? I am sorry, no, it was... That was for W.M. Mercer Limited

relating to the administration of the pension program. They do an actuarial

review each year to determine where our liability is. They determine the number

of pensioners, existing lives, and what it is going to cost, and that is what we

did on that. Last year the special report for the teachers was not necessary.

MR. J. BYRNE: Next section, .06, Purchased

Services, $15,200 budgeted and you spent $40,000. Why?

MR. DICKS: I'm sorry, would you (inaudible)?

MR. J. BYRNE: Same subhead, subsection .06,

Purchased Services.

MR. DICKS: Yes, okay, it went to $40,000.

MR. J. BYRNE: Yes.

MR. DICKS: I will tell you what that is. We had

$15,200. Why was it revised to $40,000, John? (Inaudible). Good question. I have

a list of the $15,200, I do not know where the other twenty -

MR. J. BYRNE: Twenty-four thousand eight

hundred dollars.

MR. DICKS: John, do you know why (inaudible)?

If I can just say that Purchased Services in Pensions Administration, to give

you an example, those are things like outside printing, inside printing,

furniture and equipment and rental and you have $5,000, $2,900, $4,600. Repair

and maintenance is about $1,600 and rentals $1,000. That was the $15,200. Why it

was higher than that I (inaudible).

MR. J. BYRNE: Twenty-four thousand eight

hundred dollars higher.

MR. DICKS: Yes, I don't know why.

MR. J. BYRNE: You can find it out. Under the

next section, 2.1.05, Financial Assistance to Crown Corporations, you have

Grants and Subsidies there of $3 million. What is all that about?

MR. DICKS: The $3 million?

MR. J. BYRNE: Yes.

MR. DICKS: That was NMFC. Last year we put $3

million in NMFC to assist municipalities with debt, municipalities which were in

over their heads. Where we cut back on MOGs we gave the minister some

flexibility to negotiate with municipalities to try to bring them in line.

MR. J. BYRNE: I have a question on that because

you don't have any budgeted this year. Is there any likelihood you will be going

into it this year for that purpose? This is debt retirement for municipalities,

right?

MR. DICKS: All that money has not been used up.

It is there now and we did not have, frankly, any more money to put into it.

NMFC is a very substantial debt obligation of government. If I had my druthers I

would not mind reducing that over time, but this year, at the end of last year,

we did not have any money to put into it.

MR. J. BYRNE: With respect to that debt

retirement for the municipalities, it seems to me the municipalities that - I

cannot say abused the system, but utilized the system to the hilt -

MR. DICKS: Extensively.

MR. J. BYRNE: - extensively over the years are

the ones that benefiting now. The municipalities that were conscientious and

tried to pay down their debts and everything are really not benefiting now. For

example, the town of Torbay wrote trying to have their debt renegotiated. They

were prepared to refinance and what have you, but because of the penalties that

were being charged by the Newfoundland and Labrador Municipal Financial

Corporation they could not do it. They were better off just taking it on the

chin. I think we have contacted the minister on that, and the Minister of

Municipal and Provincial Affairs, and there was nothing done. I find that to be

pretty unfair and unreasonable, really.

MR. DICKS: You have to remember that one of the

things with allowing municipalities to pay off the debt is a lot of the ones

that are being paid out are ones that are in good shape and could afford to

continue servicing the debt, because they can go to the banks and raise the

money. The ones that cannot go to the banks and raise the money are the ones

that are not paying the debt to the Crown. You can question the wisdom of

governments over the years, and all of us bear responsibility for that, in

continuing to extend credit and allowing municipalities to borrow, and keep

going back every year and renegotiate a repayment

schedule that anybody who is

being honest with themselves and with the municipalities would know they could

not meet.

I suppose, in answer to your first question, we are

not doing people any favours. On the other hand, the way NMFC works, the

municipalities go with the government guarantee and borrow the money from the

bank. They then come to government which borrows it through NMFC. The problem we

have is when municipalities want to pay us out early we still have debt

obligations. Someone can go to the bank - let's say successful municipalities,

ones in better financial shape -, they can now borrow the money at 7 per cent.

We have maybe nine years of an obligation on a bond where we are paying 11 per

cent. Now, is it fair to taxpayers for us to absorb the, say, 4 per cent in

interest on the remaining debt?

What we say is: Look, if you want to pay us out

because interest rates are low, you should pay us the liquidated amount to cover

the additional cost to us, because we have to reinvest the money. We have to pay

it off.

MR. J. BYRNE: On the other side of the coin,

you are taking the money, that $3 million for example, and giving it to the

municipalities anyway to pay down their debt, and here we have a municipality

that was responsible but could not take advantage of it.

MR. DICKS: That can occur. What we said to Art

Reid, the minister, is: Look, there is $3 million here. You work with the

municipalities and you, in your discretion, make the decision as to how the

money can be best utilized. Part of it, I expect, could be used to give some

debt relief to municipalities which are in a position to refinance and find the

interest penalties a little high.

The other issue you have (inaudible) we all face

the same. If you take a mortgage out at 10 per cent and interest rates drop to 7

per cent, the first thing you do is recalculate. How likely are they to stay at

7 per cent? Should I renegotiate now and pay the penalty? Because over the

lifetime I am going to have with the mortgage I will still save money. Towns

have to make that same decision.

In answer to your question, if they come to us the

$3 million is there, and if they are deserving then the minister has to make a

judgement how to best utilize that $3 million. Because there is a lot of need

out there as you know.

MR. J. BYRNE: Sometimes I wonder if the

decision was made on where the municipality was situated. In the meantime -

CHAIR: One short one.

MR. J. BYRNE: One more short one.

CHAIR: One short answer.

MR. DICKS: I would expect not.

MR. J. BYRNE: You would expect not. Okay.

MR. DICKS: We now have an answer for you on the

$15,000, after embarrassing my officials.

MR. WALL: That earlier question on the

Purchased Services -

MR. J. BYRNE: Twenty-four thousand eight

hundred dollars.

MR. WALL: Yes. At Budget time last year we

anticipated that direct deposit of cheques to pensioners would be in place

before the year just ended. There is a lot of reduced costs associated with

direct deposit as opposed to doing up cheques and mailing them out to people.

That did not take place. We anticipate that it will take place in the current

fiscal year. That is why it went from $15,200 up to $40,000 last year and back

down to $15,200, because we anticipate that mandatory direct deposit to

pensioners of their cheques will happen this year.

MR. J. BYRNE: Thank you. Under

Section

2.2.03.05, Professional Services, you budgeted $65,800 and it bumped up to

$215,800, and it is back down to $65,800 this year.

WITNESS: Was that 2.2.03?

MR. J. BYRNE: 2.2.03.05, page 38.

CHAIR: Economics and Statistics.

MR. DICKS: I can tell you what that is composed

of. This has to do with the Newfoundland and Labrador econometric model.

MR. J. BYRNE: Say what?

MR. DICKS: The Newfoundland and Labrador

econometric model.

MR. J. BYRNE: It sounds good.

MR. DICKS: The main cost there was $150,000 for

a provincial demographic study. There was one being done by - was it Stats

Canada or a federal group? There was a Canadian one being done, so by us

agreeing to participate in it, it cost $150,000. We could procure the same

information. Bev Carter, I remember, came to Treasury Board (inaudible)

permission to do it. If we had to do it ourselves the cost would be

substantially more. I forget the exact figure, but it would be $700,000 or $1.5

million.

MR. J. BYRNE: Why was it necessary?

MR. DICKS: For the very reason we discussed

earlier. We need to know what is happening in the Province. We are negotiating

with Ottawa on equalization. Demographic models tell you, for example, the age

of your population. There is a lot of important information.

MR. J. BYRNE: Yes, I know.

MR. DICKS: This is a very detailed study. What

is happening in the Province is you have a shift. St. John's grew by 1 per cent

over the last several years and the rest of the island shrank by 18 per cent, 12

per cent, 7 per cent. There was a population shift. Of nineteen to

twenty-four-year-olds, about 80 per cent out-migrated. You need that

information. The childbearing statistics, for example, it is 1.2 per cent and

dropping. That has dropped substantially the last three or four years. It used

to be 1.4 per cent about two years ago. We are below the replacement, which is

about 2.2 per live births of females of childbearing years. In about five years

time the number of deaths in the Province will surpass the number of births.

You need to know that information. Because, for

example, if you are going to design a hospital system, how much acute care do

you need? The problems of the aging are different from the problems of the

young. How many gynaecologists will you need, how many obstetricians will you

need, things like this. Demographic information, if you are going to properly

plan in the Province, is probably the most critical thing we need.

MR. J. BYRNE: How often would you have that

done?

MR. DICKS: We rely on Stats Canada, we do it

ourselves. This kind of thing I don't recall, since I have been minister, that

we have ever done it. It is not available from Stats Canada. The other thing is

that - I should have Bev Carter talk to you for three hours some time - the type

of modelling that the federal government uses in Stats Canada is different. They

take five or six communities in a cluster and study them in detail, and they

extrapolate from that to generalize about areas.

Frankly, our economic group is much more detailed.

We have much more knowledge about the Newfoundland economy and population in

many cases than the federal government does, which is why we often get these

revisions from Ottawa. They take Newfoundland only being 2 per cent of the

population of the country and assume in large part that what is happening

elsewhere is happening here, and it's not. That is why, for instance, the GDP

figures, we often disagree with the federal government, and then the major

banks. Unfortunately in past years they have been overly optimistic, and we were

fortunate enough to realize that the economy was not going to perform as well.

Demographic information is the same thing, and ties

in very closely with your economic information when you see population shifts.

You need to know what type of services you need in each area. The two are very

closely related and that study is money well spent.

CHAIR: Thank you, Minister. Thank you, Mr.

Byrne. Mr. Oldford.

MR. OLDFORD: (Inaudible) it is related to HST.

I have often wondered. I know if you go in and buy a used car you pay HST, if

you buy a used skiddoo you pay HST. A thought occurred to me one day. I was

driving out in Conception Bay and I noticed at the marina out there that there

are all sorts of millions of dollars worth of boats, and these boats are

purchased in Nova Scotia, Ontario or wherever. There is a great trade going on,

people trading boats and buying boats. Is HST collected on these boats?

MR. DICKS: Yes. We have had several issues with

boat owners who did not pay it. We always collect the RST on it, and HST applies

to sales of these as well.

MR. OLDFORD: Obviously these boats are

registered. How would you verify whether or not a boat -

MR. DICKS: People like Doug Oldford come in and

tell us: Did so-and-so paid tax on that great big vessel sitting out in

Conception Bay? No, I don't know. Maybe I should ask Bob if we have a formal

system of monitoring it. You have to remember, most taxation statutes are

self-policing. It is up to you to remit your income tax if you are

self-employed; we require employers to do it. To an extent they are

self-assessing. What we try to do is narrow down the areas for abuse. In many

cases we require automobile dealers to collect the tax, we require cigarette

distributors to collect tax rather than rely on it at the retail level. In

essence it is largely self-policing. Bob, can you reply on the vessels in

particular?

MR. CLARKE: Used boats of course are taxable

under our provincial legislation and we can generally get a copy of an invoice

which would show the purchase price.

MR. OLDFORD: That was my question. When people

go out to Ontario and buy a $50,000 boat I was wondering (inaudible). If you go

to a dealer obviously the dealer remits the HST, but how do you know whether or

not the HST is paid when it says private transaction?

MR. CLARKE: The HST of course is the

responsibility of the federal government, but if it is a provincial tax we would

probably get the information on being registered with the federal government.

MR. DICKS: Can I just say in response to your

question, Doug - it is not going to answer it completely -, that private sales

are more difficult to place. In automobiles, for example, it is easier, because

people have to register their vehicles. One of the advantages of the HST, in

case of sales outside the Province into the Province the federal government will

collect the HST in the full 15 per cent. Previously they would only collect the

GST at 7 per cent and it was left to us to find the 8 per cent ourselves. We

would send auditors up to the various clothing companies, furniture companies,

and we would do an audit up there.

When I was first minister I would get these letters

from some person who had gone out and brought a chesterfield suite in Ontario

and shipped it down here. My officials had gone up there, audited and sent him

or her a tax bill, and they were upset because they had to pay the tax plus

interest because they had not remitted it. In any system that is the reason we

have auditors. We pick these things up.

In the case of vessels it is a little more

difficult because there is no central registry in the Province for recreational

vehicles. I should not say recreational vehicles, but recreational vessels. To

the extent people are supposed to remit, and when we can we police it. Like you

say, I suspect that is one of the areas where we may miss some tax.

MR. OLDFORD: Thank you.

MR. DICKS: No system is perfect, but taxpayers

don't seem to mind.

CHAIR: Thank you, Mr. Oldford. Thank you,

Minister. Mr. French.

MR. FRENCH: (Inaudible) on page 35, Crown

Agencies - Recoveries, 2.1.02. It says, "Appropriations provide for the recovery

of dividends from Crown Agencies." In .02 it says Revenue - Provincial. In

1997-1998 we budgeted $46.8 million and we collected $16.8 million. Why the

difference? Then in 1998-1999 budget it is gone up to $60 million.

MR. DICKS: Actually I answered that question. I

believe Mr. Oldford asked it earlier. That is the Hydro dividend. The difference

is that in the budget this year we have a $12 million regular dividend that we

get from Hydro. In addition to that we have about another $24 million that is

our share that comes from the sale of the 130 megawatts (inaudible) by CF(L)Co.

It sells for about $36 million and we get two-thirds, so around $24 million.

That is the first $34 million. It is roughly $22 million there, so $22 million

plus $12 million gives you the $34 million.

There is a Hydro special dividend of $15 million

that we required them to pay several years ago, and a (inaudible) from CF(L)Co

of $20 million, so that gives you a total of $69 million.

I should say that as well we expect this year the

returns from hydro should be higher because they are doing a review down there

and we expect the regular dividend to be increased as well. So all of that money

comes from hydro, the full $69 million.

MR. FRENCH: Okay.

In 2.1.03, Industrial Assistance, in Grants and

Subsidies we budgeted $171,500. Can the minister tell us what that was used for

and who would have been given that money, or some of that money?

MR. DICKS: That money goes to Marble Mountain

Development Corporation. What happened was several years ago the government was

going to privatize it. It did not come off. That money - in fact substantially

more than that - over the years had been in the Department of Tourism, Culture

and Recreation. At the time the subsidy for Marble Mountain was in there at

$171,000 and that was transferred over to the department because it now reports

to the Department of Finance.

MR. FRENCH: Okay.

On page 38, 2.2.04, Project and Program Analysis.

If we come down to Professional Services, we budgeted $20,000 and the actual

expenditure was $105,000. We are over budget $85,000. Can the minister tell us

why?

MR. DICKS: I think we can. I will get the

answer for you. Those were consulting fees for Voisey's Bay. We hired two

experts to come in and advise us on tax regimes around the world, and we focused

on South Africa and Australia, so the additional amount there covered the cost

of those consultants.

MR. FRENCH: How close are we to the tax regime?

MR. DICKS: I think we are very close. We have

some models that we think would work very well. The only thing is that

government has not made a final decision on it yet, but I think we have some

very good work done as to what would be the best regime to impose on Voisey's

Bay. I should say on Voisey's Bay (inaudible) also, because all taxes have to be

of general application. So let's just say that in terms of a type of change to

the fiscal regime that would take into account projects of a very valuable

nature that yield high returns to the owners, I think we have a system in place

that works very well, or we have some proposals that I think would make a lot of

sense.

MR. FRENCH: You may have already answered this

one. Again on page 38, to go back up the page, in 2.2.03, Professional Services

were up by $150,000. We have dealt with that, I think.

MR. DICKS: I think I did. That was the

econometric model, I think, the $150,000. Was that where -

WITNESS: Yes.

MR. FRENCH: Yes, okay.

MR. DICKS: Yes, that was mostly to do with -

WITNESS: Demographics.

MR. DICKS: Demographics, yes.

MR. FRENCH: On page 39, Support Services,

Salaries, we have gone from $615,000 down to $478,700, roughly a reduction of

$136,300 in this fiscal year. How many positions were eliminated to reach that

savings?

MR. DICKS: This is part of the tax change,

going to the HST. I said earlier, some of these are disbursed around, Bob, in

different areas in Tax Administration. For instance, there is a change. If you

notice, Compliance and Audit is down from $3,700,000 to $3 million. The reason

for that is, we had a drop because our employees went over - you see, it went

from $3 million down to $2,200,000. It will go back up to $3 million because we

lost people and then we had to replace a smaller number and it spread throughout

the department. Because you need fewer tax auditors, you are going to need fewer

support staff for them.

WITNESS: Thirty to twenty-one.

MR. DICKS: This went from thirty to twenty-one

in Support Services. It is part of the same phenomenon where we are dropping the

overall number of people needed to collect taxes. That has already taken place,

by the way, and we accommodated all the people who were affected. In fact,

Revenue Canada hired more if my recollection is correct; that have been adding.

MR. FRENCH: On page 28, Treasury Board

Secretariat, 3.1.04, if we come down to 02 Revenue - Provincial. We budgeted

$58,000 and it was revised to $35,000.

MR. DICKS: I am sorry, you say 3.1.04.

MR. FRENCH: Under 3.1.04, and we come down to

02 under Revenue - Provincial. It was budgeted $58,000, revised to $35,000, and

we have gone back up to $58,000. If we budgeted $58,000 and only got $35,000,

why the difference? Why is that?

MR. DICKS: I am sorry, Bob. You say 3.1.04 and

MR. FRENCH: Come right on down the page to 02.

MR. DICKS: Provincial Revenue.

MR. FRENCH: Yes.

MR. DICKS: I do not know. To be quite frank,

these are estimates of Executive Council that we normally do in the House, not

in committee. I do not have the answer here; I will get it for you when we do it

in the House. I would not know what that was offhand. I could maybe make a guess

at it. I do not know; it might be some (inaudible). Would you know about it

offhand?

MS DEVINE: It may be revenues from training,

but I am speculating.

WITNESS: Our front-line leadership courses were

down this year.

MR. DICKS: Yes, our front-line leadership

courses were down this year. The revenue from this, where is says Revenue -

Provincial, that is monies paid by the departments, because the departments were

sometimes charged with different areas of cost to the department. That comes

back as accounted for in this fashion.

CHAIR: Thank you, Minister.

Mr. Sparrow?

MR. SPARROW: Just a quick question, Minister.

With all the IT equipment that becomes redundant

after eighteen months, what do we do with the old equipment? Do we own it or do

the IT companies repossess it and upgrade it or whatever?

MR. DICKS: It depends on whether we buy it or

lease it. In a lot of cases we do, in fact, own it. It goes to government

purchasing; it goes to works and services for disposition.

What has been happening, though, is that we have

been in some cases putting them in schools. Because although it is not the

highest level you need for certain types of major tasks in government which

involve a fairly high level of, in our department, fiscal review, they still

have other uses. I noticed the department, instead of just putting them out on

public tender where they go for very little, is trying to find other uses within

the system, particularly in education. Occasionally, if you have a deserving

public group in your community, you may even be able to get one out to them in

that way, which I think is not a bad way to go about it.

MR. SPARROW: Would you contact the departments,

or would you go to government purchasing?

MR. DICKS: I would go to the Minister of Works,

Services and Transportation. I had a public group contact me a little while ago

about getting computers, so I wrote to them to see if they had one available

that was redundant that we could give to this group. I think I got one last year

for a poverty group in my district that was working with school children. I

think that is probably the best use, because when you sell things on public

tender you get little or nothing for them.

MR. SPARROW: Thank you.

CHAIR: Okay, Mr. Ottenheimer.

MR. OTTENHEIMER: Mr. Chairman, I have no

questions. I will reserve my other questions for the House with respect to

Executive Council.

CHAIR: Okay, Mr. Byrne.

MR. J. BYRNE: Page 39, under Compliance and

Audit, 3.1.01, Salaries went from $3.7 million down to $2.2 million, and back up

to $3.03 million. Why the drastic difference there? Why did it go down and back

up again?

MR. DICKS: That was because of the HST

amalgamation. We had seventy staff that left us and went over with the federal

government. That started to occur last year after April, so by the fall most of

the people - I think it was by September - had gone over with the federal

government. Initially we were funding about seventy positions and it dropped

down. We lost seventy, but in the meantime we had to add back people we hired on

contract, so we actually dropped from 115 to fifty-eight, which is why it went

from $3,700,000 to $2,200,000. Then we hired back the people on contract - Mr.

Ottenheimer asked about the people in Corner Brook and so on - s