Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, APRIL 29, 1997

Afternoon

Volume 4, Number 10

[ Page 2913 ]

The House met at 2:05 p.m.

R. Masi: It's my pleasure today to introduce 28 students from North Delta Senior Secondary, accompanied by a longtime colleague of mine, Mr. Gary Bennett. Would the House please make them welcome.

Hon. L. Boone: It gives me great pleasure today to introduce to the House three hard-working women, two from the Transportation Financing Authority and one from the Ministry of Transportation and Highways, who are joining us in the House today. Would the House please welcome Barb Howard, Shannon Dimaulo and Ruth Samarin.

C. Clark: I'm pleased to introduce to the House today three individuals who spend much of their day in my riding at Simon Fraser University. As students each of them is concerned about the quality of education and about ensuring that there are jobs for them in the future, so each of them has joined the SFU Liberal club. I'd like to introduce you to, and I hope the House will make welcome, David Jang, Chris Seguin and Aaron Moore.

Hon. D. Zirnhelt: I'd like the House to welcome some local political leaders from north and south Cariboo: Mayor Steve Wallace; Al Richmond, from the Cariboo regional district, representing the 100 Mile House area; Mary Glassford, from the CRD in the Nazco area; and Brent Oxenbury, from the health council in the north Cariboo. They're down here to meet with the Minister of Health. Please make them welcome.

Hon. D. Miller: Today in the members' gallery we have a special visitor from the People's Republic of China. His Excellency Zha Pei Xin is the newly appointed Ambassador of China to Canada. He has recently taken up residence in Ottawa, and I'm sure he is already looking forward to the APEC economic leaders' meeting in Vancouver this November. The Premier and I are looking forward to meeting with the ambassador later this afternoon. I would ask all members to join me in extending a warm welcome to Zha Pei Xin.

J. Wilson: I would also like to extend a welcome from the House to the visitors from Cariboo North and Cariboo South. I also ask that we make them welcome.

S. Orcherton: In the gallery today are two constituents from Victoria-Hillside who have dropped in to see the proceedings of this House: Erin Miller and Joscelyne Addison. I ask the House to make them welcome.

P. Calendino: I notice in the gallery that among those students from North Delta Senior Secondary are two former students of mine, and I'd like to add my welcome to that of the speaker from the other side of the floor. I see Sarah Hughes there and Jeff . . . . I forgot your last name, Jeff. Forgive me. Time really goes fast in this place. I would ask you to please welcome the students there.

Hon. C. Evans: Visiting today from the HEU are Margaret Caven and Judy Shirley; from the BCGEU, Suzanna Gesman and Daniela Demetlika; and from the Egg Marketing Board, Gerald Zalph and Gerry Brown. Would the House please make them welcome.

Oral Questions

GOVERNMENT CONSULTATIONS ON

ELECTION ACT DRAFTING

G. Campbell: Hon. Speaker, on June 1, 1995, a new Election Act was introduced to the Legislature. I think everyone would agree that the Election Act should be above politics. However, the B.C. Liberals have received an internal NDP memo from Keith Reynolds, former provincial secretary, to the NDP provincial secretary today, Brian Gardiner -- a transition memo, I suppose -- which was written a full year prior to the tabling of the Election Act in this Legislature. It is clear from this memo that the NDP's top political advisers were included in the review of the legislation a full year before it was tabled in this House. I quote: "Hans Brown and Gerry Scott have already seen it."

Can the Premier explain why Hans Brown and Gerry Scott, two top political advisers to the NDP, were involved in the Election Act a full year prior to its being tabled in this House?

Hon. G. Clark: I, of course, was not the Premier at the time, and know not of what the member refers to. Did we have wide consultation on the Election Act? Yes, and thank goodness we did, because now we know the Liberals got a million dollars in campaign donations from banks and big forest companies in this province. And we wouldn't have known that if we didn't have an Election Act which made them fess up. This party across the way got more money from corporations than any party in the history of Canada. We know who they're beholden to, because of that Election Act. It's a good act, hon. Speaker, and the member should support it.

G. Campbell: The Premier has actually identified one of the major problems with the act:

whereas most people have got to disclose fully what has happened, the act was specifically drafted to hide the kinds of contributions that the NDP was getting, in spite of the fact that those laws were in place for municipalities.

The issue remains. It is clear from the memo, in 1994, that the Election Act was about to be tabled. However, after involving Hans Brown and Gerry Scott, after involving the NDP's table officers, the legislation was dragged back into the back rooms of the NDP, and it did not see the light of day for a full year. The NDP spent that year ensuring that the act met their political objectives as opposed to the public interest.

Can the Premier explain to British Columbians why they should ever trust either the NDP or him again, when that's how this government treats the Election Act?

Hon. G. Clark: Hon. Speaker, the Election Act is not a secret document; it is

an act tabled in this House and debated in this House clause by clause, subject to the scrutiny of everybody in B.C. If the government of the day consulted broadly and widely around the makeup of that act, including with political people on all sides of the House, for a matter of public debate . . . . When the Election Act was tabled in this chamber, it was the subject of public scrutiny. It's subject to public debate.

Frankly, this Election Act is the toughest of any election act in Canada. Everybody who's objective acknowledges that. It has the most exposure, and it highlights who gives money to what political party. If money could buy elections, they

[ Page 2914 ]

would already have bought the last election -- but it can't. They got money from every major bank, every major company, every media outlet. It's all for everybody to see now, because of the Election Act. It's a good act. Because of that, people know you can't trust the Liberal Party, because they're beholden to banks and big corporations.

[2:15]

G. Campbell: Hon. Speaker, if what the Premier said were true, we might have a better act. I can tell you that the campaign manager for the B.C. Liberal Party was not consulted, the campaign manager for B.C. Reform was not consulted, the campaign manager for the PDA was not consulted, the campaign manager for the Green Party was not consulted, and the Christian Heritage Party was not consulted. In fact, if they had been, we wouldn't have an Election Act that tries to wipe out half of those parties in the province. If they had been consulted, hon.

Speaker, I can guarantee you that we would not have had an Election Act that stifles public participation and brings in a gag law that tries to close down public debate.

My question to the Premier is simply this: why would NDP insiders, operatives and patronage appointees be given a piece of draft legislation for their review before it is tabled in this House?

Hon. G. Clark: The Election Act governs how we conduct elections. The chief electoral officer in this province is now appointed by an all-party committee of this House, for the first time -- appointed by the members opposite. The legislation was debated. There's a committee of the House that oversees the Election Act. These are matters of public debate. I'll be very clear: if those members opposite think we're going to allow the pharmaceutical industry or other major . . . .

Interjections.

Hon. G. Clark: If they think that we're going to go the way of the United States and allow interest groups to purchase elections, while we control spending for political parties, they're wrong. They have been exposed. They have been exposed to be a party beholden to corporate interests, the likes of which we have not seen in Canada, and we're not going to let them try to change the law to allow even more corporate participation on their behalf.

G. Plant: The question, of course, is: how are laws made in British Columbia? And for one brief, shining moment, we see the truth: laws are made when this government goes and asks its friends and insiders what to do.

The memo from Reynolds to Gardiner refers to the Election Act, and states: "You were at the table officers' meeting that discussed this." Mr. Speaker, one of the table officers at that time was none other than the member for Vancouver-Kensington, the current Attorney General. Can the Attorney General, the minister responsible for the Election Act, tell us why it was necessary for him and the other table officers of the NDP to have access to the Election Act a full 14 months before it was introduced in this House?

Interjections.

The Speaker: Order, members. Let's hear the answer.

Hon. U. Dosanjh: This is a great piece of legislation. As I said yesterday in the estimates, when issues around the Election Act were raised, we will continue to monitor how this legislation functions, the chief electoral officer will make recommendations for change, and we will consult. If changes need to be made, they will be made. There was the broadest possible consultation on this issue before the Election . . . . Before the act came into this Legislature, it was debated. It's a great piece of legislation. If changes need to be made, let's debate those.

G. Plant: Well, we all know that the night the Election Act, as it was introduced in 1995 . . . . It included a gag law intended to stifle public debate by individuals and organizations during election campaigns.

Can the Premier tell us. . .

Interjections.

The Speaker: Order, members. I want to hear the question.

G. Plant: . . .exactly who of his party organizers, or organized-labour friends, instructed his government to include the gag law within the supposedly impartial Election Act? And why should British Columbians ever trust his government again?

Hon. G. Clark: Unlike the Liberals, we don't believe that freedom of speech extends to the right to purchase elections, hon. Speaker.

Interjections.

Hon. G. Clark: This is a matter of serious public policy debate in this country. The national party, the former national government . . . . I think it was a Liberal government. But then again, there are no federal Liberals over there, hon. Speaker.

Interjection.

Hon. G. Clark: Although he left, hon. Speaker.

They passed one which limited third-party contributions to try to level the playing field, so people could not purchase elections in this country the way they do in the United States. It was struck down by one court in Alberta. It's a matter of great debate. The chief electoral officer of Canada has indicated that there should be some restrictions on third-party advertising. We've chosen in this province to do so. I not only stand by it; I say it's critical to democracy that we make sure that multinational corporations cannot buy elections.

It's particularly critical in British Columbia when we have a party over there -- a craven party -- on their knees for contributions from corporations. We will not allow them to intervene in the democratic process in this province, and we'll let the people decide.

COST OF NIS G A'A COURT SYSTEM

R. Neufeld: To the Minister of Aboriginal Affairs. As I explained last week during the Attorney General's estimates, northerners are frustrated that the courts often sit in their communities only once a month. Can the minister explain why less than 2,000 Nis g a'a people living in the Nass should have their own court system, when other British Columbians can't even access the courts that already exist?

Hon. J. Cashore: It's very clear in the agreement-in-principle that the scope of the court within the Nis g a'a is

[ Page 2915 ]

extremely limited and would not be dealing with the kinds of issues that the vast majority of court issues would be in the other courts that the member refers to. So it really is a comparison of apples and oranges.

R. Neufeld: At a time when this government claims it doesn't have enough money to run the courts we've got in smaller communities, it wants to fund an entirely new court system for native people only in the Nass. How can the minister possibly justify funding an ongoing court system for the Nis g a'a when his government is closing existing courthouses and off-loading court operating costs onto municipalities? Where is the equity and balance in this approach?

Hon. J. Cashore: Implicit in this new arrangement -- witness the fact that B.C. insisted on phasing out the tax exemption -- will be the eventual reality that the Nis g a'a will be paying their fair share for all the services they receive.

GOVERNMENT CONSULTATIONS ON

ELECTION ACT DRAFTING

G. Farrell-Collins: I listened with interest to the Premier's comment, because he said that the government consulted widely with all people on all sides of the House and all parties. It wasn't too long ago in this House that I asked the question of the former Attorney General. I asked whether the Attorney General could tell us which individuals or organizations in the labour movement he or members of the government had been consulting with in regard to this legislation. That Attorney General stated: "I have consulted with nobody in the labour movement."

This memo goes on to say: "Angie Schira has to see it, because it's going to change the financial arrangements between us and the labour movement." Will the Premier tell us who's telling the truth? Is it the Premier, or was it the former Attorney General -- or none of the above?

Hon. G. Clark: I was not in a position three years ago, when the memo refers to, to answer this out-of-order question, hon. Speaker. Having said that . . . .

Look, there's nothing nefarious about consulting broadly on anything. We'll be bringing in legislation on fisheries renewal very shortly. I want the members to know that I have told everybody with anything to do with the fishing industry, including New Democrats who are involved in the fishing industry . . . . I have shared with them broadly what we're thinking of bringing into this chamber.

It matters not who we consult with on any piece of legislation. What matters is what's brought into the House and what's debated. When it's in the House . . . . I defy the members opposite not to at least admit that they consult with their political staff about the legislation that's in the House, to help prepare criticisms of the legislation. It's debated in this House. This act was debated in this House. It's good legislation. It has exposed the Liberals, hon. Speaker, and we stand by it.

The Speaker: The bell terminates question period.

Tabling Documents

Hon. J. MacPhail: I have the honour to present the '94-95 annual report of the Ministry of Health and Ministry Responsible for Seniors, and the '94-95 annual report of the Medical Services Commission.

Petitions

J. Weisbeck: Mr. Speaker, this petition is presented on behalf of 829 students from the Prince Rupert campus of Northwest Community College. This petition protests a 33 percent cut in university credit courses. These cuts will perpetually limit the access of Prince Rupert residents to post-secondary education.

Orders of the Day

Hon. J. MacPhail: I'd like to advise members that the House will be sitting tomorrow. I now call Committee of Supply in Committee A. For the information of the members, we'll be debating the estimates of the Ministry of Attorney General. In this chamber, I call Committee of the Whole to debate Bill 2.

BUDGET MEASURES

IMPLEMENTATION ACT, 1997

The House in committee on Bill 2; G. Brewin in the chair.

section 1.

[2:30]

F. Gingell: The first

section of Bill 2 deals with the repeal of the Agricultural Credit Act. The Agricultural Credit Act was intended to enhance . . . . I think I'd like to explore some issues relative to

section 1 to discover whether the role and the job that the Agricultural Credit Act was intended to perform have truly come to an end. If one goes back and checks the numbers, there have not been any new loans made under the Agricultural Credit Act for two years now, as I understand it. There were none made in the '95-96 financial year, and none made in the '96-97 financial year. I wonder if we could start this with the minister confirming that.

Hon. A. Petter: Yes, I can confirm that. The program was terminated in the 1995-96 fiscal year due to decreasing participation. Therefore the account is no longer required.

F. Gingell: Can the minister advise the committee if any applications for loans were made at all during that period?

Hon. A. Petter: What I can say is that applications for loans were no longer receivable after March 31, 1995. Therefore I don't know if some people ignored the deadline and tried to put in applications. If they did, they would not have been applications in the sense that they had any chance of succeeding, because applications terminated as of that date.

F. Gingell: The Agricultural Credit Act provided, as I understand it, for loans rather than grants. I was wondering if the minister could advise us of the current balance of loans that are outstanding.

Hon. A. Petter: I understand that the payments in outstanding loans are currently valued in the range of $15 million.

F. Gingell: I take it, then, that the responsibility for administering these loans and collecting them will rest within the Ministry of Finance rather than the Ministry of Agriculture, Fisheries and Food.

[ Page 2916 ]

Hon. A. Petter: That would be a correct assumption.

F. Gingell: Can the minister give the committee any feel for the quality of those loans? I notice that you use the word "valued" rather than "are," so I presume that the amount of the loans is somewhat in excess of $15 million. I wondered if you have any feel . . . . We know that all of them are more than three years old. What is the gross amount if it isn't $15 million? I presume the minister, in giving me the $15 million number, is suggesting that that is a reasonable estimate of future collection possibilities.

Hon. A. Petter: Yes, that is the most recent estimate that I have that staff provided me in writing. If the member is interested in what the outstanding debts are and what the current valuation is in more precise detail, I'd be happy to arrange for that information to be provided to him.

F. Gingell: I'm just really concerned that when a program like this ends, they sometimes tend to get lost. Accounts receivable collection action that should take place sometimes doesn't happen with the vigour that it should. I want to make that point -- and use this opportunity for the minister to join me in getting a little more background on it -- that it's important, that these are taxpayer funds and that collection practices do, in fact, carry on.

Hon. A. Petter: Let me just say that I share the member's concern. Any amount of money that's outstanding and owed to the Crown is money that we should collect and is money that does not necessitate us to find additional funds for needed programs. Let me just endorse the member's concern. I know staff have noted it. Having said that, staff at the Ministry of Finance are very professional and have a very strong ethic in favour of full collection of outstanding debts. I'm sure they will show that ethic at work in this case, as in others.

J. Wilson: The minister has inferred that this program was discontinued because there were insufficient applications. I am not sure if the minister is aware of the fact, but it was advertised a full year or more before the program was to be discontinued that it was about to end. In the last few months it did discourage some applications. He has not provided us with the number of applicants. The question that I believe was asked was, "What was the number of applications during the last year?" and not: "What came in after the deadline?" At least, that would be my question to the minister.

Hon. A. Petter: Maybe I can just clarify for the member what this provision tries to do. The decision to end the program was taken previously. It was no doubt debated in previous years' estimates for reasons that relate to the priorities of the ministry and the government of that day -- relating, as I understand it, to budget pressures and a philosophy within the ministry to move to farm income support. This is not the occasion, nor would it be appropriate, to reopen that debate.

All this provision does is remove the account in light of the fact that that prior decision to terminate the program was made and that the outstanding collections can be accommodated without the necessity of continuing this particular instrument.

J. Wilson: This program did have a great deal of benefit, whether the government realized it or not. Could the minister tell us what interest rate the government is receiving on the present balance that's outstanding in this account on that money that was lent?

Hon. A. Petter: Again, I'd be happy to follow up with that kind of detailed information. My understanding is that the rate that was provided was a concessionary rate, concessionary to the tune of about 4 percent. Where those loans now stand in respect of that rate and the times at which they were made would require more detail than I have at my disposal. I'd be happy to provide it to the member.

J. Wilson: These loans went back over a period of 15 or 20 years. The interest rates ten and 15 years ago were significantly higher than they are today. Even at half of prime -- which was what these loans were lent at -- it would still be a better rate of interest than we're going to get on our money today if we invest it.

On the other hand, the implementation of this program . . . . Could the minister give me a cost figure on what it cost the government to actually implement this program?

Hon. A. Petter: Just so we don't get into a long inquiry in areas that are really beyond the scope of this particular provision, let me just clarify that the elimination of the account in no way changes the status of the loans, their repayment schedules and the ability of the Crown to collect on outstanding debts. All of that remains the same; it's not affected. All this does is terminate the development fund's special account, because the program has been terminated. The question of collection and amounts due and the terms of those loans will continue outside of this account.

So really, this line of inquiry is one that's more appropriate, I would suggest, for estimates debate -- if the member is interested -- or through an inquiry which I'd be happy to respond to in writing.

J. Wilson: My question was not answered. I asked the minister -- and this goes back prior to the cancellation of the program: was there a cost factor for the government? Does the cost of running this program have any bearing on the fact that it's been removed? If that's the case, what I'm looking for is: did it actually cost the government any money, or was the interest incurred on the loan more than enough to pay for the administration of the program?

Hon. A. Petter: This was a subsidized program.

J. Wilson: Hon. Chair, could the minister explain what he means by subsidized?

Hon. A. Petter: What I mean is that the costs of providing the loans at the concessionary rate did not recover sufficient money to pay for the costs of raising the money and administering the program.

J. Wilson: In other words, hon. Chair, he's saying that the cost of the program exceeded the return on the money that was lent.

I had another question that has to do with who was responsible for the administration of this program. Now, I have been told that it was the responsibility of the Minister of Finance. Did the Minister of Finance, in the administering of this program, pay the wages of personnel within the Ministry of Agriculture to carry out the approval, the monitoring and this type of thing?

[ Page 2917 ]

Hon. A. Petter: I'll just make this my final answer on this line of inquiry because it seems to me well beyond the scope of the section. The

section deals with the account, not the program. The decision to terminate the program was taken and announced in 1995-96. If the member or his predecessors had fully debated at that time and had been available to inquire into why that decision was taken and all the details around it . . . . All this does is terminate the special account that was associated with the program, in light of the fact that the program was terminated. To revisit the debate on why the program was cancelled, when it was cancelled and all those details really goes beyond the scope of the information I have available and revisits an issue that was properly before this Legislature and debated at the time.

Section 1 approved.

section 2.

F. Gingell: Mr. Minister, is it correct that what this does is remove about $2.6 million that presently is paid by the Ministry of Municipal Affairs and is required to be collected by the Assessment Authority from all British Columbia property owners?

Hon. A. Petter: My understanding is that the cost will be borne, at least in this year, by the Assessment Authority. There is not an intention that it will be passed on in this year.

F. Gingell: Could the Minister of Finance inform the committee what revenue sources the Assessment Authority of B.C. has?

[2:45]

Hon. A. Petter: I will defer to my colleague the Minister of Municipal Affairs to answer some of these detailed questions.

F. Gingell: Just to bring the Minister of Municipal Affairs up to date, we have established that what has happened here was to remove approximately $2.6 million from the budget of the Minister of Municipal Affairs and have those funds raised by the Assessment Authority. That was agreed.

My second question was: what revenues does the Assessment Authority have from which to pay these costs?

Hon. M. Farnworth: Basically two sources of revenue, hon. member: the mill rate, in terms of property tax, which is levied provincewide; and sale of services.

F. Gingell: So the taxpayers of British Columbia are still going to pay this $2.6 million. Instead of it being paid by all the taxpayers through sales taxes, income taxes and the whole mix of things, now it's specifically going to be paid by property owners through an assessment against property taxes, because the revenues from the sale of services were coming in anyway and would have reduced the Assessment Authority costs.

Hon. M. Farnworth: The mill rate stays the same, so the cost is paid by all taxpayers who pay property taxes. That is correct.

F. Gingell: Could I just switch back to the Minister of Finance, if I may. It is my submission that this $2.6 million, small as it may be in the scheme of things, is still a cost which has in previous years been paid out of the consolidated revenue fund and, in this particular year, is being paid by taxpayers through some other means -- still a provincial government body. When the Minister of Finance makes the claim that the total expenditures of the consolidated revenue fund for '97-98 have gone down compared to '96-97, it is only fair and proper to add this $2.6 million back to that calculation before he makes that statement.

Hon. A. Petter: Well, I'm not sure if that's a question or a rhetorical statement, but I don't share the view. I think that by and large it's good policy that the Assessment Authority of B.C., or any agency whose activities incur costs, bear those costs. But in this case, as I've previously stated, these particular costs are at least initially going to be borne within the budget of the Assessment Authority. If the Assessment Authority requires additional revenue in order to pay for these costs, then they are free to do so through the means that they have at their disposal, which the Minister of Municipal Affairs has already outlined.

F. Gingell: The minister has thrown a little curve ball in here. I appreciate that you may think my question is rhetorical, but I'm looking for some acceptance that all these little changes about where things are paid for is critically important when one makes claims about how this year's expenses compare to previous years' expenses. And I would have thought that was a pretty straightforward question which would have deserved an answer of yes.

Interjection.

F. Gingell: Hon. Chair, through you to the Minister of Finance or to the Minister of Municipal Affairs. At the present time this House and the elected members of the Legislature have the opportunity to debate, and will vote upon, the expenditures made by a series of various government agencies, one of which is the B.C. Assessment Authority. But now, if I understand this correctly, the B.C. Assessment Authority will be in the position to raise the money that is necessary to pay this cost without going through any process -- i.e., the mill rate that the B.C.

Assessment Authority requires all municipalities or regional districts, or however it is done, to put on their annual property tax notice is not subject to any debate within this House. Is that correct?

Hon. M. Farnworth: That is correct. It is subject to cabinet approval by order-in-council.

F. Gingell: Battles have been fought on bloody fields all over Europe for 800 years to ensure the people's right to discuss, debate and vote upon the expenditure of funds. I think it is poor public policy, even though the amount is small, for you to remove costs from the consolidated revenue fund, which is debated in this House, and put them into an Assessment Authority which has the ability to raise taxes to cover these expenditures without any debate.

Hon. A. Petter: Well, I always love engaging in public policy debates with the member opposite, and I will try not to get too far into it, because we could spend all afternoon. But really, there are good reasons why, when an authority and the appeals associated with its activities incur costs, that authority should bear those costs. We could get into a discussion around that, but there are good reasons why those who generate costs should bear those costs: so that there's a better relationship

[ Page 2918 ]

between the activity and the cost. As for this question about debate, there's plenty of chance to debate. We are debating this matter now. In fact, the member is debating the very point he's saying he can't debate.

F. Gingell: The last time.

Hon. A. Petter: No, no. The member says "the last time." That's not so. During the course of estimates of the Minister of Municipal Affairs, I'm sure the member will not feel constrained to stand up and raise questions concerning the B.C. Assessment Authority and cabinet decisions this year and in the future, as well as Assessment Authority decisions of any manner and scope. There will be plenty of chance for that member to debate those matters in the scope of that debate as well.

So there are competing public policy interests here, and this provision responds to those competing public policy interests in a way that I understand the member doesn't agree with, but I don't think it's a one-sided debate.

F. Gingell: I agree with the minister that there is an issue to debate here. I note, from reading the minister's CV, that he comes from the legal profession. Let's just think about what this process is. It is a court, even though it is a quasi-administrative court. I'm not a lawyer so I don't know the right term.

Hon. A. Petter: Administrative tribunal.

F. Gingell: A tribunal. It's an operation which makes decisions. There are two parties. There is a property owner and property taxpayer, and there is an assessor, who is part of the organization of the Assessment Authority. They have not come to an agreement, and they go to this tribunal for a decision. Does the minister really feel that it's appropriate for the funding of that tribunal to be paid for and raised by one of the members, one of the parties to these disputes?

Hon. M. Farnworth: Yes, hon. member. I think you have to realize that the administration of the two functions are completely separate. Even though one is funding the other, the administration of the Assessment Authority and the Assessment Appeal Board are two separate administrations that don't come into each other. One does not tell the other what to do. They're completely independent.

F. Gingell: I'm always suspicious of these Chinese walls. Surely, the B.C. Assessment Authority is the authority for which the assessor who has made the assessment works. The B.C. Assessment Authority is the body that is now responsible for funding the appeal board. I'm sure that the Minister of Finance, with his law hat on, wouldn't agree to some arrangement whereby the justice system funded judges' salaries and expenses of the operations of the courts out of the proceeds of whatever revenues the courts can come up with -- fines, etc.

I just think that it's inappropriate public policy. You were better off to leave these expenses where they were, funded by the Ministry of Municipal Affairs. What have you accomplished by changing it? You haven't accomplished anything. It's not better public policy.

Hon. M. Farnworth: The budget continues to be set by the government; it's not set by the Assessment Authority. The Assessment Appeal Board's budget is set by the government. All we're saying is that the Assessment Authority is now responsible to cover those costs. The fact of the matter is that they still remain as two independent agencies. The Assessment Authority has no jurisdiction in terms of telling the Assessment Appeal Board what it can and cannot do, and the budget for that continues to be set by the government.

F. Gingell: Maybe the minister can now tell us what the overriding public policy is that the Ministry of Municipal Affairs believes is being furthered by this change in funding mechanism.

Hon. M. Farnworth: Basically, hon. member, it's a question of cost recovery from the people whom it serves. That what's being accomplished here. The people who are using the service are the property owners. Okay? So they are paying for full cost recovery. That's what is taking place.

F. Gingell: So in looking at the role of the Assessment Authority, all of its expenses -- the assessment process, the production of the roll, sending the roll out -- are paid for by all property owners. Now, only a very small number of those property owners appeal the assessment.

Hon. A. Petter: But they all have a stake in it.

F. Gingell: But only a few of them appeal the assessment. Is the suggestion being made that it's appropriate for all property owners to pay the costs for those few property owners that appeal the assessment?

Hon. M. Farnworth: We are reviewing the system, and if there are ways of making it better or more equitable, we do. But I think the key question is equity -- that is, you're correct in saying that a few do take advantage or do have to appeal and go through the process. But those few are not always the same. It changes from year to year. What we have to do is make sure that the system is affordable and accessible to everybody. If you only made the costs of the system . . . .

If you charged -- where I think you're leading -- for those who use the system or use the actual appeal process and recover the costs fully from those few, you would make it inaccessible for the vast majority of people. So even though you're asking everybody to pay, what you're saying and ensuring is that everybody has a guarantee of access to the system and that the costs are equitable to everybody who uses the system.

[3:00]

F. Gingell: I'm not convinced, I'm afraid, and I have listened with great care. I see the next move: all the criminals will be paying for the costs of the criminal courts. I really do believe -- and it's no good following this on -- that this is an exercise where we're moving $2.6 million from the consolidated revenue fund to some other government agency, still to be paid for by taxpayers. I've not been convinced of any public policy reasons for making that change.

G. Abbott: I just want to follow up on a couple of the points which the member for Delta South has made. First of all, just so it's clearer to me, we're in a kind of three-step process here in terms of the transition from the old world to the new world of payment. In the old world -- up until this year, I gather -- the funds for the Assessment Authority came from the consolidated revenue fund through the Ministry of Municipal Affairs. I think I understand that from 1998 on, those funds will be coming from property tax.

[ Page 2919 ]

I'm not clear on what happens in 1997. I understand the previous statement was made that the Assessment Authority will be funding it. But through what mechanism? And who will actually pay?

Hon. M. Farnworth: They will be funding it internally through a combination of reserves, internal savings and internal efficiencies. They also are instructed that they cannot increase the mill rate.

G. Abbott: And again . . . .

The Chair: Excuse me, I have to acknowledge you when you've risen. The hon. member for Shuswap.

G. Abbott: I'm sorry; I was deep in concentration, hon. Chair, attempting to digest the previous answer. Thank you.

Again, as a matter of confirmation here, we are talking about $2.6 million on average per year to operate the Assessment Authority?

Hon. M. Farnworth: No, it's not the Assessment Authority; it's the court of revision and the Assessment Appeal Board.

G. Abbott: Both together, then -- the cost of operating courts of revision plus the Assessment Authority is approximately $2.6 million per year?

Hon. M. Farnworth: Correct.

G. Abbott: We understand, then, that the $2.6 million will be gathered by the Assessment Authority from reserves, fees and so on for 1997, that there is no contribution from the Ministry of Municipal Affairs, the consolidated revenue fund or from property tax. Is that correct?

Hon. M. Farnworth: It will come from reserves -- the existing cash flow that comes from or to the Assessment Authority through the existing mill rate, for example. You'll have growth within the economy and the growth in the assessment stock, so that's where it will come from.

Hon. S. Hammell: I would like to ask for leave to make an introduction.

Leave granted.

Hon. S. Hammell: In the House this afternoon are some students, parents and a teacher from Cindrich Elementary in Surrey. Mrs. Cosens is their teacher. There are 23 grade 7 students and four accompanying adults. Would the House please make them welcome.

G. Abbott: I want to turn to the question which I believe the member for Delta South pursued briefly, but I want to pursue it a little bit further. Why is this change being made? I'd appreciate it if the minister could provide me with some further enlightenment with respect to why we are making this three-stage move to a new way of financing the courts of revision and Assessment Authority.

Hon. M. Farnworth: Basically we're moving to the way that other authorities and agencies are funded, and that is to move towards full cost recovery by the users of the system. It's our view that by doing that we can make it more efficient, and it's fairer overall to the taxpayers of the province. This is a system that deals with property tax, and so we feel that property owners who pay the tax should pay for the system.

G. Abbott: I think the answer ties in rather well to a response earlier to a question from the member for Delta South: the point that if this was a move towards cost recovery -- in the sense, I guess, that we've come to expect it from agencies and so on -- then we would see, in fact, the users of the system bearing some portion of the cost of operating the courts of revision and Assessment Authority.

Just to pursue that a little bit more, and so the minister can confirm that it's in fact what we're doing here rather than what might be cynically referred to as downloading, could the minister advise at this point what portion of the cost of the operation of courts of revision and the Assessment Authority is in fact secured through user fees in terms of the cost of appeals and so on?

Hon. M. Farnworth: Approximately $500,000 will come through fees. The rest will come through a combination of either reserves, as I stated before, or the mill rate, as applying to the overall growth within the assessment roll.

G. Abbott: Given that, is it a correct supposition that if the object in making this change is -- as the minister says -- to see the system go to cost recovery by users of the system, it is the intention of the government to see that $500,000 share of the $2.6 million grow?

Hon. M. Farnworth: The $500,000 comes about through users of the Assessment Authority, not necessarily the courts of revision or the Assessment Appeal Board.

G. Abbott: I thank the minister for that clarification. He still has not, however, addressed the substance of the earlier question, which is: is it the aim, intention or goal of the provincial government to see a higher portion of the $2.6 million cost borne by the people who actually launch appeals through the system, or is it not? I'm just asking that as a straightforward question.

Then what we've got to do is look at the number of appeals that are taking place over time. And then, I think, you'll be able to find out where the appropriate costs are going to be and where they are going to have to be assessed.

G. Abbott: Actually, that's fair enough. I think we're getting to the point. I wasn't trying to trap the minister or anything shallow like that. I was merely looking for enlightenment.

Interjections.

G. Abbott: I believe I have found that enlightenment in what I think was a very definite maybe from the minister, and an understanding that the ministry -- and, I presume, the Assessment Authority -- are at this point in time reviewing

[ Page 2920 ]

the system to determine whether such changes might be appropriate down the line. He can correct me if I'm putting words into his mouth, but I think that's a fair summation of the position he's advanced here.

Could the minister advise what consultation took place, prior to the introduction of this bill, between the provincial government and stakeholders in the province with respect to this change?

Hon. M. Farnworth: The consultation that took place was within the ministry. An internal review was done to identify areas that could be administered more efficiently, keeping with policies such as those around full cost recovery. That's how the decision was made.

G. Abbott: Again, I don't want to read anything into the answer of the Minister of Municipal Affairs, but I would presume, then, that absolutely no consultation took place with, for example, local governments on the issue of whether this change should be made.

Hon. M. Farnworth: No consultation has taken place with local government. In fact, they are not affected by the change in this decision.

Interjection.

G. Abbott: I think the member for Delta South is attempting to raise a very important issue in a quite informal fashion here, and I'll actually try to get to that point as well. If I forget, I'm sure he will leap to his feet again before or after I'm done.

The next question I have revolves around: if there is to be -- and I'll use the very polite term "devolution" -- a devolution in terms of bearing the cost of the Assessment Authority and courts of revision and so on, shouldn't there also properly be some devolution in the way in which those boards and bodies are appointed? That's where I'm heading here, just for the enlightenment of the minister. The first thing I would like to ask him is: could he briefly tell me how courts of revision and the Assessment Appeal Board are currently appointed?

Hon. M. Farnworth: Courts of revision are ministerial appointments, and appointments to the Assessment Appeal Board are order-in-council appointments.

G. Abbott: Again, just to confirm: courts of revision are ministerial appointments, and appointments to the Assessment Authority are order-in-council appointments. Perhaps I can get clarification on that.

Hon. M. Farnworth: Assessment Appeal Board appointments are order-in-council.

G. Abbott: Perhaps, as the minister suggests, this could be a very valuable part of his review: giving them significantly distinctive names so that . . . .

S. Hawkins: Better acronyms.

G. Abbott: And perhaps acronyms. I think you and I could perhaps jointly work on appropriate acronyms for these bodies.

To go a little bit further, then, clearly in both cases -- the courts of revision and the Assessment Appeal Board -- the appointments are made by the province. If we are in fact seeing here -- and I think we are -- a devolution, or what might be cynically termed a "downloading" of the cost of this board, is it appropriate, then, that we see the UBCM, local governments or whatever playing more of a role in who actually sits on these courts of revision and on the Assessment Appeal Board?

[3:15]

Hon. M. Farnworth: In terms of any review that's taking place, that's certainly a valid point which I'm more than willing to look at. Currently, I can tell you that in terms of courts of revision, for example, I do get a fair amount of input from municipalities. Names are forwarded to me. The same with members for the Assessment Appeal Board, though that's a much smaller body. I do get recommendations on a fairly regular basis from mayors and communities throughout the province to consider such and such a person. But you raise an excellent point, and it's certainly one that I'd be willing to consider.

G. Abbott: It's rare that any statement I make is acknowledged to be an excellent point, and I thank the minister for that.

I would like to . . . .

Interjection.

G. Abbott: I'm sorry, I missed that bit of heckling.

An Hon. Member: This side of the House always gives positive reinforcement. I'm not sure about your side.

G. Abbott: Yes, we've noted that on many occasions, in fact.

The issue of how the cost from 1998 on is going to affect the local taxpayer is something that we need to canvass. The member for Delta South, I think, raised this issue. I'm not sure it was answered to his satisfaction. It certainly wasn't answered to mine. And I know it wasn't to his, either, because he informally raised the issue here moments ago, as I said.

The minister -- and I can't remember whether it was the Minister of Finance or the Minister of Municipal Affairs -- at one point suggested that in fact the mill rate would stay the same, despite this change being made. I'm intrigued by that. If the responsibility for approximately $2.1 million -- the Assessment Authority, its reserves and so on -- is being shifted from the consolidated revenue fund this year onto property taxes from 1998 on, I'm wondering how the mill rate can stay precisely the same. It may only be a minor change, but I don't see how it cannot change.

Hon. M. Farnworth: Two points: first, the OIC has already been passed so the mill rate is already in place for the coming year, so it won't change. The second is that we've got growth in the population of about 2 percent per year, which is fairly significant. That will have a pretty big impact. So there's no reason why the mill rate should change.

G. Abbott: I did spend long enough in local government to appreciate that values do change from year to year. They do, on balance, grow. I guess the point I'm getting to here is that if this change in terms of responsibility for paying for the board and the courts of revision was not made, there would

[ Page 2921 ]

still be growth. What I'm saying is that, all things being equal, there is going to be a slight extra charge to the local taxpayers as a consequence of this.

Hon. M. Farnworth: In part, it will depend upon the assessed value of your property and how your property sits in relation to every other piece of property. I guess it's the same as your property taxes. If the mill rate in the property tax for municipal or local government rises by 5 percent, let's say, and the assessed value of your property rises by 5 percent, you pay exactly the same amount of tax. Likewise, if the assessed value of your property is 5 percent lower than average, you'll pay a slightly lower rate of tax. It would be the same with this.

It depends on where your particular property sits in its assessed value in relation to all the other properties in that particular class. I know it's confusing, but trying to explain this is . . . .

G. Abbott: It is indeed mildly confusing. There's no question about that. I guess the point I was trying to get to is that there is a downloading of costs of either $2.1 million or $2.6 million here that the local taxpayer is going to be picking up, that they didn't pick up previously. Whether that necessitates a mill rate change or not . . . . I understand your point about mill rate. All I want is a simple acknowledgment from the minister that some $2.1 million or $2.6 million in extra costs is in fact going to be borne by local taxpayers as a consequence of this change.

Hon. M. Farnworth: The cost is going to be borne by the Assessment Authority internally. Part of where they get the money from is through internal efficiencies or reserves, or through the mill rate. In terms of the mill rate, whether you see an increase is going to depend on how your particular property assessment went for the coming year.

So I come back to my example. If you have a $100,000 house, and if its assessed value has risen 10 percent and every other property in that class has risen by 10 percent, then no, you would not see an increase. If your property rose by 15 percent and the average increase in the assessed value was 10 percent, then yes, you would. But if your $100,000 house increased at 2 percent, which is less than the average increase in assessed value for all the properties in that class, then you would in fact see a tax decrease.

G. Abbott: I understand all that stuff, and I appreciate that if your assessed values go up higher, and so on . . . . Again, all I'm pursuing here is a simple acknowledgement that while it may be a very small figure, the consequence of this change is going to be a slightly larger tax bill for local taxpayers. I know it's going to vary. I'm saying that on average . . . .

Hon. M. Farnworth: I guess what I'm trying to say is: look, you've got the same mill rate that you had before. On average, some people will see the portion of their tax bill that goes to the Assessment Authority stay the same. Some people may see it go down, and some people may even see it rise, but that has to do with the vagaries of assessment in their area.

G. Abbott: Well, hon. Chair, the minister is going around in circles a bit on this. I hope I haven't confused him, because he keeps giving a rather complicated answer to what I think is a very simple question. I understand the averages; I understand that if your assessment goes up and somebody else's goes down, etc . . . . I understand all that. I simply want an acknowledgment that the effect of this is to pass along a small increase to local taxpayers. Previously it was borne by the consolidated revenue fund for the Ministry of Municipal Affairs.

This year, it is being borne by the Assessment Authority internally through reserves, etc. In 1998 and onward, it is going to be borne by local taxpayers by a slight increase . . . .

Interjection.

G. Abbott: It's $2.6 million over the province. I just want an acknowledgment of that.

Hon. M. Farnworth: I do appreciate what the hon. member across the aisle is trying to do. He is trying to get me to say that everyone is going to have a tax increase. That simply isn't the case. I'll repeat again that the money that the Assessment Authority will be paying to cover the cost of the court of revision and the Assessment Appeal Authority will come internally as well as through savings and efficiencies -- but also from the mill rate that's available to it. I've explained to him how that works: some people can see a decrease, some people can stay the same and some people can see an increase. It's not a blanket statement that applies to everybody.

I think there's another important point, and that is that one of the things we've asked the Assessment Authority to do is to identify areas where they can generate more revenue that can finance their operations. As minister, I've encouraged the authority to identify areas of revenue generation, particularly through marketing of services, with a goal of being able to generate more revenue outside their day-to-day operations around the assessment of property.

G. Abbott: I really don't want to dwell on this point any longer. I think the minister has probably come as close as he's going to get to acknowledging what appears on the surface to be a fairly obvious point here: that the cost of the Assessment Authority is going to be borne by the tax roll -- i.e., the local taxpayers in British Columbia. That's the only point I want to have him confirm. It seems to me that the whole heart of the thing is that the local taxpayer is going to be picking up $2.6 million of what was previously borne by either consolidated revenue or in the present year by the Assessment Authority.

He may want to confirm that as well as answering the additional question, but let me just move on a little from that, if I could.

The minister noted that the budget for the Assessment Appeal Board, and presumably for the court of revision, will continue to be set by the provincial government through regulations enacted under orders-in-council or whatever, but the operation of these authorities will be paid for through the property tax. I'm wondering if there is some inconsistency of principle here and whether, as part of the review, the government should not be looking to address whether there is an inconsistency of principle and whether some change should be made in terms of devolution of authority in that regard.

Hon. M. Farnworth: No. We are conducting a review, and we are looking at all kinds of options, including some of the ones the hon. member has mentioned -- fees, ability for all kinds of product change and that sort of thing. Those points will be taken into account and will be looked at. But I think the important thing we want to ensure is that at the end of the day the system remains accessible and equitable to every property owner throughout the province.

G. Abbott: I have just one straightforward question before I turn the floor over to any others who may have

[ Page 2922 ]

questions. Could I get a bit more precisely the makeup of the sales-of-service component in the revenues of the Assessment Authority?

Hon. M. Farnworth: I'll be pleased to get that information for the hon. member.

P. Reitsma: Sometimes I think there's a lot to say for hearing aids, because you can turn them off if the answer is repetitive or you can't understand it. I know the minister has been a local council member for many, many years, and I know his mayor. I think next time at the UBCM, if there is any protocol agreement still in place, I should talk to him and find out what job he has done in advising his council member on mill rates and so on.

I wasn't going to get into this foray, but I was a bit astonished -- and curious, I suppose, at the same time -- when the minister replied to one of the questions that it doesn't affect municipalities. I beg to differ with that.

Many a time, in my nine years as mayor of Parksville, I stood at the front line during tax time, partially to shield some of the staff. From time to time we do get, as the member knows, some irate people, in terms of the taxes and what's going on. However, on behalf of the concerns expressed by the mayors and council members of my municipalities -- Parksville, Qualicum and Nanaimo -- it's straightforward: at some time $2.6 million or thereabouts is going to be shifted from the consolidated revenue fund, where it's been coming out of, onto the local taxpayer through the Assessment Authority. That is the bottom line.

[3:30]

Now, when we are talking about side-shifting, sidestepping, the fact of the matter is that at the end of the day the local taxpayer is going to pay for it; no ifs and buts. I know that because I've done that. I've collected taxes on behalf of the provincial government. To the chagrin of many people, things are going up. Local municipal governments and regional districts, as the minister so well knows, have to balance the budget. Given the fact that grants are down and taxes are going up, in terms of a small amount through the Assessment Act . . . .

All those little bits and pieces make it different for a local government, particularly -- as the minister has acknowledged in a roundabout way -- since when you unpeel it and strip it down, no consultation has taken place. Despite the fact that there's a protocol agreement with the UBCM and the municipalities, no consultation has taken place. The bottom line, of course, is that it's another off-loading or downloading -- something that this government so abhors when it happens to them. That is the bottom line: it's the local taxpayer that ultimately pays for that amount.

I'd like the comments from the minister on that, so I can report back to my municipalities, and my taxpayers, as well.

Hon. M. Farnworth: First off, the municipalities don't have a role in setting the rate for the Assessment Authority. The provincial government sets the rate for the Assessment Authority. And though that rate . . . .

Interjection.

Hon. M. Farnworth: I'm replying to your comments, hon. member. I'm responding to them. I listened to what you had to say, so please extend me the same courtesy. Thank you.

The rate has not changed from last year to this year. It's not changing. With the money that the Assessment Authority is being asked to pick up, we've asked them to . . . . One, they're going to do it in the same mill rate. Okay? So there's no increase. They are asked to absorb it, find it internally. It's not being borne by the local taxpayer; it's being borne internally by the Assessment Authority. I've also stated that I've actively encouraged the Assessment Authority to look at outside sources of revenue generation.

I've said that I would get back to the hon. member in terms of what the potential numbers on some of those are. So I think you'll see by that, hon. member, that there's no impact on your local taxpayer.

Interjection.

The Chair: Excuse me, hon. member. I might suggest that when you first rise, take a moment before you speak. I'll acknowledge you and then you can speak.

P. Reitsma: Just my last comment. What may happen in 1997 is fine. I'm looking at subsequent years. The bottom line is that there is no consultation taking place between the government, the UBCM and the municipalities, despite a protocol agreement. The bottom line is that about $2.6 million will be downloaded onto the local taxpayer in the years to come.

I. Chong: I have some questions as well. I hope it's not going to be viewed as repetition, but I had to step out momentarily.

Could the Minister of Municipal Affairs just elaborate on whether or not the Assessment Authority, in collecting its revenue, is permitted to build up a surplus?

Hon. M. Farnworth: Yes, it is.

I. Chong: To the minister, then. Would he be able to elaborate as to what these surpluses would be used for?

Hon. M. Farnworth: They generate surpluses almost like a standard business practice. There's no intention to generate surpluses. They're allowed to use the surpluses in the administration or the carrying out of their statutory obligations.

I. Chong: As I understand it, there is no intention to create a surplus. In fact, if a surplus is created, it's to defray other costs.

If for some reason a surplus does build, could the minister advise whether those surpluses could be passed back onto the property tax payers by a reduction in their assessments?

Hon. M. Farnworth: The surpluses generated are normally carried on on a year-to-year basis. Some years you have an increase in costs -- like, there will be an extra increase in appeals -- and some years there's a decrease. So it's a case of good business practice. That's why the surplus is there. I hope that answers your question.

I. Chong: It answers it in part, but only on a sort of accounting basis, not as to the intent of the surplus. That's why I posed the first question. As I understand it, if the idea is to allow the balances from year to year to go up and down, costs can be higher and more appeals are heard. It also stands to reason that if there are savings, if there are efficiencies that were built up over a cumulative two or three years, those would ordinarily be allowed to be passed through to the

[ Page 2923 ]

property tax payers. I would like to know whether or not, by the imposition of this $2.6 million onto the assessment board, you have in fact taken away and encroached upon our ability to have a reduction in our property taxes.

Hon. M. Farnworth: No, you haven't taken away the ability for a municipality to vary its mill rate or to raise or lower taxes. The municipality can do with its mill rate and its tax rate what it chooses. In fact, I would venture that most municipalities probably don't . . . . They set their budgets based on their needs and pay very little attention to what the Assessment Authority's mill rate is going to be.

I. Chong: I know there's a difference of opinion here, but given that the mill rate is in fact tied into the Assessment Authority and the property tax payers, then what I see happening here is . . . . With the $2.6 million additional cost, which the Assessment Authority did not previously have to pay, the efficiencies that the Assessment Authority may have gained . . . . They cannot pass those back to municipalities and advise them that those are allowed to be dealt with at a municipal level.

In effect, what's happening is any savings in efficiencies that have been gained by the Assessment Authority are not being passed to the taxpayers but are being passed back to this government by allowing them to not have to pay those costs.

Hon. M. Farnworth: I think the member is making an assumption that the $2.6 million is passed to the entire local taxpayer. Well, it's not. The mill rate stays the same. It hasn't changed, and it's not going to change in the coming year. The $2.6 million -- the cost of administering the court of revision and the Assessment Appeal Board, now provided for out of the Assessment Authority -- is not passed directly onto the local taxpayer; it's absorbed within the Assessment Authority. So you're not impacting on the municipality's ability to vary its tax rate.

I. Chong: If you don't want to relate it to the mill rate, I'll accept that for the moment. But as property tax payers we all contribute to the Assessment Authority, because that's where they're collecting their source of revenues from. So if the Assessment Authority has to collect $2.6 million in additional revenues because they have $2.6 million of additional costs, it will in fact go on the property tax bills. If the Assessment Authority had efficiencies and surpluses, perhaps in some years they could not increase those costs -- or reduce those costs to the property owners.

Hon. M. Farnworth: I'll answer the second part of your question first. Over time, costs may very well come down, because you've got growth within the economy; the roll is currently growing by about 2 percent per year. You may very well see a lowering of the mill rate over time. So that's one area.

The second point I'd like to make is that I've instructed the Assessment Authority . . . . We're doing a review, and I've encouraged them to look at ways of generating revenue through services that they can offer to defray expenses within their operations. So your assumption that this $2.6 million is going to be borne directly by the property tax payer is something that I don't accept, because we froze . . . . The mill rate stays the same this year as it was last year.

I. Chong: As he said, I suppose the Minister of Municipal Affairs doesn't accept the argument that this is a cost that will be borne by taxpayers. The members on this side of the House do believe that. So for the moment I will leave that and go directly to some of the paragraphs contained within the bill.

section 2(5) you've stated: "Each year before December 31, the Minister of Municipal Affairs and Housing may submit a requisition to the authority for the amount required to cover the. . .costs . . . . " My question to the minister is: if those costs are determined on December 31 each year, is that based on a calendar year, where you're going to determine those costs and then collect them in quarterly instalments throughout the year?

Hon. M. Farnworth: It's an anticipated cost of the next provincial fiscal year.

I. Chong: I want to be quite clear on this: that in fact the $2.6 million anticipated cost is April 1, 1997, to March 31, 1998, not from January 1 to December 31, 1997.

Hon. M. Farnworth: The actual figure is $2.25 million, and it's from April 1, 1997, to March 31, 1998.

I. Chong: Has the minister any information available at this time about whether the cost over the last five years has been consistent at the $2.6 million level on an annual basis? I haven't been able to receive the annual reports.

Hon. M. Farnworth: It's my understanding that it has been consistent for the last few years. I can get the exact figures for the hon. member, if she requires.

I. Chong: Just for a bit of consistency on this, if in fact an averaging has been chosen as the $2.6 million. . .

[3:45]

Hon. M. Farnworth: It's $2.25 million.

I. Chong: . . .or $2.25 million -- it keeps changing -- I would like to know if that is an estimate prepared at the end of the year, whereby quarterly instalments are then required to be paid into the Ministry of Municipal Affairs and Housing. Is there an adjustment that is made at the end of the year to ensure that the actual costs are repaid to the ministry? Or will the estimate be the amount that is permitted for the entire year?

Hon. M. Farnworth: The last quarter will be adjusted.

Section 2 approved.

section 3.

F. Gingell: Sections 3, 4 and 5. Let's just deal with

section 3 first -- a

section that this side of the House agrees with and is looking forward to seeing these changes. I wonder if perhaps -- just for the record, so that it's in Hansard -- the minister could briefly give us a short

summary of how this will change the method by which personnel employed by the province are reported.

Hon. A. Petter: I guess to boil it all down, there has been a good deal of controversy in terms of trying to figure out the number of employees who are ascribed to the consolidated revenue fund. Various methods of accounting have been used. The member knows this better than I.

[ Page 2924 ]

In the spirit of some of the recommendations that have come previously from the auditor general, this

section tries to come to a base that everyone can agree upon and that we can therefore use as an effective basis of comparison, year over year. That base is related to the flow of funds. It defines government staff as those employees whose salaries are paid directly from the consolidated revenue fund. That provides a more certain, stable and verifiable way of tracking those employees who are ascribed to central government and whose salaries are paid from that fund. Indeed, that is how it is now represented and adjusted, incidentally, so there are no games being played in this year's estimates.

I. Chong: Just a quick question to the Minister of Finance. I understand the need for improved disclosure. My question is, though, in cases where there is contracting-out, where it's paid by the consolidated revenue fund, where they can be identified as self-employed contractors versus a business entity, for example, where someone actually does work, will you have any provision to ensure that those are in fact counted, as well as separate individuals with their contracts?

Hon. A. Petter: Well, I guess there are all sorts of difficulties that this

section won't entirely deal with, but other initiatives have tried to. When this government was first elected, in its first term . . . . Members may recall the Korbin initiative, which was an attempt to try to prevent government from using contracts to essentially hire full-time employees who weren't employees. Those guidelines continue, and ministries are not permitted to use that device. So those contractors that are usually utilized are not counted as FTEs, as I understand it, but that constraint flowing from the Korbin initiative is there.

Frankly, I think there's an argument . . . . It's a question of whether FTE-tracking, certainly as a control device, is worthwhile at all. The sign of efficiency of how an entity operates is not necessarily a product of the number of employees it has. As the member points out, there may be some agencies that do better with more employees and fewer contractors, and some that do better with more contractors and fewer employees. There are some aspects of government in which increasing employees could increase efficiency, and other aspects of government in which increasing efficiency could be better entailed through a reduction in employees.

So FTEs are, in my view, a questionable measure of efficiency in any event. But to the extent that people find it useful, I think it's useful to track it through the flow of funds. That's what the auditor general suggested, in terms of those who are payed through the consolidated revenue fund, and that's what this amendment does. But it doesn't solve every problem, nor does it make FTE-accounting the best norm or the best touchstone of effective or efficient government, in my view.

I. Chong: I can understand why the Minister of Finance believes that the FTE counts would not necessarily be a good measure. But given that a good number of FTEs are moved out and continue to essentially do the same work, and they're no longer counted . . . . But if they were brought back into the cycle and they were to be counted again, how are we going to get some consistency in terms of a comparative year-to-year, which is the whole idea of changing this to allow for some improved disclosure and improved comparisons?

Hon. A. Petter: Well, I'm saying that you try to deal with one problem at a time. This deals with the problem of trying to make sure that you have a consistent base in terms of which full-time employees are ascribed to the consolidated revenue fund and which aren't. This helps, I think, to provide a much clearer, consistent and verifiable base.

As to the other question about the use of contractors or not using contractors, this government has made some real strides -- and paid a political price for those strides, incidentally -- in terms of insisting that those people who perform full-time service for government are not allowed to continue on contracts. As a result of that initiative, the FTE rolls swelled and we were criticized for it. But we felt it was better to bring those employees onto the table, rather than dealing with them under the table. There are still functions that are performed by contractors, where those contractors are not performing full-time service.

This government, incidentally, has an initiative to look at contracts across government. We may be criticized for this too, and if we are, well, so be it; it's a good initiative, in my view.

Where we feel it could be more effective and that services could be more effectively performed by full-time employees -- say you have three or four contractors in different ministries performing a communications function, and one employee could better perform that function -- then we're prepared to increase the number of employees if it can be shown that it's a more efficient and effective way of doing things, just as we're looking at situations in which contracting services out may be more efficient and effective in other areas.

In all of these areas, wherever you draw lines and you have these distinctions, you will not solve every single problem. But I think the record of this government, in terms of trying to move forward on the contractor -- full-time employee distinction, has been laudable. And I think that this particular initiative, which deals with another problem -- that of which employees you count based on the flow of funds -- is also laudable. That doesn't mean all the problems are solved, but we're making steady progress.

I. Chong: A final question, then. If in fact you're going to be counting the FTEs so a comparison can be made and you track it through the flow of funds, can the minister advise whether or not he intends to introduce any changes as to how an FTE is established?

Hon. A. Petter: No. There is no present intention to make any changes. If the member has suggestions, obviously I'm interested, but I'm not aware of any changes -- beyond these ones -- that affect the way in which FTEs are counted.

I. Chong: One concluding comment. I just want clarification, because in this day and age, with all the amounts of work-sharing and things such as that, I just want to ensure that there is some consistency in what was classified as an FTE. I don't know whether there are intended changes as to the number of hours, number of days, or whatever measure may be introduced. I just want to find out from the minister whether or not there are any impending changes.

Hon. A. Petter: Let me just confirm that no, there are not. But in the circumstance that the member posits . . . . Say you have two employees job-sharing and they're not contractors; then those two employees who are job-sharing, each performing halftime work, would be counted as a single FTE. That is not ignored. The fact that a person who is a full-time employee works for less than a full complement of hours doesn't remove that person from the FTE count. They get counted on a prorated basis.

[ Page 2925 ]

Sections 3 to 6 inclusive approved.

section 7.

F. Gingell: The grazing enhancement account is intended, as I understand it, for basically two purposes. One purpose is the maintenance and enhancement of range, and the second is for research, both at universities in the form of pure research and in funding pilot projects. Can the minister give us some rough breakdown on how the moneys have been spent in the past between those two differing programs?

Hon. A. Petter: As I understand it, the program is still in a formative or ramping-up stage, and therefore there have not been extensive expenditures in the two categories the member refers to. But what expenditures there have been, I take it, are more in the project end of things than in the research end of things.

F. Gingell: I only went back looking at the costs that had been expended to the year 1995-96, where there was roughly $925,000 spent. Were there any in years prior to 1995-96?

Hon. A. Petter: My understanding is that 1995-96 was the first year, and the expenditure in that year was $362,000.

F. Gingell: Which brings me to a somewhat different subject. We've just spent some time talking about FTEs. Perhaps we could improve the accounting practices so that we can look at last year's estimates and find out what really was spent on these projects. My evaluation, looking at last year's estimates book, was that $925,000 had been spent. This program was set up to run for a five-year period, to the year 2000. What this amendment does to the bill is extend it to the year 2005. I guess that is to give some certainty to this program.

When I look back and I see the commitments that this government has made to municipal governments about the certainty of future grants -- and they lasted one year -- what is there to convince us that this government's commitment to continuing this program to the year 2005 is any better than the commitment they had to give municipalities certainty for grants in the future?

[4:00]

Hon. A. Petter: Well, I'll ignore the rhetorical part of the question and say that the intention here is indeed, as the member suggests, to provide an additional five years so that the spending commitments towards grazing enhancement can extend beyond the year 2000. It's taken longer in some cases to start the program up. There's more work that needs to be done in some areas, and to provide an additional five-year period is seen as something that will send a signal to those who will benefit from this program. This government remains committed to the program, and for that reason I think this amendment is seen as a positive signal.

F. Gingell: I take it that many of these projects you got involved in in the first two and a bit years are more than one-year projects. You go into an enhancement of grazing land, and it takes more than one season; it goes into multiple seasons. Have commitments been made for multiple-year or multiple-season projects?

Hon. A. Petter: I don't know the answer to that. We can go about it two ways. I can undertake to find the information for the member, but probably the easiest way is to take up that question during the estimates of the Ministry of Agriculture.

F. Gingell: Then perhaps for estimates I could at this point ask the minister, seeing that it's to do with this, if they could provide us with a clear statement of what the intent of this program is: what it is you are trying to accomplish, how those things are to be measured, volume numbers, what are you planning on doing as far as acreage and quality are concerned, irrigation projects and those kinds of things.

Hon. A. Petter: I'll pass the member's request along to the Minister of Agriculture, through staff, so that information can be provided in anticipation of the estimates debate.

J. Wilson: This grazing enhancement fund which you have now modified . . . . How is this going to be distributed to the people out there?

Hon. A. Petter: Again, if the member wants to get into real detail on this, probably the estimates of the Minister of Agriculture would be the best way. My understanding of how the program is administered is that it's targeted at three different areas, and in each of those three areas there are advisory groups that have been brought together to review the objectives to which the program might be put within those areas and to advise government as to how best to expend these funds, consistent with the objectives of the program.

J. Wilson: Could the minister be a little more specific here? He has referred to advisory groups. That leaves me a bit confused. Are these government-appointed advisory groups? Are they industry-appointed? Could he clarify that?

Hon. A. Petter: I don't know the answer as to how they are composed. I am sure the intention is that they be representative of various stakeholders and those with an interest. But again, this is a matter which probably is better taken up during estimates. All this amendment does is extend the period of time through which the grazing enhancement fund special account will operate, and it extends its benefits. If the member has questions as to how the minister intends to operate within that time frame, those are matters that could easily and properly be taken up in the estimates debate.

J. Wilson: Is this modified grazing enhancement fund meant to cover the entire province?

Hon. A. Petter: In the sense that there is no other grazing enhancement fund, yes, it's designed to cover the entire province. But, to my knowledge, the program is focused in particular on three areas of the province in which there have been land use planning initiatives. In those three areas, those initiatives gave rise to a particular need for an investment program with respect to grazing enhancement; hence this fund exists and provides support for those programs.

[R. Kasper in the chair.]

J. Wilson: I believe that what I hear the minister saying is that this grazing enhancement fund of $1.4 million or $1.5 million is earmarked for the three land use plans that have been completed at this point.

Hon. A. Petter: I'm not sure that it's specifically targeted for those three, but those are the three of which I'm aware. Again, the details on that could most properly be taken up in estimates debate. The fund is, I suspect, not specific to those areas, but those are the areas that are currently identified and targeted for benefiting under the fund.

[ Page 2926 ]

J. Wilson: It would appear that the minister is a little bit ambiguous, here, in his answer. We don't know if this money is going to be earmarked for land use plans that have been completed or whether it encompasses all land use plans in the province. I believe there are certain LRMPs which have not yet been completed. Are they going to be included in the formula, or will they be left completely out once they come on line?

Hon. A. Petter: I'll be happy to provide this member with this information in writing, but really, this is the kind of inquiry that he should undertake during estimates debate with the minister who, with staff, is directly responsible for administering this program.

I'll make this my final answer, at least on this line of questioning, hon. Chair. All this amendment really does is extend the period to which the fund applies so that the benefits of the fund can continue beyond the year 2000. Insofar as the details of how it is going to be applied, that's a matter which estimates debate is really designed to accommodate.

J. Wilson: An important part of our grazing enhancement fund as it existed before this was changed . . . . It was an integral part of the three land use planning processes. There was a set amount that was put in place by the government to fund each land use planning area. There was also a commitment by the previous government to allow additional funding for land use planning that was to be completed over the next two or three years.

Some of these things have been completed at this point, and some of these land use planning processes are still ongoing. There is nothing in the funding change here to indicate whether it is going to be all-encompassing or whether it is going to target specific land use planning areas. I think it is very important that we get some direction from the minister, because he has made a drastic change in the amount of funding that is available. If we haven't got any target for that, it leaves a lot of people out there with really no direction as to what's happening.

Hon. A. Petter: Let me see if I can answer the one new point that I think comes out of that line of inquiry; that is, the budgeted funding reflects the anticipated annual funding required for this program. Because the program is anticipated to not require . . . . Let me put it this way: because it's viewed as more desirable for the program funds to extend over a longer period and it's taken a longer time to get the program up and running in some areas, extending the period is beneficial in the sense that it means that the program will not terminate by the year

Section 7 approved.

section 8.

F. Gingell: I'm going to do something different on this occasion, if I may. I'm going to suggest that the minister should make a minor change to this section.

The thing that surprised me was that the

section requires the reassessment to be made. I'm sure there are many occasions when equity will determine that a reassessment should not be made. For instance, when I think about this particular application, it deals in this first one with the hotel room tax. I understand that you get into some disputes relative to when lump sums are paid for room and board. There has to be an allocation as to what's for board and what's for room. The room portion is subject to the room tax, as long as it doesn't exceed certain periods. Advice may have been given by ministry officials to someone, and then subsequently it changes.

I don't think that the Ministry of Finance will lose anything by changing the word "requires" to "may." I think it would give you more flexibility. I think it would make your lives easier. It would allow you to react and respond to unusual circumstances in the understanding and humane manner that Ministry of Finance officials always do.

Hon. A. Petter: I appreciate the member's concerns. Let me assure him that the situation he posits is counter-factual. There is, within the general provisions of taxation statutes such as this, the ability to exercise discretion where there's some injustice. But under these circumstances . . . . This is a circumstance in which someone has been overpaid a refund. That refund comes about through a claim that they make for refunds. There are no assurances given in the context of that.

If it's been determined that there has been an overpayment made of that refund based on the information provided, why shouldn't there be any discretion in claiming back the money that's due to the Crown beyond the discretion that already exists and can be applied in the circumstance to all tax matters where there's unfairness?

To introduce a secondary or additional discretionary element around the question of overpayments per se would only complicate the matter and undermine the excellent policy objective here: that is, to create a situation in which the ministry can provide refunds with confidence, knowing that if those refunds are excessive, they can recover them, rather than the current situation, in which the ministry must exercise an overabundance of caution and delay refunds in some cases. Because once they go out the door, they can't be recovered.

I think the member's amendment, while well intentioned, would only further complicate that matter and is unnecessary in light of the discretion that already exists with respect to inequities within the tax system.

[4:15]

F. Gingell: My only thought now is that the only way a person will then be able to bury a reassessment without going to court -- and we're not talking about that -- is through an appeal to the minister. I wasn't necessarily speaking about refunds that were originally generated by the taxpayer. In my years of public practice, assessors would come in, look at a set of circumstances, deal with them in a fair and equitable manner and advise the taxpayer that they had overpaid their taxes. I wasn't trying to do anything other than trying to get you out of a position where you are required to do something, which you could still be able to do, through it being permissive rather than regulated.

That was the only point. The minister doesn't think that's a good idea. I won't make any more suggestions.

Hon. A. Petter: I always appreciate the member's suggestions, and I don't want to discourage him in making them. Very often are they not only well intentioned, but they find their mark. So please, member, your suggestions are always welcome.

In this case it is just not a concern that requires a change. The practice, when the ministry audits, is that that audit then provides the basis for seeking an overpayment or recovering an overpayment -- or not. The ministry, when they audit again, will audit for a different period.

[ Page 2927 ]

The situation here is one in which people will claim refunds. The ministry wants to be in a position to provide those refunds in a timely way, and this provision allows the ministry to recover them, in terms of discretion, for some injustice that already exists within a statute and can be applied in this situation as in others. Therefore the kind of factual pattern the member seems to be describing is not one that exists. If it were to exist, it could be covered off through the general discretionary powers and appeal provisions that exist under the statute.

I. Chong: Just to pursue this a little further, but not too much, I'd like to ask the minister, then: is there a discretionary limit that your department uses such that as a result of an inspection audit or examination. . .? If, for example, you determine that there's a $20 overpayment -- and here in this subsection it says that "the director must make an assessment" -- would the cost of that reassessment not counteract the benefit of the recovery?

Hon. A. Petter: The way this operates in practice is that once the refund has taken place, an auditor may go in. The auditor will identify whether or not the refund and the tax assessment was appropriate. If we're talking about minor, insignificant amounts, then the auditor, just as a matter of practice, would not dwell on that matter. It would be inefficient and ineffective to do so. Certainly, if there are any significant amounts, the auditor then can seek, as a result of this provision, to recover overpayments.

The good news at the front end, then, is that the ministry will not feel constrained in providing refunds, because they know that if those refunds are excessive, and that's demonstrated in a subsequent audit, they can then make those recoveries in an effective and timely way. No one has an interest, as a matter of good administration, in hassling over pennies or a few dollars. The goal here is to enable effective recovery of amounts that are substantive.

I. Chong: I want to be very clear. I appreciate what the minister has said, because it is only common sense that you wouldn't be spending $100 to collect $20. But the amendment clearly says that "the director must make an assessment." If that's the case, as the member for Delta South has suggested, the word "must" should be changed to "may." Otherwise, you're stating that the legalities of this will be compromised by a policy to not follow this. I just want to be reassured that we will have something in place to ensure that that discretionary ability is there. If it's not there, then we should have it in the statutes and ensure that it is there.

Hon. A. Petter: I really caution the member not to make things more complex than they are and not to assume that every legal provision anticipates how things actually happen in practice administratively.

What this provision does is provide that the director must make an assessment. But as a matter of administrative practice, when an auditor goes in, the auditor goes in to audit the business. If, in the course of auditing the business, they determine that there's been a substantive error made or mistakes made or an overpayment made, then as a matter of administrative practice, that would be communicated to the director. If, as a matter of good administration, the auditor determined that discrepancies were within the norm of ordinary acceptability, then they would not report that.

It would not show up as something that the director was then forced to act upon. That's the way the administration of statutes must and does and should occur. If we try to provide for that in every statute, legally I think we'll be creating a Kafkaesque nightmare that we wouldn't want to create.

R. Neufeld: Could you give me an indication if. . .? Because of this statute being brought in, has it been common practice that people have been claiming refunds that are larger than they should receive?

Hon. A. Petter: No, it hasn't been common practice, but it has happened. Particularly in the recent year, we have encountered this. The difficulty with it is that a few bad experiences have a chilling effect on the ministry, which then is visited upon those whose refund claims are legitimate. The ministry then, of course, immediately feels they can't let the money out the door, because they have no way to recover it.

So really what we're trying to do here is provide a situation where a few exceptional, bad experiences don't colour the ability of the ministry to provide timely refund cheques to the vast majority of claimants whose refund claims are ones that prove to be accurate and verifiable.

R. Neufeld: Chilling is right.

What happens now if someone doesn't remit the tax at all? What process is in place? Is it much the same penalty as prescribed here for overpayment of a refund?

Hon. A. Petter: As I understand it, if a person doesn't pay the tax, then there is provision to go and seek the tax and provision for payment of the tax plus interest. However, if the failure to pay was advertent, if it was due to some attempt to avoid the tax, then I understand there are additional penalties that would apply to someone who's trying to evade tax. That would then apply, in addition to those that apply simply by failure to pay due to some inadvertence.

R. Neufeld: Attempting not to sound too tough, I wonder if the prevailing interest rate is a deterrent. If one thinks about a time, not that long ago, property taxes in communities weren't paid for three years, because they could go out and borrow the money at a low interest rate when it had to be paid. So they didn't lose the property.

I'm just wondering. If someone knowingly overclaims a refund, there should almost, I would think, be a penalty larger than just the going interest rate. If someone does not remit to the government the tax that it has collected, I would almost think the same. There should be a stiffer penalty than just paying the tax and the interest, because my goodness, we could have almost everyone doing that. I can tell the minister that when it comes to the Motive Fuel Use Tax Act, there is a very stiff penalty when you do not remit the correct tax.

I'm wondering why we're really tough in one part of the tax on motive fuel, compared to something like this, where it's just the going interest rate, and that could be, I mean, 3 percent or 4 percent -- my goodness.

Hon. A. Petter: That's an excellent question. The reason is that in the circumstance where someone advertently, knowingly, deceptively tries to achieve an additional benefit that they're not entitled to, there are penalty provisions right now to deal with that. What this is really trying to deal with is a situation where someone inadvertently makes a claim, and it turns out that due to their inadvertence they are paid an excessive amount back by way of a refund. Subsequently, the Crown wishes to recover that amount, and there is interest due.

[ Page 2928 ]

As I say, the problem here is that where that happens, it sends a signal to the ministry that perhaps they should be far more conservative in providing refunds in a timely way to everyone because there hasn't been an ability to recover up until now. Given that that is the circumstance being dealt with here, given that there are additional penalties where someone tries to abuse the system consciously, I think the rate of interest here is an appropriate one in light of the circumstances I have described.

Sections 8 and 9 approved.

section 10.

F. Gingell: The industrial incentive fund would seem, at this point, to be being given a further two years' life, roughly. I would first of all just like to confirm if, in the opinion of the minister, this will see the fund through the '97-98 year and the '98-99 year, and if that is the intent.

Hon. A. Petter: Well, in looking forward and forecasting, one never knows with certainty, as I as Minister of Finance have already found out -- to my disappointment. I think it's a rough estimate. In the normal course of events this should provide for up to two years' requirements, as the member indicates. But that is a prediction, or a forecast, and it depends on how circumstances unfold.

F. Gingell: This fund is basically for two purposes: one is to look after new technology and technology improvements in present and existing businesses, and the second is to deal with any advances to be made by government that may be recommended by the job protection commissioner.

Appreciating the inaccuracy of financial statements and estimates put out by the government, who have already been proven to be wrong once today . . . . When my reading of the statements showed $900,000, I'm informed that the amount paid out was $325,000. My current understanding is that we paid out roughly $73 million in the year 1996-97. Can the minister advise: (1) if I've got that number right; and (2) how that might have been broken down between the new technology side and the job protection commissioner loans?

Hon. A. Petter: I think the member's number is correct: about $73 million. My understanding is that with respect to that $73 million, virtually none -- I'll say that, to be careful -- was job protection-related. Almost all of it was dedicated to the other component of the program.

[4:30]

F. Gingell: So that we can get some feel about this roughly two-year life span we discussed, could the minister advise us whether there are any commitments that have been made in the 1997-98 year and how much they might amount to?

Hon. A. Petter: None are committed to date that I'm aware of. Obviously there are some projects which may come into this year that are publicly known, but none have been committed in this fiscal year to date that I'm aware of.

C. Hansen: If I could just follow up on my colleague on that. Can we also draw from that that there have been no commitments made for a subsequent fiscal year?

Hon. A. Petter: I'll try to get this right, and I'm sure staff will correct me, or the member will, if I miss the mark. I think commitments . . . . There have been no commitments made for new projects beyond this year that I'm aware of, but for projects that have already been committed to, the disbursement of those funds may well take place in this fiscal year and in future fiscal years because of the cash flow of funds to those projects. I want to be completely accurate, member. There are projects that have been approved, not in this fiscal year but previously, the disbursement of funds for which may be accounted for in this and future fiscal years, as I understand.

C. Hansen: Could the minister advise us how much of these funds have actually been committed?

Hon. A. Petter: My understanding is that up to March 31, 1997, the amount approved is in the neighbourhood of $388 million, and the amount disbursed is roughly $308 million. So there is about $80 million outstanding to be disbursed from those commitments.

[G. Brewin in the chair.]

C. Hansen: My rough calculation would leave us with about $71 million that's not committed out of that fund at the end of this fiscal year. Sorry, my calculation is very rough. I was wondering if the minister could explain where the $50 million number has come from.

Hon. A. Petter: As I indicated in response to the questions of the member for Delta South, it's an estimate as to the requirements for the next period of time. The member for Delta South suggested perhaps for the next two years, and I suggested that yes, in the normal course of events, probably for the next two years. It's an estimate.

F. Gingell: But I'm taking it from the answers that in fact the $50 million is not enough. If one goes to page 120 of the estimates . . . . The additional $80 million, I take it, is part of the $67.5 million that is anticipated to be paid out in this year. There will be a further $12.5 million the following year. So after this exercise is finished, we will have roughly $59 million.

Hon. A. Petter: I'm not sure where the last number came from, but up to that point I'm in wholehearted agreement with the member.

F. Gingell: Just to make sure we're not confused, there is roughly $139 million at the beginning of this year, after the additional $50 million has been added to the fund -- that's after the $50 million. We've got $80 million outstanding from previous commitments made, and 80 from 139 leaves $59 million for new projects.

Hon. A. Petter: My calculations, I guess, are based on the numbers that I gave earlier. They're a little different; they come out to about $62 million -- roughly $60 million, yes.

Sections 10 and 11 approved.

section 12.

G. Abbott: I'm really choked up about this particular

section of Bill 2. I wonder, hon. Chair, whether we should allow the Minister of Municipal Affairs a moment to don his Superman costume and enter the chamber. Or shall I direct my comments to the Minister of Finance?

[ Page 2929 ]

The Chair: You can direct your comments to the Minister of Finance for the moment, and the minister will be here shortly.

G. Abbott: One of the last things I would want to do, hon. Chair, would be to insult the Minister of Finance in any way by intimating, suggesting, even contemplating the notion that he might not be capable in any way of dealing with any sort of questions that I might advance with respect to

section 12.

Perhaps, given that the Minister of Municipal Affairs is not here yet and that we regrettably didn't have an opportunity to hear from the minister in second reading with respect to the reasons, the philosophy and the policies behind the changes to the Local Government Grants Act, I will begin with this question to the Minister of Finance. Why are they proposing in

section 12 to repeal

section 2 of the Local Government Grants Act?

Hon. A. Petter: Maybe the member wasn't in the House, but I thought I covered the answer to this in a succinct and dignified way yesterday in the conclusion of second reading debate on this bill.

The situation is one in which this government, in the determination to protect health care and education funding that has been threatened by reduced federal transfer payments, has been searching for ways in which we can find efficiencies across government in order to protect those funds. The reductions from the federal government are substantial: $600 million in this year alone relative to what we received two years ago; $1 billion in total over the last two years. In doing that, we initially looked at savings that we could make internally to government.

We made substantial cuts within our own budgetary envelopes in administration, in communications budgets, in travel budgets, in furniture budgets right across government, and we made major savings.

We looked at programs and we reduced some programs. I know that members opposite who say we should cut programs in principle seem to oppose them whenever we do them in practice. But we did that, nonetheless, in order to protect funding for health care and education. Then we said we should look at other levels of government and others who receive subsidies from government, like businesses, to make similar savings within their organizational structures to assist in protecting health care and education.

In the case of municipalities the decision was made to make reductions that were no greater than 3 percent of the revenue base of municipalities and, in the case of small municipalities, to protect them altogether from reductions -- to have those municipalities play a role in protecting health care and education for their residents in the same way that we are making our contribution to that same initiative.

This has to be a collective effort. Everyone has to play their part. Municipalities are being asked to play theirs. Businesses have reduced subsidies. We've sharpened our pencils. Municipalities are being asked to do the same. The goal is to protect health care and education funding in this province to ensure that we have our social priorities well protected.

Thankfully, as a result of these reductions and others, this year's budget sees increases in both of those areas and does so in a responsible way that shares the pain and shares that burden fairly.

G. Abbott: There isn't, I don't think, a lot of point at this time in reviving the arguments that were raised in second reading. I think that members on this side of the House made the point very, very well that what the government had done in proposing to repeal

section 2 of the act was in fact to betray their trust with local governments in this province.

It's tiresome, to say the least, to constantly hear the mantra that it is necessary to download onto local governments, to arbitrarily, unilaterally cut transfers to local governments, because something along the same lines has occurred to the province from the federal government. Again, I don't propose to explore that issue in depth. I think the vital point to recall here, though, is that, first and foremost, there was absolutely no notice given by the province to the municipalities that these kinds of changes were coming.

I had the good fortune -- or bad fortune -- to be here in Victoria on November 26, when the extent, the magnitude, of the cuts was announced. Speaking to the UBCM executive members that were there that day . . . . They said they were shocked to hear on TV on the night of November 25 and read in the papers on the morning of November 26 the extent of the cuts. They, unlike the federal government, were not provided two years' notice of the changes in transfers. They were advised without any kind of proper notice -- and just a week before the municipalities were obliged to tender their provisional budgets.

So I think, first and foremost, that the way in which municipalities were treated by this government is absolutely shameful. I hope that this government has learned a lesson from what has happened over the subsequent months: that this is an absolutely wrong way to deal with local governments.

Further, I'm also very tired, as I'm sure all members on this side of the House are, of the constant chime that everything is justified because we must protect health care and education. We have seen over the past months an absolutely curious, striking range of things that this government has tried to justify on the basis that they're protecting health care and education. Presumably, at some point, that gets very difficult to justify.

All members of this House clearly place the highest priority on protecting health care and education, but I think it's hollow indeed to claim that the horrendous range of developments that have come about by this government are all because it's in the interests of protecting health care and education.

Further, with respect to the issue of an impact no greater than 3 percent, this is pure spin. In order to make that work, not only do the transfers to regional districts and school boards and so on have to be included in the mix . . . . If we're looking at purely municipal revenues, the impact is far more significant than 3 percent. Of course, in terms of the transfers themselves, we have seen cuts in transfers up into the high 70th percentile as a result of the changes being proposed here.

[4:45]

That, I guess, leads back again to the question which I asked initially: why repeal

section 2 of the Local Government Grants Act? Were alternative ways of dealing with this situation contemplated? What were they and why were they not pursued?

Hon. A. Petter: Well, I know the member opposite finds it tiresome when he is reminded that we have gone through some major changes in financing in this country, many of which were initiated by his Liberal cousins in Ottawa, who decided, without any consultation with the provinces, to not only make reductions in transfer payments but to target their

[ Page 2930 ]

deficit reduction program at health care and education. He may find it tiresome to be reminded of the fact, but there it is. Those are the facts.

We know that when there are changes made -- and certainly this member should know that from his own professional background and study -- in financing arrangements from one level of government to another, from one order of government to another, they have secondary and tertiary impacts. There's no magic here. When less money is provided to the provinces for health care and education, those provinces have a choice. Some provinces . . . .

Interjections.

Hon. A. Petter: Well, I know members don't want to do this, because members opposite aren't interested in constructive solutions on this issue; they're interested in ranting and raving and being negative.

They have a choice. Some governments have taken the choice of passing those cuts through in areas that correspond to the areas that were being cut. So other governments have cut health care and education. The other choice is to not do that; it's for the province to fill that room and to then find savings elsewhere or to increase taxes.

Now, the members opposite have to, at some point, come forward and say what they would have done, not what they wouldn't have done. Yet they refuse to do so. They are so unremittingly negative and non-constructive; they refuse to do so. The fact is that we went about a savings exercise that was announced well before last November, in which we indicated we'd be looking to municipalities and businesses to make a contribution. We limited the impact on municipalities to 3 percent of their revenue base.

Half of municipalities were omitted altogether from impacts because of their small populations and the difficulty they would have had in accommodating those changes. As a result, we have protected health care and education.

Now, what would the members opposite have done? I guess I can only assume from their position that what they would have done is what other Liberal governments have done and what their Liberal friends in Ottawa have done -- that is, target the cuts at health care and education. We chose not to do that. And rather than ranting and raving and crying crocodile tears, perhaps they should come clean and say what they would do for a change and not tell us what they think we oughtn't to have done.

G. Abbott: I'm certainly glad, personally, that I didn't try to revive the second reading debate on this issue, because it would have permitted a rhetorical flourish on the part of the Minister of Finance, and of course that would certainly not have been welcome at this point.

Regrettably, it seems that my question somehow got lost in that flourish. I suppose I could rephrase it and deal with the Minister of Municipal Affairs now, if that doesn't offend the Minister of Finance in any way. The question which I posed a few moments ago to the Minister of Finance, he was unfortunately unable to answer -- apart from a kind of rhetorical flourish. Perhaps you can fill in the small technical spaces that I was really looking to be filled. Were alternatives to the repeal of

section 2 of the Local Government Grants Act explored -- alternative ways in which some savings could have been achieved without this rather fundamental breach of the Local Government Grants Act? What were they? Were they explored, and why were they found wanting?

Hon. M. Farnworth: This exercise, this reduction, took place in the context of every ministry identifying cost reductions and cost efficiencies in areas where we needed to make cutbacks and to assess where finances were going.

As the hon. member knows, we had budgetary problems which we had to deal with. We've had to absorb, as the hon. member has said, significant downloading from Ottawa, and we had to do a ministry-by-ministry examination of where potential cost savings were. That's what took place, and that's why what happened, happened.

G. Abbott: I must pose my questions in an unusually convoluted fashion. I always fancy that they're straightforward, and somehow the responses that come back suggest that I've asked something completely different.

I merely want to know whether alternatives to the repeal of

section 2 of the Local Government Grants Act were explored, what they were and why they were found wanting.

Hon. M. Farnworth: Yes. I'll tell you one of them, hon. Chair. It would have been to do nothing -- to leave the grants intact and have a significantly higher deficit. We weren't prepared to allow that.

Interjections.

The Chair: Order, hon. members. We want to be able to hear both the question and the answer.

G. Abbott:

Section 2 of the Local Government Grants Act, which is being repealed here, is titled "Municipal General Grants." Is it correct that the repeal of

section 2 involves, in fact, the eradication of the concept as well as the reality of municipal general grants? Are they eradicated, eliminated, struck from the face of the earth, and have they disappeared forever?

Hon. M. Farnworth: The general grant, as the member has stated, is gone, but in fact it was replaced by two other grants.

G. Abbott: Those, of course, would be the small communities protection grant and the equalization grant. Is that correct?

Interjections.

Hon. M. Farnworth: There's a little background noise on the other side of the House that makes it difficult to hear the instructions of the Chair. Anyway, my answer to the hon. member is yes.

G. Abbott: I'd like to briefly discuss with the Minister of Municipal Affairs the consultation which preceded the decision by the government to repeal

section 2 of the Local Government Grants Act. Could the minister outline for me the obviously extensive round of consultation which preceded this?

Hon. M. Farnworth: In terms of consultation, the province is required to act in the province's interest, first and foremost, and that's what we did. In terms of extensive consultation with the municipalities, I would have to agree that there was not an extensive period of consultation. Having said that, I would also say that at the time -- because I know where

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the hon. member is leading -- the protocol was signed. That was made extremely clear. In fact, there was a reluctance at that time to sign the protocol for the very reason that: "Look, there are cuts coming." The UBCM was warned at that time.

G. Abbott: I have heard the rather interesting if not particularly informative comments of the former Minister of Municipal Affairs with respect to why he signed a protocol which had, as its central feature, consultation between the province and the municipalities, while at the same time saying that consultation would not apply in this instance. Regardless of all that, and I don't necessarily accept that that's the case, does the minister agree that the consultative process in this case -- and I'm going to be as diplomatic as I can here -- left much to be desired?

Hon. M. Farnworth: I guess, in an ideal world, one would like to engage in as much consultation as any particular issue merited. Depending on your point of view, either consultation is extensive or it's not extensive, or it's too much or it's too short. You know, hon. member, I could say, "Yes, it was," and you wouldn't like that. And I could say, "No, it wasn't," and you'd say: "Yes, I agree." One can always have more consultation.

G. Abbott: When Hollywood makes its movie about this particular era in British Columbia politics, I'm not sure whether they will treat it as a kind of horror movie -- say, perhaps, "A Nightmare on Government Street" -- or perhaps as a humorous piece: "Honey, I Shrunk Municipal Transfers." Either way, I do think that there are important lessons which the province could have learned with respect to the consultative process as a result of the fiasco, shall we say, surrounding the amendment of the Local Government Grants Act.

My questions are always very straightforward: are there important lessons that have been learned by this government with respect to consultation as a result of this experience?

[5:00]

Hon. M. Farnworth: I think that in any exercise, one always learns important lessons.

G. Abbott: There's clearly no point in pursuing the issue of consultation any further. We seem to have come to a bit of a brick wall on that one.

I do want to ask the minister: what effect does he anticipate the repeal of

section 2 will have with respect to government grants in '97, '98 and '99?

Hon. M. Farnworth: In terms of this year, as the hon. member knows, those allocations have already been determined. One of the things that I think is extremely important, one of the things that I have committed to, is to discuss as soon as possible with the municipalities what the implications of government's finances are going to be for grants next year. That process is already working. We've had three meetings now with the joint council process, and we've already committed to having a meeting on the budget in the summertime. That process is in place, and I think that's working quite well.

G. Abbott: At the heart of this thing is the unfortunate fact that the Local Government Grants Act is a pretty good piece of legislation. From the province's perspective, at least for a time -- and certainly from local governments' perspective -- the Local Government Grants Act was a good piece of legislation, particularly because of

section 2, which provided from year to year what was claimed in 1994 and still applies today: stability, predictability and certainty. That surrounded

an act which required transfers from year to year to be within 2 percent of what they had been the previous year. People could look to the year ahead and know that there was some stability, certainty and predictability about what they would be receiving on that end.

It seems to me that in repealing this, we are repealing away all of that certainty, predictability and stability. It's at the heart of the matter here. What is there, given the repeal of

section 2, that would provide that stability, predictability and certainty?

Hon. M. Farnworth: I think what's important is what is in place, and that is a joint council process. That is starting to evolve into a mechanism where the province and the municipalities can sit down together and discuss legislative changes and, equally important, financial changes. As far as I'm concerned, the key is getting that process, that joint council, up and working, so that we can get to a position where the municipalities know well in advance of their own budget year what financial decisions the province will be making and what the financial implications are going to be for them in the coming years.

That's a very positive way that we can provide a sense of certainty to them and give them the ability to plan well ahead of time.

G. Abbott: Actually, I appreciate the minister's comments with respect to a joint council; I think that's good. On this side of the House, we take some satisfaction in -- how shall we say? -- the receipt of that portion of our community charter which now forms part of provincial legislation. I appreciate the minister going that way. Perhaps it would be worthwhile at this point for the minister, if he wishes, to outline in further detail how he sees the process of grant determination involving members of the joint council.

Hon. M. Farnworth: The way I've indicated it to the joint council and the way I'll communicate it to you is that I hope to receive, in my discussions with the Ministry of Finance, well enough ahead of time, how much money is likely to be available for grants in the coming year. Then it will be a question of sitting down with the joint council and starting to determine: okay, here's how much money we've got to work with. It may be the same as the previous year, it may be raised, or it may be less. Then the question is: how should it be