Government Services Committee — Department of Finance and the Public Service Commission tonight — 21 May 1996

1996-05-21

Newfoundland and Labrador — Committees

May 21, 1996

GOVERNMENT SERVICES ESTIMATES COMMITTEE

Pursuant to Standing Order 87, Mr. Jim Walsh, M.H.A.,

Conception Bay East and Bell Island, substitutes for Mr. Doug Oldford, M.H.A.,

Trinity North.

The Committee met at 7:00 p.m. in the House of

Assembly.

CHAIR (R. Wiseman): Order, please!

My name is Ralph Wiseman; I am the MHA for the

District of Topsail. I want to introduce to you my Vice-Chair, Mr. Jack Byrne,

who is the MHA for Cape St. Francis. I will now ask the other members of the

Committee to introduce themselves, beginning with Mr. French.

MR. FRENCH: Bob French, MHA for Conception Bay

South.

MR. E. BYRNE: Ed Byrne, MHA for Kilbride.

MR. J. BYRNE: Jack Byrne, MHA for Cape St.

Francis.

MR. SPARROW: Anthony Sparrow, MHA for Placentia

and St. Mary's.

MR. SMITH: Gerald Smith, MHA for Port au Port.

CHAIR: And, of course, we have Mr. Jim Walsh,

who is the MHA for Conception Bay East and Bell Island. He is filling in for Mr.

Oldford.

First of all, I want to say that we did meet

briefly this morning as a committee and established some ground rules as such.

The procedure itself, I suppose, will dictate. The meetings begin at 7:00 p.m.

and they run until 10:00 p.m., depending on the way that the procedure goes. We

are going to have the minister give his opening remarks for fifteen minutes. I

think the Vice-Chair will respond for fifteen minutes, if he so desires that is,

or unless you have designated somebody else to do so. Then we will alternate

every ten minutes until everybody has had an opportunity to speak. We will then

revert back to the original order in terms of having people ask whatever

questions they may deem necessary to ask.

I want to take this opportunity, Minister, to

welcome you. We hope that your stay here this evening will be pleasant, fruitful

and rewarding. I would ask you now, if you would be so kind as to introduce your

staff.

MR. DICKS: Thank you, Mr. Chairman.

I don't have any opening remarks as such. I just

generally prefer to answer questions rather than make any general commentary

about the department.

You asked me to introduce my staff. I would ask the

staff to introduce themselves and to state their positions.

MR. WALL: I am Phil Wall, Deputy Minister of

Finance.

MR. CLARKE: I am Robert Clarke, Assistant

Deputy Minister, Tax Administration.

MR. HOLLETT: I am Bruce Hollett, Director of

Fiscal Policy.

CHAIR: For the record, Minister, and for

committee members, I guess, when you are speaking or asking questions, or

responding to questions, I would appreciate it if you would state your name so

that we can identify who is making what particular statement. Go ahead.

MR. DICKS: Thank you; I have no -

CHAIR: Okay. I will ask the Clerk to call the

heads, I guess.

CLERK: 1.1.01.

CHAIR: Okay, she is calling the first head,

which is 1.1.01, Finance. I should add for the record, that we are doing the

Department of Finance and the Public Service Commission tonight.

MR. J. BYRNE: From memory - don't we get to go

through the whole thing instead of calling head by head by head? (Inaudible) ask

questions.

CHAIR: Well, she can start off with 1.1.01. You

can go from 1.1.01 to whatever particular head you want.

MR. J. BYRNE: Okay.

CHAIR: The hon. the Member for Cape St.

Francis.

MR. J. BYRNE: My first question to the

minister: On page 29 it says, "The Department of Finance is responsible for

matters related to the fiscal policy and debt management of the Province, the

collection and payment of employee pensions and benefits, and the administration

of taxation statutes."

Under Government Services and Lands, page 43,

Pensions Policy, the department, I suppose, is responsible for: `appropriations

provide for the regulation of all provincial pension plans and participation in

national pension reform...' Is there any contradiction there, or overlap, or

what have you, with respect to both departments on that?

MR. DICKS: No, on the first page the

description of what we do in the Department relates just to government pensions.

What the Government Services does, under Corporate and Commercial Affairs, is it

has a group of people who set up regulations to administer pension plans outside

government. One of the things we have to do is make sure that people who act as

administrators - a lot of trust companies, Canada Trust, for example, Royal

Trust, and people of this sort or groups of that sort - properly administer the

funds. So they have regulations that govern, I suppose, the financial integrity

of those plans. They also make regulations and my recollection is that we are

subject as well to the general pension policies set. So ours, in finance, is

just the regulation of government pensions.

MR. J. BYRNE: Okay. On page 31, Minister's

Office: In the 95/96 Budget, it is shown there as $34,100 under Salaries, but in

the previous year's Estimates, this Red Book here, it shows it at $34,300. Why

is there a difference there? I know it is only $200 but shouldn't it be

corresponding, be the same?

MR. DICKS: I suspect that is a step increase of

some sort. It is a fairly marginal amount. I wouldn't know what the $200

difference is. I have an executive assistant and two secretaries, so it is

probably a step increase for someone there I suspect.

MR. J. BYRNE: Thank you.

The next, General Administration, Current, you have

Salaries, 95/96, budgeted, as indicated here, $556,500, but in this Red Book

again you had budgeted for 95/96, $455,000. That is a $100,000 difference. The

two of those should be the same.

MR. DICKS: I am sorry. You are saying that the

salaries went from $556 to $638 and then - I didn't understand your question

precisely.

MR. J. BYRNE: No, no! What I am saying is this:

That you had budgeted in 95/96, as indicated here, $556,500, but in the

estimates for the previous year, this book here, it shows $455,000 which is

$100,000 difference. So in actual fact you have gone up $100,000. You are not

staying the same on that estimate.

MR. DICKS: Yes. Go ahead Phil.

MR. WALL: Since last year's Budget, the

Economics and Statistics

section that used to be last year in Executive Council,

has been transferred to the Department of Finance and along with that, an

Assistant Deputy Minister, Beverley Carter. So that is the reason why the 95/96

budgeted numbers are larger than exactly what was in the Budget last year,

because of the addition of Beverley Carter and her shop.

MR. J. BYRNE: But, in actual fact, it was not

really budgeted. I mean, what was budgeted was $455,000 not $556.

MR. WALL: Yes, but we had to change that to

make it comparable because we would have to show her in both cases then, because

for the 95/96 where we show her, we had to show her either here or in Executive

Council. The decision was made to show her in the Department of Finance for both

years so that it could be compared. All her travel is in there as well and other

items.

MR. J. BYRNE: Very good.

Yes, the next section, I was going to bring that

up. Under subsection 03 Transportation and Communications, in this year's

estimates you have budgeted $56,700 and in last year's it was $44,200; so it is

a $12,500 difference.

MR. WALL: Yes, $12,500 is included there for,

again, the Assistant Deputy Minister of Economics and Statistics.

MR. J. BYRNE: My problem with this is that when

someone picks up this book here and reads it and makes the comparison, they

would say: Oh look, the Budget is basically staying the same as it was last year

but in actual fact it has gone up on those two items. There is more, lots more.

The next one: the breakdown on Administrative

Support, Transportation and Communications: you have no salaries there. Why is

that? Under 1.2.02, Administrative Support?

MR. DICKS: I think you referred to two

sub-headings here, can you tell me what exactly the question was?

MR. J. BYRNE: On page 31, in your Budget for

96/97, subsection 1.2.02, there is nothing there for salaries?

MR. DICKS: Well, go ahead Phil, you can explain

it.

Mr. WALL: The salaries, related to

administration in the Department of Finance and Treasury Board, are all included

in Executive Council. The administration of the department was consolidated

along with Treasury Board a year ago, so that we only have one administration

section now looking after both departments. That has happened in a number of

cases. Government has amalgamated two or three departments into one for

administrative savings.

We don't have an administration

section now in the

Department of Finance. The costs here are related to things like transportation,

communications - the major part of that is the postage costs for all of

government. We don't have any staff now directly in the Department of Finance.

We rely on people in Executive Council to look after our administrative

function. All of our administration

section was either down sized and let go or

amalgamated into Executive Council.

MR. J. BYRNE: Under that same section, in

1995-1996 in the budget you had $89,800 shown last year and this year it is

$88,000. The Purchased Services, is there is a list of those? Can we get what

those Purchased Services are for that?

MR. WALL: Yes. Purchased Services: Provision

for 1996-1997 includes: lease of a photocopier, $10,900; copier usage charge,

$9,600; office rentals, $7,600; printing services, $17,700; and credit checks,

$12,800. I can only assume that is the Dun and Bradstreet reports and things

like that that we use. That is the $58,600. The reduction from last year just

shows the restraint measures that we have brought into play. We have gotten rid

of some of the previous purchases that we used to have.

MR. J. BYRNE: Under

section 1.3.01, Government

Personnel Costs. You have Salaries there of $1.8 million. It was budgeted $1.8

million, no revision, but for the previous year, 1994-1995, there was nothing

budgeted. Where did that come from all of a sudden, the $1.8 million?

MR. DICKS: That is pay equity in the public

service. That is where it shows up in the Estimates, the $1.8 million. Employee

benefits, I can explain that as well. That is our pension contributions and I

guess UIC would be in that as well, Phil?

MR. WALL: (Inaudible) UIC, CPP (inaudible).

MR. DICKS: UIC, CPP, group life and medical,

payroll tax, all those things are in there.

MR. J. BYRNE: Under Pensions Administration -

let me see - in the 1995-1996 Estimates, that red book again, compared to this

year, you had budgeted in 1995-1996, $1,445,700 last year, which was indicated,

and this year in the book you have shown us, the Estimates, it is $1,386,000.

That is a $59,700 difference there.

MR. DICKS: Are you saying we were down there,

Mr. Byrne, from $1.4 million, was it?

MR. J. BYRNE: It was $1,386,000.

MR. DICKS: Yes, and what was the figure in the

other book, a million -

MR. J. BYRNE: One million four hundred and

forty-five thousand dollars.

MR. DICKS: My recollection is that we may have

down sized a position or two there when we were looking to -

MR. J. BYRNE: No. You see, the point I'm

getting at is if you had the budget shown here for 1995-1996, last year, at

$1,445,000 -

MR. DICKS: Right.

MR. J. BYRNE: - and then you printed your

budget this year, that figure there should correspond to the figure that is

here. It shouldn't be out by $59,000. Regardless of what you did with it, it

should be the same.

MR. DICKS: I don't know if Phil has an

explanation for that particular one -

MR. J. BYRNE: It is happening throughout so

far.

MR. DICKS: Oh yes, that is right.

MR. WALL: I think I have.

MR. DICKS: Yes, go ahead, Phil, explain it.

MR. WALL: I think I have Mr. Byrne. I think

that relates to the fact that a year ago - your first question tonight related

to the pensions benefit act and the administration of that. There are two staffs

involved in that area of administering all the pension plans in the Province.

They were in this budget moved over to Government Services and Lands. I would

say the difference there of $59,000 relates to a manager and a secretarial

position that I imagine are now budgeted in Government Services and Lands.

MR. J. BYRNE: So really it is going to be

almost impossible for us to do a comparative analysis on this budget.

MR. WALL: Well, the budgeted number will

reflect the comparative number last year compared to the number budgeted this

year for the same responsibilities.

MR. DICKS: If I might intervene, what was the

exact amount of difference you are saying?

MR. J. BYRNE: I am just doing it quick in my

head here.

MR. DICKS: One million, four hundred - because

I don't have last year's Estimates.

MR. J. BYRNE: Where was it, administration?

MR. WALL: $1,445,000.

MR. DICKS: $1,445,000. Well, if you look at

page 43 it shows that there was an amount of $69,300 budgeted in Pensions

Policy. That might account for the difference.

MR. J. BYRNE: Again, not to be difficult, I

suppose, but really we are looking for answers. To say that it `might' be the

answer is not really acceptable.

MR. WALL: I am sure it is.

MR. DICKS: Well, my deputy assures me that it

is.

MR. J. BYRNE: It is, is it?

MR. DICKS: Yes.

MR. J. BYRNE: Okay, we will keep her going.

Purchased Services, under Pensions Administration:

Again there is a difference. In 1995-1996, you had $35,800 and here you have

$34,800, which is only $1,000 difference. That is where I am having problems,

having those differences. What would those purchased services be for?

MR. WALL: The breakdown of the $27,200 is:

outside printing, $17,100; inside printing, $2,009 because we are charged by

Works, Services and Transportation; furniture and equipment rental $4,600;

repair and maintenance $1,600; and other rentals $1,000.

MR. J. BYRNE: Furniture and equipment rentals,

what was that amount?

MR. WALL: It says: To cover costs of processing

laser pension cheques and other printing jobs, rental of copier, and maintenance

contracts for microfiche machines.

MR. J. BYRNE: Okay.

Just down there it says Amount to be Voted, and

then it says, Revenue - Provincial, and you have $1,445,900 compared to

$1,574,500. Why would there be a difference there now?

I am saying, it is what you actually spent compared

to what you are budgeting this year.

MR. DICKS: Well, the cost of pension

administration is paid out of the pension plan itself. Whatever our costs are,

our net, they net out at zero to the Province. If we spend less, there is less

charged to the pension plan. In other words, we administer the pension plan so

the cost of that administration is a benefit to the plan, so that is debited

from the plan as you would if you had a mutual fund, for example. The trustees

fees and the management fees come off the top. We operate on the same basis.

MR. J. BYRNE: Okay, thank you.

Under Debt Administration, page 33, you have

$30,000.

MR. DICKS: $30,000?

MR. J. BYRNE: Why is there such a difference

there from what was budgeted in 1995-1996 to 1996-1997?

MR. DICKS: What we do is manage the funds on

behalf of NMFC, so this year in terms of looking at where we could have

efficiencies, we are charging half a salary to NMFC of one of our positions that

is there to manage funds. So that is a cost recovery from NMFC.

MR. J. BYRNE: Okay. If you compare that again

to the 1994-1995 - no, that is going back too far. Okay, fine.

Under Investments on page 33 you have

Transportation and Communications. You had budgeted $8,700 for 1995-1996; you

only spent $2,400, and now you are back up to $4,000. Why?

MR. DICKS: I'm sorry, did you say under

Research?

MR. J. BYRNE: Under Investments.

MR. DICKS: Oh, Investments, $8,700.

MR. J. BYRNE:

Section 2.1.03, Transportation

and Communications.

MR. DICKS: Twenty-four hundred dollars, and why

are we up to $4,000 from $2,400?

MR. J. BYRNE: Yes.

MR. DICKS: Communications would be our phone

bills and so on and transportation would be some amount of travel. We can give

you a breakdown.

MR. J. BYRNE: The question is: You only spent

$2,400 the past year.

MR. DICKS: Telephone calls we estimate at

$1,500, and the travel expenses we have allowed $2,500 this year. Last year we

only spent $2,400 so that division did very little travel.

MR. J. BYRNE: Why would you expect that to

change this year? With the cutbacks and people in the civil service getting laid

off right, left and centre, why would you even think about increasing it? Why

didn't you just freeze it at $2,400?

MR. DICKS: You always have to allow for a

reasonable amount of latitude. Just because we give people money doesn't mean we

allow them to spend every nickel. It is subject to my approval. I'm very

cognizant of the fact that government officials, in some people's view, may

travel a little more than is required, so we try to restrict it somewhat. At the

same time, I think that is a reasonable allowance. We cut it more than in half.

I expect it to come in at last year's level.

If I can just make a point. The people who manage

this money are responsible for an awful lot of money. We are going to the

market, for example, for about $358 million to re-finance other years'

borrowings. There is a certain amount of travel required, and it is

counter-productive not to provide them with sufficient funds to keep in contact

with the people who float these issues for us. Four thousand dollars is a

relatively modest amount.

MR. J. BYRNE: So the people in that position

last year only did $2,400 worth of travel. Were they counter-productive last

year?

MR. DICKS: No, not at all. Most of that is

telephone.

MR. J. BYRNE: Still the same thing applies.

Under Crown Agencies - Recoveries: Can you give me

basically an overview of what is going on there with that $31.8 million?

MR. DICKS: That is the recovery of monies from

Hydro. There is $27 million there from Hydro and an additional $4.8 million from

CF(L)Co.

MR. J. BYRNE: Is that the same Hydro we were

going to sell last year or the year before?

MR. DICKS: I don't recall selling Hydro last

year, Jack.

MR. J. BYRNE: That you were going to sell, or

try to sell, or the year before.

MR. DICKS: I was in the Speaker's Chair, you

may recall.

MR. J. BYRNE: Not you.

CHAIR: Thank you very much, Mr. Byrne.

We will get back to you. I want to move on now. Mr.

Sparrow, you have -

MR. SPARROW: No (inaudible).

CHAIR: Okay. Mr. Smith? Mr. Walsh? I will go

back up around. Mr. Byrne.

MR. E. BYRNE: Thank you.

Good evening. I just have some questions for the

minister and his department.

I guess, first of all, on page 33 dealing with Debt

Administration, Minister. Outlined there: "Appropriations provide for the

management of the Province's industrial assistance programs and administration

of the Newfoundland Municipal Financing Corporation and other Crown

Corporations." Is the Department of Finance directly responsible for the entire

operations of the Municipal Financing Corporation?

MR. DICKS: Yes. Phil sits on the board of

directors.

MR. E. BYRNE: Okay.

MR. DICKS: I forget who else is there, but

basically it is an in-house corporation. It is mostly accounting entries as

opposed to any active management. There is no structure there or anything.

MR. E. BYRNE: Fair enough.

MR. DICKS: For instance, Holiday Inn used to be

in here.

MR. E. BYRNE: Yes.

May I ask then, what money is outstanding to the

Corporation now in terms of the amount? How much money is outstanding?

MR. WALL: MFC, loans to municipalities, would

probably be - I don't know - $300 million or $400 million. I'm not sure of the

amount off the top of my head.

MR. E. BYRNE: Is there any truth I guess to the

- somebody made a submission to me recently that if all loans were repaid to the

Municipal Financing Corporation now it still would be out in excess of $39

million to $40 million. If all loans were to come in today, for example, if we

were lucky enough to have every municipality pay off every penny they owed the

Corporation, if we were only lucky enough, would the Corporation still have

significant financial problems in terms of being able to meet its outstanding

debt above and beyond that?

I'm not trying to trap you. What I'm trying to do

is really get a sense of what kind of trouble the Municipal Financing

Corporation is in, how much money is loaned out, what the situation is that

faces the Province right now with that Corporation.

MR. WALL: First of all, I did say $300 million

or $400 million before. There is probably $500 or $600 million, in that range,

in municipal loans to the various municipalities around the Province from NMFC.

NMFC has, I think, somewhere in the neighbourhood of 2,000, 2,500 individual

loans to different municipalities. Some municipalities would have fifteen or

twenty different loans, others would have one or two, and others would have even

more than the fifteen or twenty.

I've never looked at it from the point of view that

if we collected them all today would we have - there is a deficit on the books

of NMFC going back a number of years, relating to the fact that back in the

1970s the government borrowed U.S. dollars, in many cases, and loaned those

dollars to the municipalities in Canadian dollars. The money it was getting back

from the municipalities obviously wasn't enough to service the U.S. debt,

because the Canadian dollar lost ground and we had to pay more to service that

debt and we weren't getting enough in.

Over the course of the 1970s, and particularly the

1980s, there was extra money having to be spent by NMFC for that purpose. That

is gradually being recovered through a premium that NMFC charges the

municipalities. The big problem NMFC has now though is receivables from

municipalities. They have amounts outstanding, or the municipalities owe NMFC

somewhere in the neighbourhood of $7 million or $8 million at this point in

time. I think not too long ago, about a year ago, before we got very aggressive

in trying to get them to come to the table with repayment schedules, it was up

over $10 million. That is the problem. NMFC of course has the carrying cost

related to these short-term borrowings that it has to incur now with the bank in

order to carry the fact that the municipalities are in arrears on payments to

NMFC on their debt charges.

MR. E. BYRNE: Let me ask you another question.

We are all aware of the financial and fiscal situation the Province is in. More

so than ever, I think, the public are aware. As municipal operating grants

become further reduced pressure is put on municipalities in terms of not only

surely their willingness but their real ability to pay for outstanding debt that

they owe to the Corporation. Has the department done any long-term analysis on

what sort of position vis--vis the amount of money that will be outstanding say

three, four, five years from now compared to the amount of money you just talked

about now? Will it be further compounded? Will the Corporation be in further

difficulty?

MR. WALL: If I might. I guess the fact that we

have no more U.S. denominated debenture debt, it has all been paid off within

the last year or two, the last loans going back I guess to the late 1970s, early

1980s, will mean that we won't have any more foreign exchange related losses.

The government has been very diligent in the last

couple of years with respect to the types of new projects that it is approving.

It has been attempting to reduce the amount of money going out to municipalities

which have been neglectful of their debt servicing cost. That is why you have

found in the last couple of years a lot of municipalities are taking significant

action to try and increase their own ability to service their debts. People have

been turning off lights and things like that because in order to get new money

from NMFC or from the government through NMFC they have to be, I guess, up to

date on their existing loan payments. As I said, the government has been saying

no to municipalities which are in looking for new programs, water and sewer

projects, et cetera, if they are not keeping their existing debt obligations up

to date.

MR. E. BYRNE: Yes, okay.

MR. WALL: The short answer to it is, I believe

the longer we progress here the better off NMFC is going to be, because

(inaudible).

MR. E. BYRNE: So what you are saying then -

correct me if I'm wrong - is that because of the foreign exchange that you say

is not a problem as it was say two, three, four years ago, that our ability to

collect or to finance that outstanding debt has changed in a positive way. But

in terms of analysis by the department, this is what I'm asking here, has the

department done any long-term analysis of what shape we will be in in terms of

our ability to collect on outstanding loans three, four years from now as the

economy continues to shrink for some time? Do you see, or does the department

see, the Province and the Municipal Financing Corporation being in worse shape

three or four years from now than it is today? I guess that is the long and

short of the question.

It is an important issue to a lot of municipalities

out there, and it is an important one to the Province with the amount of loans

that are outstanding. If the Municipal Financial Corporation were in the private

sector it would be declared insolvent, I am sure.

MR. WALL: I guess if our experience over the

last year or two continues on into the next few years, NMFC should be in a more

favourable position than they are now because we are in a better position now

than we were a year or two ago because we had collected a lot of arrears. A lot

of municipalities have been forced by the government's approach to municipal

financing to come to the table and work out a plan with us to pay down their

arrears, to get it up to date.

MR. E. BYRNE: Okay.

Another question dealing with Pensions

Administration, on page 32, the preceding page, subhead 1.3.02: Appropriations

requested here provide for the administration of the Newfoundland Pooled Pension

Fund and the four Provincial pension plans. I guess this is more of a question

to the minister, not necessarily dealing with the administration of the plan but

dealing with it in that everybody - we know that we have a serious problem in

terms of the unfunded liability portion of the pension funds, and much sooner

now than later we, all of us, are going to have to deal with it. To the extent

that you can, can you shed some light on how government intends to deal with

that unfunded liability portion, particularly over the next four years per se?

MR. DICKS: I will speak to that. There are

several issues. I guess the easier way to address it is to look at the different

pension plans we have.

MR. E. BYRNE: Yes, okay.

MR. DICKS: The MHA pension plan and the

uniformed service pension plan are completely unfunded; there is no money in

those plans. The public service pension plan is funded approximately 40 per cent

of the liability. My recollection is it is about $1 billion.

AN HON. MEMBER: Yes.

MR. DICKS: The effect of that is that with the

actuarial assumptions that we now have, given people's life expectancies, when

they are likely to retire and so forth, that plan will not run out of money

until about the year 2020. The other thing that we have done there is increased

the premiums, and it is gradually improving somewhat. I think in the last couple

of years it has gone up by two or three points, so what was about 37 per cent

funded is now approaching 40 per cent funded. We do not have an immediate

concern with that plan. We believe that it will become properly funded over the

course of the next five or six years.

There is an issue as well as to how much the

government should put into that plan from its pre-1980 liability when the

government used the funds that were provided by the employees for public

purposes. Up to that point I believe the government did not make contributions

to a pension plan. So I think in fairness over the next several years when the

government is in better financial shape we should start putting money in. So the

effect of that would be that in the foreseeable future the public service

pension plan would be in good shape.

The teachers' pension plan is very, very difficult.

The problem is that as of 1997 we not only continue to spend the income - that

is money that we are earning on the assets - we not only spend the

contributions, but we start spending the capital. That plan is only 17 per cent

funded. As of next year it starts depleting. By the year 2005 the government

will have to put in approximately $120 million in the latter part of that year

to meet obligations.

There are a whole host of things that have to be

done. The difference, in part, from the public service pension plan, the

uniformed service pension plan, the MHA pension plan, is that we can

unilaterally change those plans by legislation. The difficulty with the

teachers' pension plan is that there is a provision in there that the pension

plan cannot be changed without their consent. I would prefer to solve it at the

bargaining table, and we will be putting a position before the teachers shortly.

Part of the difficulty is that the teachers have a very attractive pension plan.

For years it accumulated at 2.2 per cent, and that was reduced some years ago to

2 per cent, I believe.

They also have a provision for thirty and out,

which allows a teacher with thirty years of service to retire. Thirdly, they

have what they call `stacking'. The teachers' pension plan is not reduced when a

retired teacher starts to get the CPP, Canada Pension Plan. So there are a whole

lot of measures as well. The government has a similar liability there for monies

it used prior to 1980, and we have calculated that liability. The difficulty is

that each one of those adjustments, even if one were to eliminate all those

particular things and increase the contributions, it still doesn't dramatically

alter the fact that that pension plan is so drastically underfunded it is

difficult to project it out beyond about the year 2015 with the most severe and

probably unacceptable changes to that pension plan. It is probably one of the

single largest financial issues that will confront the Province over the next

couple of years. We have to resolve that and we hope to sit down with the

teachers and attempt to do that over the next month.

MR. E. BYRNE: Yes, and not only in terms of the

pension plan but in terms of the money markets. The lenders look at (inaudible).

MR. DICKS: Yes, just on that point. We are one

of the few provinces that don't consolidate their pension plan liability. Our

pension plan liability brings the public debt to almost $9 billion. When you

talk about other provinces showing surpluses and their per capita debt and GDP

ratios and all that kind of thing, all of them carry their pension plans on the

books of the province. So when people make comparisons interprovincially they

sometimes don't realize these things and the comparisons get distorted.

From a fiscal standpoint, and also from the

standpoint of people who hope to be paid pensions, I think we owe it to

everybody, to the taxpayers of the Province and to teachers themselves and to

government, to sit down and figure out a way to deal with the plan. I haven't

been able to do that yet for obvious reasons. We have had a lot of things going

on in the last little while, but we are formulating a position to take to

Cabinet shortly and put on the table with the NLTA to see what we can do to

resolve this.

MR. E. BYRNE: I know I only have a couple of

minutes left, Mr. Chairman, but I wonder -

CHAIR: Go ahead, Ed.

MR. E. BYRNE: Okay, thanks.

On page 33,

section 2.1.02, dealing with Research.

It outlines: "Appropriations provide for the management of the Provincial debt,

the preparation and implementation of the Province's borrowing program and

research on the capital markets." It indicates that there is a $76,000 Salary

unit there. The whole subhead there basically doesn't seem like a lot of money

for the appropriations "for the management of the Provincial debt, the

preparation and implementation of the Province's borrowing program and research

on capital markets." Is that part and parcel of something else within your

department?

MR. DICKS: We have a lot of expertise in the

department in money management. Phil came out of that sector, essentially. We

have John as well who is an ADM whose salary wouldn't show up in there, John

Bennet with whom you have probably dealt. We have a very sophisticated money

management plan. A lot of people don't know. We issue treasury bills, we are

constantly in the market looking to purchase bonds, sell bonds. We deal with

groups of people who come to see us, who approach us, lend us money, who know

when our issues are coming due and so on. I agree, it isn't a lot of money, but

we do have a lot of expertise in the department that is not in that Salary

allotment.

MR. E. BYRNE: Yes, I was wondering if it was

part and parcel of something else.

The next question I have deals with Investments in

subhead 2.1.03. I would like to talk about, first of all, government's sinking

funds, if we may for a moment. What is the Province investing this year? What

money do we have in sinking funds right now?

MR. DICKS: We have about $1 billion, I think it

is.

MR. WALL: Yes.

MR. E. BYRNE: That is administered out of the

Department of Finance, obviously.

MR. DICKS: Yes, we administer all that

ourselves.

MR. E. BYRNE: In terms of the short-term

investments that the Province makes, by which process and which investments -

the decisions at which you arrive or the department arrives at, is it completely

done in-house? Are there people, investment brokers, consulted to ensure that

the investments the Province are making, we are getting the greatest return we

can? I would just leave it open-ended for a moment.

MR. DICKS: Let me just comment on that. One of

the least known things about the Department of Finance is the degree of

sophistication of its money management. We get $3.5 billion a year in revenues.

You get a cheque from Ottawa for equalization of several hundred million, for

example, and you get your retail sales tax every month. Every day we have people

who contact the markets to see what the best amount they can get is for

investing this money.

The other thing we have to do is we have to plan

when our liabilities come due. For example, we have people going to the market

to purchase bonds that will come due in September of 1997 because we know that

our pension liability for that month will be X amount if dollars.

MR. E. BYRNE: And that you are getting a return

on that as well.

MR. DICKS: Yes. We will auction treasury bills,

and I think as well we buy commercial paper, banks and so on like that. We try

to manage our money to get a maximum return, so we are always turning over an

awful lot of money. As well, what we do is we have needs to meet, we have

ongoing payroll, things like this, but we have to make sure we have money on

hand to do that. What we do is when we need money we don't go to the market for

$10 million or $15 million. We wait till it builds up to a certain point that we

need an issue and so on.

It is a very complicated - or it is not complicated

- it is a very painstaking process.

MR. E. BYRNE: It is complex.

MR. DICKS: It is complex, yes.

MR. E. BYRNE: It is a complex sort of

situation. I understand that.

MR. DICKS: In answer to your other question, we

have a syndicate of dealers. Our lead partner in the U.S. is Merrill Lynch. If

we want to go to market, we deal with these people. We will call them, for

example, and say: Well, look, if we went into the American market, how much

could we borrow at? How much would it cost us to swap back to Canadian currency?

Because what we do not want to get is any downside risk in currency exchange.

Last year we lost $7 million on the Swiss franc. So recently we called up to see

if we went to market for about $100 million or $150 million what the cost would

be, and after we did the analysis, figured out what it would cost us for a swap

back to Canadian dollars, which is a form of derivative, it was about a five to

six basis point spread. In other words, we could borrow in Canada cheaper than

we could by going to the American market.

The problem with going to the market as well is you

have to be sure there is enough money around to buy up the ratio. If you go to

the market in Ontario and B.C. and Alberta and Nova Scotia and the Government of

Canada all on the same day, there isn't that amount of money in the market. So

sometimes what happens, and the reason we sometimes borrow internationally,

partly is because the interest rate spreads are very small. I was looking at

something today. I think Hydro, for example, has a Japanese issue that has .87

per cent interest. They have a Swiss one that has about 2.5 or 2.25 per cent

interest, but they got killed on the currency exchange. These are some things

you have to bear in mind.

MR. E. BYRNE: Those are some of the next

questions I was going to ask. In terms of borrowing, say, on the Japanese

market, for example, the Province has borrowed in the past on the Japanese

market, what sort of safeguards do we take to ensure against - the Japanese yen,

for example, is subject to huge fluctuations at times, especially in the last

eighteen to twenty-four months. What safeguards are there? Are there built in

safeguards to these fluctuations that guarantee to the greatest extent possible

our short-term or long-term investment?

MR. DICKS: There are two things. One is that

you have to look at the interest rate that you are borrowing at in foreign

currency, and you have to make a determination. If there is, say, an eight point

spread between what you can borrow at in Canada and borrow on the Japanese

market, the issue then is, where is the Japanese yen going to be in, say, thirty

years' time when it comes due, or ten years' time, depending on the length of

your issue.

The other thing you can do - and quite frankly the

Japanese market, there are two factors in it right now, as I know at least. One

is that they are lending at very low rates, about half a percentage point, I

guess, (inaudible) percentage point. The other thing, too, is the Japanese yen

was trading at a high of eighty yen the dollar. Last I checked it was about 106

to the dollar. In other words, it is weakening against the American dollar for a

whole lot of economic reasons in Japan.

Now the question is: Is Japan going to become

progressively weaker, and will the yen be at 200 yen to the dollar in ten years'

time? I do not know.

What you do is you can hedge in certain ways.

People want to lend money, so you have a whole group of people in the financial

community who trade in currency futures essentially. What they will do is say:

Look, we will take the risk of paying this back in Japanese yen and we will

convert it now. So if you want to borrow $100 million in Japanese yen today, if

the Japanese yen depreciates 50 per cent against the Canadian dollar you have to

pay back an extra $50 million more than you borrow. Now, there are banks that

will take that risk, and sometimes it works out well for them and sometimes it

does not.

MR. E. BYRNE: What you are saying then, I

understand -

MR. DICKS: It is the dynamics.

MR. E. BYRNE: - historically you are explaining

the process, but in terms of the safeguards that the Province takes in terms of

MR. DICKS: Well, the only safeguard is

discretion because there is nothing to prevent us going into any foreign market

and borrowing in that currency based on some assumption that it will favour us,

but I would not want to be one particularly to speculate that the American

dollar is going to be stronger or weaker against the Japanese yen or Swiss franc

or German mark in ten years' time. So what you would probably try to do is look

at the cost of a swap in today's dollars. So you would hedge your risk is what

you would do. In fact, you would eliminate your risk.

The only other part of that transaction you would

have to be careful about is the bank that arranges the swap. You would have to

have some degree of confidence in its ability to meet its obligations as well.

I will leave it at that. Phil has done a fair

amount of work in this field. Phil, is there anything you want to add to that?

MR. WALL: Yes. Wherever we can, I guess, when

we have borrowed in recent years, we have tried to hedge back into Canadian

dollars because of the experiences of the 1970s, and particularly the early

1980s. In fact, we have done several foreign currency loans that we have hedged

back into Canadian dollars. If you borrowed in yen at 2 or 3 per cent, and the

Canadian dollar rate is 8 per cent, you do a hedge. That will bring the

effective rate of the yen loan when you hedge it back up to around 8 per cent.

What you try to do is get is just below 8 per cent. If you can get it cheaper

than your cost in the Canadian market then it is a good deal for you.

Sometimes in the past what the Province has done is

said: We are going to take a risk here and we are going to go with the 2 per

cent. What has happened is the currency has gone the other way and when it all

works out it ends up costing you 10 or 11 per cent instead of the 8 per cent

that you probably could have jacked it up to if you had hedged it all.

MR. E. BYRNE: Hopefully that is in a minority

situation.

MR. WALL: That has been done in the past and it

hasn't been done in recent years. I should mention -

MR. E. BYRNE: It hasn't been done in recent

years?

MR. WALL: In recent years we have been hedging

wherever we can.

MR. E. BYRNE: So wherever we can. That doesn't

mean there isn't a hard and fast rule where -

MR. WALL: There is not a decision not to

borrow. I mean, that is a Cabinet decision. Even in the last number of years we

have borrowed U.S. dollars and have saved money. For instance, I remember when I

was here the last time we did a U.S. loan for $200 million in 1993. The Canadian

dollar has lost ground since then, but not enough to make that loan more

expensive than it would have been if we had hedged it. That is still a very

attractive rate because U.S. rates back then, if I recall, were something like 1

per cent or 1.5 per cent lower that Canadian rates. If the Canadian dollar drops

a cent or two it may mean ten or fifteen basis points over the long haul on that

loan. If you have 1.5 or 2 per cent saving in the beginning it is usually a good

deal.

I know, when we have gone to Cabinet with cases

like that, we will always give them a break-even exchange rate. So that if you

are doing a loan today and the dollar is at $0.73 versus the U.S. dollar, we

will do the calculation based upon the difference in interest rate and say that

over the next twenty years if the Canadian dollars averages down to $0.68, for

instance, instead of $0.73, you are going to lose money. Then Cabinet has the

decision to make as to whether it is prepared to take the risk of it going down

to $0.68, or will we lock in by hedging the whole works. As the minister alluded

to, I think his leaning and my leaning as well is to hedge. I mean, we are kind

of -

MR. E. BYRNE: Wherever we can.

MR. WALL: Yes, wherever we can. I will answer

another question you asked earlier that the minister didn't answer, actually.

You asked him what you do with sinking fund money.

AN HON. MEMBER: (Inaudible).

MR. WALL: If you don't mind. You asked about

what he does with sinking fund money. Our sinking fund money is primarily

invested in Canadian bonds, mostly Newfoundland bonds. If we can go out and buy

Newfoundland bonds out of the marketplace then that is what we will do. If we

can't get Newfoundland bonds -

MR. E. BYRNE: That is a way, I guess, of

propping up?

MR. WALL: That is right. I guess that is one of

the beauties of having it. When we buy our bonds out of the marketplace we

increase the price, so we narrow the spread between ours and Canada's. The

narrower the spread when we go to do a new issue, they look at where the spreads

are for Newfoundland bonds and maybe we will save an extra five or ten basis

points, if we have been very aggressive.

I know some of the Provinces are even more active

than us, trying to, even before they are doing an issue, get out there and - I

shouldn't say the word, but maybe somewhere trying to manipulate markets to

bring the spreads in narrower so that when they come to the market they might

save a few basis points on a new issue. I know some of the provinces are into

that.

CHAIR: Thank you very much.

MR. WALL: Okay.

MR. E. BYRNE: Another question?

CHAIR: Well, I have been pretty lenient, I must

say, I have been a bit lenient and if you have one more question - I want to

move on to somebody else.

MR. E. BYRNE: If I could ask, I have just -

CHAIR: Well, okay.

AN HON. MEMBER: I have one, so you can go

ahead, Ed.

MR. E. BYRNE: Some other members have foregone

the right in terms of being first-time members, I guess.

CHAIR: Yes, that is no problem. Go ahead.

MR. E. BYRNE: I have to leave. I can't stay,

but I would like to get through all the questions that I have dealing with the

department.

AN HON. MEMBER: If he can't stay, then let's

not let him have any more time.

CHAIR: No. What I did was when the government

members passed up, Ed was kind enough to pick up. Then I gave him the government

members' time plus his own time, plus an extra five minutes. So okay, go ahead.

It has been pretty interesting. Go ahead, finish your question.

MR. E. BYRNE: On page 34 dealing with subhead

2.2.01, Crown Agencies - Recoveries. I know you explained earlier, Minister,

dealing with the additional revenue. I missed it. It was $7 million from Hydro,

I believe you said.

MR. DICKS: No, $27 million.

MR. E. BYRNE: Twenty-seven million dollars from

Hydro.

MR. DICKS: That is in dividends.

MR. E. BYRNE: In dividends, okay.

MR. DICKS: And $4.8 million from CF(L)Co.

MR. E. BYRNE: Fair enough. I just wanted

clarification on that.

The next

section dealing with Recoveries on Loans,

Advances and Investments: How much money is outstanding to the Province right

now in commercial loans? Do you have any idea of that? Outside of loan

guarantees; in commercial loans.

MR. DICKS: It wouldn't be in this figure. This

is just recoveries we expect to make on our loans this year. We have a fairly

substantial amount.

MR. WALL: I believe it is up somewhere in the

$90 million to $100 million range, but that would include - for instance, I

think there is $40-some odd million owing to the Province with respect to Baie

Verte Mines. The chances of ever recovering that are very slim, but Baie Verte

Mines has not completely closed down yet. The amount will eventually be written

off but it still is in the public accounts as a receivable for a commercial

loan. That is one.

There are also some loans related to, I think, the

advances to the Newco Corporations that used to operate the middle distance

vessels. Those are the largest of the two, Baie Verte Mines, and I think there

is $12 million or $15 million out to the Newco Corporations, which are the four

different corporations that had those middle distance vessels that we recently

sold, or we sold three of them.

MR. E. BYRNE: I have some documentation - I

thought I had it with me, but I don't - and it indicated that loan guarantees by

the Province and the commercial loans outstanding to private companies in the

Province amounted to about $315 - $320 million. Does that sound out of whack to

you?

MR. WALL: There was a report on CBC, I think,

about a week or ten days ago, and I don't know where it was generated, that

talked about $213 million in commercial loans and commercial guarantees. That is

why -

MR. E. BYRNE: Are you talking about CBC radio?

MR. WALL: Yes.

MR. E. BYRNE: Yes, I was interviewed about

that.

MR. WALL: The number that was mentioned was

$213 million. I think I asked for a transcript of it, because I was expecting

that there would be questions asked about it at the time. I checked and I knew

most of it that day. On the commercial loans side I mentioned two large ones. On

the guarantee side, the largest one there, I believe, and it was included in

commercial guarantees, was to Marystown Shipyard. There is about $60 million in

loan guarantees there. I think there is about $110 million in guarantees that

are out there, Marystown Shipyard being the largest one.

MR. E. BYRNE: Without getting into specifics,

because we are talking about a lot of money, what are the realistic chances of

recovery on some of those loans? Is the Department of Finance or government

specifically looking at it in terms of going after what possibly may be

outstanding with a view of collecting what we can, and if we can't -

MR. DICKS: I think I can speak to that. I don't

think you can generalize about the guarantees as a whole.

MR. E. BYRNE: No, I understand.

MR. DICKS: I'm one of those people who doesn't

believe government should be lending a heck of a lot of money to businesses

anyway. But, for example, the Marystown Shipyard, their guarantees now amount to

either $63 million or $67 million. Part of what is happening there is progress

payments as these vessels enter the water, so that will decline somewhat after

that. I think Baie Verte Mines will probably be a write-off. I suspect that

there was a lot of money lent out by ENL, for example. You know, (inaudible) a

lot of the stuff that was there from years ago with the Newfoundland and

Labrador Development Corporation and so on like that. I wouldn't say it is all

bad loans.

The other thing we have been doing is the

Department of Finance used to offer a lot of guarantees to fish companies and so

on like that, and we have written off a lot of money over the years. What we are

trying to do with the ones we have open now, ones we have guaranteed, is to

start restricting them and try to get the Province out of its guarantee

position. The problem is that what happens every year is it usually expires at a

time when the fishing industry is down. So supposing you have a $500,000

guarantee to some company, for historic reasons it usually comes due when the

fishery is not active. Then of course during the year it fluctuates down to zero

or $100,000, then it is back up to $500,000. The banks always call them.

The problem with that is that under law you, as the

guarantor, are obligated to pay if it is called. So you have to judiciously find

a way to try to decrease your exposure on them and it isn't easy to do. In a

large number of cases it is the only reason some of them are operating. Torngat

Fisheries, for example, Nain and Makkovik, you have Fogo Island Co-op - I think

we have about $2.5 million in there - P. Janes, a whole host of them.

Municipalities would be there as well. We guarantee an awful lot of money for

municipalities.

I would be happier not to do any of it but it is

there and it is a liability. It isn't all sunk money, we have been successful in

reducing some of these guarantees. The truth is, if you give a guarantee to a

company it will generally spend it that year and you are forever on the hook

until demand is finally made. I'm not a big proponent of government guaranteeing

monies for anybody.

MR. E. BYRNE: It has cost this Province really

in many ways.

MR. DICKS: There have been some big write-offs.

Baie Verte Mines, for historic reasons, being well represented in the House -

that is an awful lot of money, $45 million. I suspect St. Lawrence, we bid a lot

of money on that; Marystown Shipyard, $135 million the last I looked.

What government does is, the current position does

not reflect the history. A lot of monies have been written off over the years.

The same thing with ENL, for example; they were writing off 10 per cent per year

in addition to what was bad debt. So it is not hard to get a view. On the other

hand, people will say that if it were not for government involvement with

guarantees in these sectors you would not have active businesses. So you can

make a very hard-headed financial decision. On the other hand, there are social

and economic realities in rural Newfoundland that are not the same as Bay Street

in Toronto.

MR. E. BYRNE: I guess the last -

MR. DICKS: Is this the next to last or is this

nearly the last?

MR. E. BYRNE: I guess that depends on the

responses coming from you and your officials.

Dealing with Tax Policy under 2.3.01:

"Appropriations provide for the review and development of provincial taxation

and exemption policies and the analysis of taxation measures in federal and

other jurisdictions."

I have to ask: In terms of the GST/PST

harmonization, after we get into the second year - in year one we recover 100

per cent of what our lost revenues were. Would that be a correct statement, in

year one and two?

MR. DICKS: In year one and two we recover 90 or

95 per cent of our losses. Then in year three it goes to 50 per cent, then 25

per cent.

MR. E. BYRNE: What is that again? I am sorry.

MR. DICKS: What it is: We agreed with the

federal government on an analysis of how much we would lose due to GST

harmonization. Then, what the federal government agreed to do was compensate us

for our losses over a four-year period. My recollection is that they gave us 100

per cent of 95 per cent. We agreed that we would take a 5 per cent loss, so they

gave us 100 per cent of the remaining 95 per cent for the first two years. Then

I think it went to 50 per cent in the third year, and then 25 per cent in the

final year, and then zero thereafter. Three hundred and forty-eight million,

though, over that period of time, with interest on it, should come pretty close

to covering most of our losses, because what we have done is -

MR. E. BYRNE: Where do we go after that?

MR. DICKS: Pardon me?

MR. E. BYRNE: Where do we go after that, in

terms of creating the additional revenue.

MR. DICKS: Well, what we are doing is injecting

about eight-tenths of a per cent of GDP back into the Province. The Province's

GDP in nominal terms is about $12 billion a year. What you are looking at here

is the injection of more than $100 million back into the economy. That is about

eight-tenths of a point of GDP. You are adding that into the economy to make the

economy grow.

The federal government has estimated that our

economy should grow by about 5.5 per cent because there is compounding effect;

you add in, say, approximately 1 per cent this year, 1 per cent next year on top

of it, and so on.

MR. J. BYRNE: (Inaudible) always be right?

MR. DICKS: Pardon me?

MR. J. BYRNE: They will always be right.

MR. DICKS: Well, I wouldn't quite say that.

Your leader and I had some discussion today about Stats Canada, but I don't

really accept the federal figures. Even at 2 per cent to 3 per cent, half of

that growth, I think that we will still show pretty close to break even and a

little better. Plus, you have to make a choice. I would sooner see the Province

gain efficiencies in its services and lose some tax revenue than continue just

to spend and keep our tax burden as high as it is. I think it is absolutely

indefensible that we have a consumption tax burden that is 150 per cent of the

national average. This was an opportunity for us to substantially reduce our

consumption tax burden.

Even if it does not work out it is close. There

will be growth in the economy, too, that I don't think any person looking at

rationally could come to some other conclusion. You can quibble and say it would

be 1 per cent or 3 per cent rather than 5 per cent - and I am quite open to an

analysis on that basis - but at the end of the day my honest view is what we

have to, across government, is to examine our services, determine if they are

still worth continuing; secondly, figure out ways to do them more efficiently;

and, thirdly, reduce the tax burden on people, and I think this will give us an

incentive to do so.

MR. E. BYRNE: One last question, Mr. Chair, if

I may; one last one.

MR. DICKS: I am glad you are (inaudible).

MR. E. BYRNE: It is a more general question to

the minister.

I recall last year going through every subhead of

every department in the entire Budget with a particular view to looking at the

allocations in every subhead of transportation and communications. Government, I

think, had estimated in last year's Budget $49 million to $50 million in total

for what it would spend as a government, entirely in terms of Transportation and

Communications.

Is there a particular view to look at reducing

expenditures particularly - communication is a different sort of avenue but in

terms of transportation costs, are there more efficient and economical ways that

we can do business without having to hop on the flight tomorrow and go to

Halifax, especially in the age in which we live. I mean, it is a lot of money?

MR. DICKS: I agree. One of the things that we

did was, put together all the travel communications and all what you would call

the discretionary budgets in government. Now I may not have the figures

correctly, but we went to each department and we looked at - you see, what

people don't realize is we spent $3.4 billion this year, down from about $3.5. A

large part of that money goes out in grants and to institutions: $108 million to

Memorial; $600 million to the hospitals, x amount in the educational system and

so on. When you really look at government's books, the cost of running

government is about $400 million, the actual in-house administration. We went

through that analysis and we found that if you want to save money out of those

categories, like discretionary spending, what you do is, you eliminate things.

For example, in Works, Services and Transportation, you eliminate the salt for

the roads which you need, say tar in the summer, you know, things that, in our

view, were not really discretionary. You would include to some extent, your

communications, your telephone systems and your furnishings.

For instance, I take the view: How many more desks

do we need at this time in government? We are not going to be adding a lot of

people, things like this. To save $15 million you had to cut those discretionary

expenses by 34 per cent. So one of the things we did was, we went to the

departments and said: Look we want you to cut 34 per cent out of your

discretionary expenditures; and by and large we had a lot of that out of the

travel budgets.

If you go through these and compare, for instance,

Professional Services - and I said it in the Budget, I forget the figures

offhand. As a matter of fact, what the figures were in the Budget were unrevised

figures because we had already gone after a lot of that money. The other thing I

have done is, I have centralized all the IT purchasing in Treasury Board as

opposed to giving each department a Budget.

So what we have done is, we have heavily

rationalized the cost of doing these things in government. So I agree with you,

there is a lot of money that is spent on -

MR. E. BYRNE: Last week, for example: The

Public Accounts Committee normally sends people to the Canadian Comprehensive

Auditing Conference. We didn't this time and it is probably $7,200 to $7,300

saved. It doesn't sound like a lot but compound it in terms of every department

of government, every subhead, it could add up to a substantial sum of money that

may be worthwhile in putting toward other services.

MR. DICKS: I agree with you 100 per cent. Let

me give you an example, just so that I can open this up. Environment and Labour,

page 111; last year's Budget, Property, Furnishings and Equipment for Industrial

Environmental Engineering, $26,000. They spent $5,000. Do you know how much they

got this year? Zero. They had Professional Services, $13,000 and they spent

$16,200. Do you know how much they have this year? Zero. Supplies, they were

given $39,100 and they spent $32,000; we have given them $22,000. Transportation

and Communications, $70,000. They spent $69,000 and they got about $66,000. You

can see this. Property, Furnishings and Equipment under Administration, Water

Resources Management, they had $700; they got zero this year. Allowances and

Assistance, $18,000; they got zero this year. If you go through a lot of these

subheads, the same thing. Water and Wastewater on page 110: they had $1,400 for

Property, Furnishings and Equipment. There is nothing there this year.

Transportation and Communications, $31,000 down to $24,500.

We have hit those. I agree with you. I am not

saying that you can't do more.

MR. E. BYRNE: No, it is just a matter of being

real, I guess.

MR. DICKS: Yes, I agree. I just think that,

what we are going to have to do frankly is, before we hop on an airplane or get

a brand new bank of systems or replace a 386, or I suppose it is now a 486

people have - If people have a task that they only need a 286 to do -

MR. E. BYRNE: We would like a couple of

computers up in the Opposition office.

MR. DICKS: Oh sure, but we automatically

upgrade them.

MR. E. BYRNE: We don't even have a 386 up

there.

CHAIR: Order, please!

MR. E. BYRNE: Anyway, I appreciate the

discretion of the Chair and the latitude he has given me, and I appreciate the

answers given.

MR. DICKS: One last one: Work, Services, page

85, IT. They had $37,000 last year and they got $500 this year.

CHAIR: Thank you very much, Mr. Byrne.

I should say to you, though, Mr. Byrne, since we

will be doing some meetings, when you get down to your last question (inaudible)

say, well it is the last question and we are pretty tolerant. I think you had

five last questions, and it was only through the goodness of Mr. French that -

MR. E. BYRNE: (Inaudible) the last

supplementary or the last (inaudible) but I appreciate the latitude you have

given me.

CHAIR: We don't want to be too rigid. It is an

opportunity for all of us to get some answers. I think the minister is doing

quite well, he is quite free with his answers.

We want to move on. I think we had agreed that at

8:30 we would take a 15-minute break. I think, Bob, you had indicated that you

wanted to speak next?

MR. FRENCH: I just have a couple of quick

questions.

CHAIR: Okay.

MR. FRENCH: Under Tax Administration, Salaries

in 1995-1996, you budgeted $4,616,100; this year it is $4,528,800. I am assuming

that is due to the reduction in staff? Would that now have been part of the 500

that we just recently let go? Am I safe in assuming that that would be all for

1996-1997 in this particular area?

MR. DICKS: To answer the first question: We

have 112 permanent positions and eighteen temporary co-op students as well. We

have abolished two tax audit/manager positions and one position under the

open-doors program was transferred to the PSC. The open-doors program is one

where disabled people are placed in government and what we do is centralize

those in the PSC.

The thing about tax audit that is a little

different is that each of these auditors, I think, brings in about $250,000 in

collections; so you pay a salary. You had to be careful you know. Much as people

love to pay taxes they sometimes make honest mistakes when they do up their

submissions to us, so auditors sort of help them with finding the right amount

they should have remitted sometimes. So we had to be careful in tax that we

don't pare it down so much that we don't get the audits on a timely basis. So

what we have done is, we have eliminated two positions there and we feel - I am

not saying we can't do more. I think people will make the argument we should

have more tax auditors, but that is where the salary savings are there.

MR. FRENCH: The other question I have is - and

I guess this more for my own general information - if I am a tax-collector and I

do business in the corporate sector and somebody with whom I am doing business

goes bankrupt, even though I have not collected a dime in provincial sales tax,

am I then responsible to pay the taxes when in actual fact I haven't really

collected any money?

MR. DICKS: Yes. If you make a sale, we require

you to remit the retail sales tax. Correct Bob? We don't allow write offs of

retail sales tax? It is a sore point with people who are in business.

MR. FRENCH: Even though I haven't really

collected any money?

MR. DICKS: That is right.

MR. FRENCH: Okay. I have one other question as

well.

The Newfoundland Liquor Corporation works in

mysterious ways, in my mind anyway; I don't know what the minister thinks, but

in my mind -

MR. DICKS: It is the spirits that move it.

MR. FRENCH: Yes, well I think it is more than

the spirits moving them in there sometimes, Mr. Minister. I guess, No. 1, they

file their own accounting to the House here or (inaudible) corporation?

MR. DICKS: Yes. We file audited statements

every year for the liquor corporation. I don't know if the year end is March 31,

I forget offhand, but we do -

WITNESS: It is March 31.

MR. DICKS: Yes, it is March 31. So once they

are audited we table them here in the House.

MR. FRENCH: Along those lines: Have we given

any consideration to - and I don't mean privatizing Newfoundland and Labrador

Liquor Corporation, but in my area of the Province we have agency stores. I get,

from time to time, from a lot of my constituents, a fair bit of flack, sort of

an unfair competition sort of a thing. Has the government given any

consideration to allowing people in private enterprise besides liquor agency

stores, to sell beer, you know, wines and spirits, under a naturally controlled

environment?

MR. DICKS: Yes. I will be frank with you, we

are considering our policies at the Newfoundland Liquor Corporation. There are a

whole lot of issues. For example, we allow anybody who wants to, basically, to

sell beer. If you are in a place like Quebec you can buy beer and wine in

supermarkets. I don't know why we don't sell wine - I have certain strong views

about the liquor industry, being a big fan of it myself. But having said that, I

think there are some things and what you will find in rural Newfoundland is,

when you close down a regular outlet and you choose one out of the small stores

in that area to do it, you give them a commercial advantage. I have said: Well,

why don't we give to anybody who wants it? From an economics point of view I

think we would probably have as much or more money.

The argument on the other side of the equation is:

well, should you allow people to get into a business that you know there is a

limited market for? The other question is: Would they provide the broad variety

of products that you expect? I think these things are things that you can handle

by regulations and saying: Look, you have to keep this amount of supplies on

hand and so on; like that.

I am sensitive to the fact, because every time you

go into a small community and replace a liquor store with an agency store there

is a very strong sense that you are in fact doing that. I am open to persuasion

on it and I have asked the new president of the liquor corporation - in fact I

met with him this afternoon - to review these and to bring forward some policy

positions on it. I think there are a whole lot of things.

The other thing is that we don't market our liquors

very well, for example; and another thing is our pricing policy is uniform on

all products. We apply the same 60-odd per cent. I think there is an argument

that on the higher end products we probably should taper off the mark up. A

large number of our products, for example, are much higher priced in this

Province than they would be in other jurisdictions. At the lower end we are

probably as cheap or cheaper. As you go up, it gets much more expensive. So

there are a whole lot of areas, I think, like that of general policy that we

should review.

The other issue of privatization is something that

I think we need to review as well. We can gradually move in and privatize in the

smaller stores. Whether or not we should do it entirely with the corporation is

something that I don't have enough information to judge. For instance, in the

American system, people have the view it is just completely free enterprise and

there are a lot of state monopolies there as well. It has been done in Alberta

and I hear mixed things about that. I think there are some larger policy matters

that we are going to have to consider at the liquor corporation. That is one of

the things that I want to do in this program review this year.

On your fundamental point, I am concerned that in

communities when you give one corner store a liquor license and another one not,

you are giving them substantial advantage. You can hear the same argument, by

the way, with respect to the Atlantic Lottery terminals, but the difference

there is there is some cost to set up,

whereas with us people have to pay the

money up front for the liquor and put it on their shelves. Perhaps if someone is

foolish enough to do it and they want to pay us the money, maybe we should let

them take their chances.

MR. FRENCH: So that policy then would be -

MR. DICKS: The policy is going to be reviewed.

We are going to have a look at a number of different aspects of the liquor

corporation's policy and operations over this year. It is just that I have been

so busy doing other things, you can appreciate that I have not had a chance to

get to it yet. I had a timely meeting with the president today and he is looking

at these issues for me and getting me the information I want; and I am going to

formulate a policy for Cabinet. There are things about closing hours and things

like that, that I think we have to look at as well. So you may see some changes

in that regard this year, Bob.

MR. FRENCH: Okay, thank you.

CHAIR: We want to move on here. Who wants to be

up next?

Gerald, go ahead.

MR. SMITH: Thank you, Mr. Chairman.

Just a couple of things, Mr. Minister, and they are

general in nature and probably closely related to Budget item 3.1.01, relative

to a compliance and audit. I am just wondering: In terms of the collection of

taxes and remittance, we hear stories from time to time of businesses that are

tardy, if not down right negligent, in remitting taxes that are collected. Is

that a serious problem or is it as serious as it is sometimes presented? Does it

pose problems for government in terms of getting the revenues that it needs to

run all its affairs? If it is a serious problem, how is it being addressed?

MR. DICKS: Yes, I will answer it. I will give

some answers then I will ask Bob Clarke, who is here with me and who handles tax

administration, to enlarge on it.

Most of our businesses are very good. A lot of

people don't realize we have about 8,500 regular monthly remitters and about

15,000 or 16,000 who remit quarterly or yearly, because of course it is an

obligation to remit all the retail sales tax collected. Most people are very

good. What you find is that there is an incentive. If you don't file and pay on

time there is a substantial penalty of about 10 per cent plus interest. So that

in itself is a good incentive. You will always have an element of people who

probably try to avoid retail sales tax. I suppose if you don't give receipts and

this sort of thing, it is hard for us to tackle the whole problem of people who

deliberately avoid tax, but I think, by and large, the business community is

fairly ethical with those people being the minority.

What we do find, when we do tax audits, is that

people miss things, honest mistakes. For example, a lot of people don't know

when they buy something for use in a business, that that attracts retail sales

tax. So we audit them and sometimes we come up with large amounts. Other times

we find it hard to get to businesses more than once every three years. When

someone buys a computer they may not realize the software that they put in the

computer is subject to retail sales tax. If you buy a $1,000 computer, the

software may be $5,000; so it's a substantial amount. What we do, as a matter of

practice, is interest that is due for more than three years, if we don't get to

do the audit, we sort of remit that amount, we forgive that amount.

I don't know the extent to which you can really

quantify the people who avoid tax in its entirety, but Bob can probably give you

an idea as to the number of people who may file late, for instance, the number

of write-offs we have.

Bob, do you have a little more detailed information

on that?

MR. CLARKE: Yes. I don't have the numbers in

terms of write-offs but the receivables have not really been a problem. They

have been fairly constant over the last few years. It is difficult to get but it

is not getting any worse, I guess. I would say about 85 per cent remit on a

routine basis without being called or anything. So we have about 15 per cent

that we have to call, those types of numbers.

MR. SMITH: What would we be writing off in

terms of default on this? Are we talking a significant amount there?

MR. CLARKE: Very, very insignificant really. It

is less than one half of 1 per cent of revenue.

MR. DICKS: Revenue being about $570 million or

so; so half a per cent. In general business experience, most people write off

about 3 per cent of their accounts on average, so when you are around half a

percentage point that's not too bad. Of course, we have a lot of legal means at

our disposal to chase people. For instance, if a business does not remit the

directors are personally liable. So that's a very good incentive.

In Newfoundland the business community is so

marginal in many cases that really what they do is the retail sales tax, I

suspect, is their operating float to keep the business going because you get the

money during the month of, say - what are we in now? - we are in the month of

May, and you don't have to remit that money until June 20. So it gives them

almost two months, in some cases, to use money to fund their operations. Usually

at the end of the day you find that if the business gets in trouble what it has

not paid is the last month or two of retail sales tax, and that is sometimes

where we get stung, in terms of collecting that.

MR. SMITH: The other issue that I wanted to

pursue for just a couple of minutes is somewhat related, again dealing with lost

revenues. It relates to cross border activities, I guess, especially as it

relates, most recently, to Labrador, primarily, I think, in tobacco products,

but traditionally on the Burin Peninsula and the South Coast as it relates to

liquor and tobacco, I guess, from St. Pierre et Miquelon.

There are some figures that I have heard quoted,

some as high as $40 million a year in possible lost revenue. I don't know if

that's really out of line. I am just wondering, and I am sure it has to be a

concern for government, especially considering the tight fiscal situation in

which government now finds itself, that any revenue that is owing to the

Province I am sure we would love to be able to collect 100 per cent.

I guess it is a two part question. First of all, I

think we all accept and recognize that there is a problem. What is the magnitude

of the problem? What can we do or what should we be doing that we are not now

doing to try to redress that problem?

MR. DICKS: A member of the House came to see me

a little while ago and he had an interesting observation, that on the south

coast he felt that the incentive to smuggle was not alcohol but the tobacco,

because tobacco is much lighter and easier to handle. He had a suggestion that

we should probably decrease the tax on a bucket of tobacco, because most of it

comes across as loose tobacco. Now he seemed to have some in-dept knowledge of

that particular enterprise, more so than I did, so I could only bow to his

advice in the matter.

I think it is hard to quantify what the amount of

slippage is, or lost tax revenue, because by definition if you don't get it you

are only speculating then. Do the RCMP pick up one-tenth, do they pick up 1 per

cent or half of what comes across from St. Pierre, for example? Having said

that, I just don't know what the figures are, and other than to speculate I

could not give you one.

However, in Western Labrador, the business

community there has been very active in lobbying us to change the tobacco tax

laws in those areas of Labrador contiguous to Quebec. As you know, Quebec

reduced its prices substantially when the federal government brought in an

initiative to undermine the smuggling by reducing the federal taxes. They had a

figure in there as to what they were losing based on how much the sales were in

Fermont compared with what the sales were in Labrador City, Wabush. I forget

what the figures were, but I don't know if they thought it was $300,000 and some

or $500,000 and some. They had a fairly persuasive argument on the point. Do you

remember Bob?

MR. CLARKE: No, I don't think it was very much.

I think it is about in that area.

MR. DICKS: Yes, I think several hundreds of

thousands. What they had done, they said: Well look, we - interestingly enough,

a large number of packs of cigarettes sold in Fermont originate from the

supplier in Labrador City who is part of this delegation. What their concern was

- and they are making the argument based on the lost revenue to the Province - a

lot of people will go over to Fermont, for example on Friday night, buy some

cigarettes, pick up their groceries, buy their liquor and so on. So their

argument was that we were losing a fairly substantial amount of money because

our cigarette taxes were that much higher. They are making the case that we

should reduce our taxes in Western Labrador. Our taxes, as you may know, are

lower now than they are in the rest of the Province; Labrador has some special

considerations.

As of yet I have not brought the matter to

government but there is an argument to be made that we could probably eliminate

some of the smuggling by reducing our taxes; but if we do it in Labrador West

and Southern Labrador, what does that say? Should we do it for all of Labrador,

and if we do it there should we do it on the rest of the island? If we get into

that and we reduce our tax substantially, I think what you will find is that you

are not going to get much in tobacco tax revenue, for example. I am quite

convinced that we would not make that up in our other sources of revenue on

other things that people purchase.

MR. SMITH: It seems to me, though, as it

relates to the activity on the Burin Peninsula - and I am perhaps a little more

familiar with that area since my parents are originally from the South Coast. I

grew up hearing stories of the smuggling, and the thing is it is part of the

folklore of that area of the Province. I think one of the difficulties that we,

as a government, are faced with - and it really struck home to me some time back

when there was a person charged on the Burin Peninsula and had coverage. They

were interviewing this older lady who was very, very distraught because they had

come and dragged this individual away. Her statement was - and I thought it was

very revealing - she said: Well, it is not like he is a real criminal. At the

time it struck me: this is the crux of the problem, that people do not see what

is happening here. It is almost like the Robin Hood syndrome; if you can get out

there and take advantage, really we are not hurting anybody. It is not like we

are out and stealing from our neighbour.

It seems to me, the more I thought about that over

the years, in looking at it, that maybe what we need to be doing there is

somehow embarking on some sort of public education to make people aware that

these are criminal activities, and beyond that they do impact negatively at a

time when we are constantly being bombarded by people who are saying: Well,

don't cut our hospital services; don't cut our educational services. Really the

only way that government can continue to fund these is if we are able to

generate revenues that are then used for that source.

It seems to me that it might be a way of addressing

this, because I don't think you can hire enough police, knowing the geography of

the South Coast to begin with, and the resourcefulness of the people who for

generations have been involved in this activity. They could not do very much

with Robin Hood and I don't think they are going to do very much with these

people who are down there; we don't have the resources to do it. Maybe just

investing a few dollars, generating them and trying to educate the people, just

making them aware as to what exactly is happening there.

I am just wondering; maybe there is something being

done along those lines, and if not, has there been any thought to doing

precisely that?

MR. DICKS: Well, it is an interesting

philosophical discussion as to victimless crime and a certain romance associated

with the business of smuggling. I suspect you are right. Most people don't see

it as a moral issue, someone smuggling a few bottles of liquor over from St.

Pierre, in the same way as if you are doing something more in the nature of

crime.

I am not sure if the answer really is in the nature

of education or deterrents. I know that some years ago when I was in Justice,

the liquor corporation ponied up $80,000 so that we could conduct an operation

on the south coast directed against smuggling. It was felt it was in their

interest to do so, because they felt they were losing some sufficient amount of

revenue that would justify that kind of expenditure. I suspect that no matter

how good the educational program were, you would have trouble defeating the

notion that, well you are not really hurting anybody and people have some fairly

desperate circumstances.

I remember speaking with Bill Matthews who was in

the House last year. We were talking about some incidence on the Burin Peninsula

of this type and he said: Well, it doesn't matter because the first thing they

do is put away the fine money in case they get caught. I suspect that it is

carried on in a very much commercial fashion rather than just being very ad hoc.

CHAIR: I believe it is agreeable that we take a

fifteen minute break and return at 8:45, which is only fourteen minutes, Jack.

It's a short fifteen minutes. If everybody is agreeable - have you guys got a

problem with it?

MR. FRENCH: He just wants to go for a smoke

break, that's all.

CHAIR: Yes, Bob, I was sizing it up. I don't

think we have any smokers. Do we have any smokers? It is very important. No, not

one.

MR. SMITH: Mr. Chairman, this is just a

suggestion. That's it for me. I don't know if there are a lot of other

questions. Rather than break, if we are only going to have another half hour, we

could -

MR. J. BYRNE: It won't be a half hour, I would

not think; fifteen or twenty minutes maybe.

MR. SMITH: Anthony may have some questions. I

was just wondering, maybe if you just did a little poll to try to get some idea,

because if we only have another half hour, rather than break for fifteen

minutes, maybe we could just carry on.

CHAIR: Well, we have an hour-and-a-half left.

AN HON. MEMBER: (Inaudible).

CHAIR: How much longer do you have?

MR. J. BYRNE: (Inaudible) we are going to be

here for awhile, but if they are -

CHAIR: Okay, what about you Bob?

MR. FRENCH: I don't have anything really. Just

on one of Gerald's questions, I wanted to propose something to the minister,

that was all. We seem to spend a lot of money in advertising on the liquor

corporation, you know: Don't buy the St. Pierre products, blab, blab, blab,

especially at Christmas time. I would suspect that that runs into many thousands

and thousands of dollars. I wonder if we dropped the price on a bottle of

spirits by twenty-five or fifty cents a bottle and cut out the advertising, I

think we just might make the St. Pierre stuff not worth the risk.

MR. DICKS: It is one of those issues that is

hard to address. I think we would have to drop it more than twenty-five to fifty

cents. I have never came across the stuff, but they tell me you can probably buy

a twenty-six ouncer or forty ouncers for about ten or fifteen dollars off the

price. I don't know, I haven't come across it. For some reason people don't

offer it to me for sale.

I think the margin would have to be substantial.

Bob, I suspect price is part of the problem but, you probably would have to come

down very substantially in our price to be competitive for what you can buy off

the black-market.

CHAIR: Thank you, Mr. Minister.

Jack, if you can do it in fifteen minutes, you have

a deal. If you can't, I have this nicotine addiction that bothers me greatly.

MR. DICKS: The Chairman is very much in favour

of increasing tobacco taxes.

MR. J. BYRNE: Fifteen minutes; 8:50 p.m.

CHAIR: Well, that is being fair.

MR. J. BYRNE: Don't hold me to it though, that

depends on him.

CHAIR: Well, he will shorten up his answers to

accommodate you.

MR. DICKS: They will be shorter than your

questions.

CHAIR: Okay, let us give it a whirl and see

what happens.

MR. J. BYRNE: On page 35,

section Economics and

Statistics, that was transferred from the Executive Council, I believe, was it?

MR. DICKS: Yes.

MR. J. BYRNE: Transportation and

Communications: You were just reading off a number to the Member for Kilbride

about the decreases in Transportation and Communications. That one there is

$36,500 spent last year and now you are budgeting $40,000 this year. I mean, I

can't see why. I think you should be holding those at what was spent last year,

at maximum.

MR. DICKS: Yes, okay.

Well, the actual amount budgeted, if you combine

the two, was $54,100. We have put it down now to $40,000. The Telephone costs

are $15,500; the travel expenses relate to two meetings of the Conference Board

of Canada and two meetings of the federal/provincial subcommittee on the Economy

and various meetings with Statistics Canada.

MR. J. BYRNE: Transportation and

Communications, $40,000.

MR. DICKS: That's right, that is what I just

said.

MR. J. BYRNE: Did you say $54,100?

MR. DICKS: Last year, the combined estimates

for this department and the other one we have here at $54,100.

MR. J. BYRNE: Okay.

Another one here under that

section too is

Information Technology?

MR. DICKS: Yes.

MR. J. BYRNE: Government spent $95,000 last

year, budgeted $83,500, and you have nothing this year. So what is that?

MR. DICKS: What that is is monies -

MR. J. BYRNE: Computers?

MR. DICKS: Pardon me?

MR. J. BYRNE: Computers?

MR. DICKS: - and soft ware and programming. The

Economics Group probably does the most detailed, economic and provincial

analysis that we have, compiling provincial statistics on jobs and all this sort

of thing. What we have done is, to get control of that, we have put all the

money into Treasury Board. We have taken it out the departments, put it into

Treasury Board and we have reduced it. I think we have reduced it to about $18

million from about $20 million or $19,500 last year.

MR. J. BYRNE: You answered my next question:

Why that was transferred from Executive Council to Finance?

MR. DICKS: The reason is that I was concerned

we were overspending in that area and I just wanted to have central control of

it to make sure that we are not buying computers that we don't need or software

that we don't need. That is a very large element of government spending and we

want to make sure that we have proper control of it.

MR. J. BYRNE: Thank you.

Page 36, Compliance and Audit. Transportation and

Communications: budgeted, $536,100 and spent, $499,000 and now you are up to

$536,100. That is probably one to two jobs there. That is another $37,000.

MR. DICKS: Yes. The reason for that is, these

people are the auditors and they do a lot of travelling. For example, this also

includes school tax collections. The postage is 55,000 in our regular

department.

MR. J. BYRNE: You are missing my point here.

MR. DICKS: Oh, I am sorry.

MR. J. BYRNE: If you budgeted $536,100 last

year and you spent $499,000, why wouldn't you just budget $499,000 and save a

job or two in the civil service? Why was there need to go beyond $500,000 when

you didn't spend it last year - and the cutbacks?

MR. DICKS: Well, I think you would be

counterproductive - this is pretty close on the money.

MR. J. BYRNE: You what?

MR. DICKS: Pardon me?

MR. J. BYRNE: What was that you said?

MR. DICKS: I said: Well, I don't think there is

a lot of difference between $499,000 and $536,100. What we are not going to do

is, if we have an auditor who is supposed to go down to Port au Choix from

Corner Brook tomorrow morning to do an audit we need done, we are not going to

say: Well, look we are not going to give you the money to travel down?

MR. J. BYRNE: No.

MR. DICKS: We monitor it and try to get value.

On a budget this size, maybe we should be giving them $450,000, maybe we should

be giving them $600,000; but I suspect this is based on prior years experience.

Most of this money is in fixed amounts, but our auditors, you know, travel an

awful lot to get to business in various parts of the Province to do their

audits.

MR. J. BYRNE: Under that same section,

Salaries, for 1995-1996, again budgeted, $4,639,700. This Budget shows it at

$4,616,100, a difference of $20,000 or $30,000.

MR. DICKS: Thirty-odd thousand dollars, yes. It

sounds like a salary unit was taken out there for some reasons. We actually

spent $4,738,700.

MR. J. BYRNE: Support Services, same page. You

have Supplies budgeted at $92,200, you spent $15,000, and now it is back up to

$56,300. That is quite a jump from $15,000 up to what was spent, 275 per cent.

Why do you need that amount of money for supplies?

MR. DICKS: I have an interesting explanation

for you.

The revised of $15,000 should be $51,000. That is

due to dye received in March but not paid until April. It is d-y-e. I don't know

what inventory (inaudible). Reduction in budget reflects restraint measures in

reduction of inventory of dye because of the cancellation of - oh, that is

gasoline dye. You know, with different fuels. So, we dye the gasoline. What it

was was -

MR. J. BYRNE: So that is an error in this then.

That $15,000 should be $51,000?

MR. DICKS: Yes. It wasn't written back to

1995-1996 until the Estimates were in final print. So there are a few minor

things like that in there.

MR. J. BYRNE: Very good.

Under Support Services: In 1995-1996 you had

estimated $948,000 for Information Technology.

MR. DICKS: In Support Services?

MR. J. BYRNE: In Support Services, $948,000,

but there is nothing shown here. I don't see it, anyway.

MR. DICKS: No, I don't know what that would

have been last year. It sounds to me like they were planning to put in a new

computer system of some sort. That type of money sounds like an awful lot of

program writing, replacement of existing programs.

MR. J. BYRNE: Shouldn't that have been

indicated somewhere in that, in those Estimates for 1995-1996, and then a blank

for 1996-1997?

MR. DICKS: The only thing they do with the

Estimates is, where we revise government departments they may have taken those

amounts over and put them in Treasury Board to reflect where the new figures

are. In other words, because we have transferred most of the IT money over to

Treasury Board, what you do is, to give a fair comparison between this year and

last year - otherwise it would show as, let's say, $18 million in Treasury Board

and zero last year. Where you have taken it from the other departments, what you

do is you take over the corresponding amounts to give an accurate -

MR. J. BYRNE: So we have to try and go through

this and figure out where that might be. That is what I was talking about

earlier with the comparative analysis. It is hard to do.

MR. DICKS: Yes, I know, I agree. I didn't write

these. I wouldn't say they would be any better had I done so, but let me see

where we are. I don't know if I can put my finger on it. Probably it is

something that might come up under Executive Council. I don't know where we have

provided for the IT spending in Treasury Board. I will have a look for it if you

want to go through the other estimates, Jack.

MR. J. BYRNE: Economics and Statistics, which

was transferred from Executive Council: Information Technology had in it

$83,500, whatever. That is $1 million.

MR. DICKS: Which one is this, I'm sorry?

MR. J. BYRNE: The one I just talked about,

under Support Services, Information Technology, I'm looking at $948,000.

MR. DICKS: Yes. I mean, there is a tremendous

amount -

MR. J. BYRNE: Where is it?

MR. DICKS: Where is that money?

MR. J. BYRNE: Where was it spent? That is what

was estimated. How much was spent?

MR. DICKS: All I can tell you is that when we

had to find the money last fall those were some things that we were very

concerned not be overspent. That is where we made a lot of savings. Social

Services was in the news with one of their little programs lately. What we have

been trying to do with IT is to make sure that we are spending the money wisely.

Frankly, Jack, I don't know. If you want I will ask and get the information for

you. I don't have it here. Phil, would you make a note of that to see where that

$1 million went that was under IT?

MR. WALL: Yes.

MR. J. BYRNE: Okay.

MR. DICKS: I'm looking for it under Executive

Council or under the other one to see where it is, where the IT money is.

MR. J. BYRNE: Okay, just find it for me later

on and let me know; that is fine.

With respect to Support Services again, under

Salaries: Salaries this time went up actually from what was spent, $781,900 to

$818,300, which is roughly $36,000. That is just the staff being jumped around,

is it, from one area to another?

MR. DICKS: I suspect that is a position that we

didn't fill for some period of time. That is why we spent less. The difference

between $813,000 and $818,000 might have been a step increase. Marginal amounts

like that are generally where someone has a few steps left on their scale to

move up.

The $781,900, I suspect, might reflect a vacant

position. Was it, Bob?

MR. J. BYRNE: Okay.

Under Supplies, Support Services: You had budgeted

$92,200, spent $15,000 and it is $56,300. Is that another error?

MR. DICKS: No, I think that is the one we just

explained, the dye. Do you remember? That was where we were dealing with the

dye. That should have been $51,000.

MR. J. BYRNE: That is the same one. Too many

sheets here.

Next I am going to jump to The Public Service

Commission, page 61.

MR. DICKS: Pardon me?

MR. J. BYRNE: The Public Service Commission,

page 61. We are here to cover that tonight too, aren't we?

MR. DICKS: Yes.

MR. J. BYRNE: Now let me see what I have on

that. Executive Support - Salaries: We had budgeted $267,600, and it is gone up

to $342,900 this year. That is quite a jump.

MR. DICKS: I can tell you what that is, if my

memory serves me correctly. There was a commissioner, and two

vice-commissioners, or whatever they are called and last year the government

decided, during the year, that it would have a service quality initiative, and

it stuck in money for that. It also transferred down an ADM. That is what the

extra salary unit is. So, as of now that person is still there. That is the

reason it is gone from $267,600 to $342,900.

MR. J. BYRNE: Okay.

Administration, again, Purchased Services, 06:

$272,900 budgeted, $235,500 spent, and $292,900 budgeted again this year. That

is a position not filled again?

MR. DICKS: The Public Service Commission

operates relatively independently from Government. What they do is they will go

out and contract for things such as, oh, I know they had somebody come in an do

a service quality thing in government, and interviewed the deputy ministers and

this type of thing. I suspect that is where the money may show up in terms of

studies they get done. I suspect that is what that figure is. I cannot be

absolutely certain.

MR. J. BYRNE: Page 62, Recruitment and

Selection, Transportation and Communications: You went from $107,000 down to

$64,000. That is a fair drop.

MR. DICKS: Yes.

MR. J. BYRNE: You are not going to do any

travel this year in that department, are you?

MR. DICKS: No, they are all going to have to

stay in Corner Brook (inaudible).

MR. J. BYRNE: Training and Development,

Salaries, the same page.

MR. DICKS: Yes.

MR. J. BYRNE: It went from $537,200 down to

$199,300. How many jobs are gone out of that area?

MR. DICKS: I do not have my salary details with

me. What we are doing with the Public Service Commission is we have taken a

substantial amount of money out of it. What we want to do is to review the level

that we need the Public Service Commission to operate at. I have asked Bob

Olivero to make some recommendations to bring back to Cabinet as to how we

should operate the Commission. What you have are basically thirty-three people

at the Public Service Commission, and it is our view that we are probably not

going to be doing a lot of hiring over the next couple of years. I do not think

we can justify having the same level of effort that you would with a more active

civil service, in the sense of people coming and going. So we believe that we

should, and we are able to make some reductions in Recruitment and Selection and

also in Training and Development. We are also looking at whether or not that

should properly by done by the departments rather than the Public Service

Commission.

MR. J. BYRNE: Okay.

On page 63. I am almost finished, I only have one

page left. Personnel Services, Salaries: That went from $161,200 budgeted to

$219,500 revised to $249,000. Why would that be?

MR. DICKS: I guess the simplest thing to say is

that the whole mandate of the Public Service Commission is under review. This is

the year in which we are going to do a complete program review. You can see that

overall we have taken something in excess of about $750,000 out of the Public

Service Commission. We need to look at the level of services that we are

providing with the Commission, given what is happening in government; we are not

expanding government, and how we might best do it.

I can say to you frankly that the way the monies

are distributed right now are probably not what the final outcome will be. I

think when we went back to the Public Service Commission and said, `Look, we are

taking this amount of money out of your budget as one of the restraint measures,

we believe you need to review your mandate,' they have made a preliminary

allocation in the various salary units. What we have not done is settle on how

that will be distributed and what exactly the role of the Public Service

Commission will continue to be in this context. That should be settled over the

next month or so.

The other thing that we have not been able to do

with the Public Service Commission is, because it is the primary vehicle to

assist with the downsizings that are happening right now, to do the career

counselling, to sort out who bumps where, we could not immediately take action

with the Public Service Commission because we need people there to do these

things. Afterwards, and when things settle down somewhat, we will be able to

take a more detailed look at the Public Service Commission, but this would not

be the best time to disrupt it, at this stage at least.

MR. J. BYRNE: His answers were supposed to be a

lot shorter than my questions, so I am going to have to have a few more minutes.

MR. FRENCH: Could we get an estimate just on

Jack's question there, Mr. Chairman, as to exactly why we have gone from

$219,500 -it was budgeted at $161,200 and we have gone to $249,000. Could we

sort of just get something as to exactly what that is?

MR. DICKS: Sure. I could tell you what that is.

I guess government is trying to deal with a level

of criticism that you have of the public service, that we don't do things as

courteously or as efficiently as we can. Last year they decided to embark on

this service quality initiative, and this is where the human resource services

comes in. In this, if you read the head note there, it says: "...for the

development, adminstration and evaluation of service-wide policies and programs

in human resources, such as employee assistance, conflict of interest and

service recognition programs."

There is some sense, and I don't say I share it,

but certainly it was a government initiative last year to try to induce a higher

level of service quality in the public service, and that role was given to the

Public Service Commission. I don't think it got off and running to the extent

people had hoped. When you are looking for efficiencies you have to ask yourself

whether or not that is best left to a central agency like that. If you tell the

departments: Look, make sure you manage your workforce properly and motivate

them. Tell people what is expected of them and get them to do the job that they

are supposed to be doing.

I have certain very decided views on this. I cannot

say at this point that they have all been endorsed by Cabinet. That is why that

money is there. What will happen is we will have to decide, with the monies

given to the Public Service Commission, how they are allocated among the

different divisions and what is going to be its core functions.

MR. J. BYRNE: I have three more questions. I

would been finished by about 8:50.

CHAIR: Three short questions you said, wasn't

it? You will get three short answers.

MR. J. BYRNE: My questions are always short as

it is.

CHAIR: Okay, the minister will shorten up his

answers.

MR. DICKS: Always.

MR. J. BYRNE: But I want good answers, of

course; I would appreciate it.

With respect to the Public Service Commission,

there has been some rumour that with respect to the downsizing in government,

and what have you, that the Public Service Commission will be wiped out,

eliminated. Is there any threat of that?

MR. DICKS: Government has not made that

decision, no.

MR. J. BYRNE: It has not made the decision. So

you are saying it is being considered, then?

MR. DICKS: No, what I am saying is that the

role of the Public Service Commission has not been decided upon. I would not

tell you today that there is going to be any servicing that is totally

protected, whether it be Treasury Board or Finance or the Public Service

Commission or the Department of Health for that matter.

MR. J. BYRNE: These three questions are more

general. With respect to Atlantic Lottery -

MR. DICKS: That makes four.

MR. J. BYRNE: No, that wasn't a question. That

was a continuation of the last.

Atlantic Lottery, the number of employees: Can we

get a salary breakdown of the people employed with Atlantic Lottery?

MR. DICKS: We can get it for you, I suppose. We

have two people who are on the Atlantic Lottery Board, one of the four people on

that. We will get that for you, 300-odd people.

MR. J. BYRNE: Names, positions and salaries,

okay?

MR. DICKS: Yes, if we have it and if it is

public I will certainly get it for you.

MR. J. BYRNE: What do you mean, if it is

public? Can't I get it under the Freedom of Information Act if I needed it?

MR. DICKS: Oh, you are welcome to it. I am just

not sure that we have it because they are a separate agency that is owned by the

four provincial governments. I have no objection to supplying it. I can tell you

300-and-some people, most of whom are in Moncton, which is something I dislike.

MR. J. BYRNE: The representatives for

Newfoundland, I would imagine there is an office here in Newfoundland.

MR. DICKS: Yes, I suspect we have the right to

the information that is public. I just do not have it at my disposal right now,

but I will certainly be pleased to share whatever I have or can get with you.

You are looking for the salaries of all the people

who work for Atlantic Lottery?

MR. J. BYRNE: Is there a board that administers

that, and are there appointees to that board?

MR. DICKS: Yes, there are two people who sit on

the board from each province, and the head of it is a Newfoundlander. What is

his name?

AN HON. MEMBER: Cluny Macpherson.

MR. DICKS: Cluny Macpherson. Atlantic Lottery

has an organization in this Province. I think Bruce Butler is in charge of it,

and they have people around the Island. I will get you whatever information we

can on it.

MR. J. BYRNE: The appointees, their salaries,

and the people who work there.

MR. DICKS: Yes.

MR. J. BYRNE: Fine.

MR. DICKS: The appointees that we appoint get

no salaries, it is only the employees.

MR. J. BYRNE: Oh, is that right?

MR. DICKS: Yes, people who sit on the board get

no honorarium that I am aware of.

MR. FRENCH: (Inaudible)?

MR. DICKS: No, it used to be that the Secretary

of Treasury Board and the Deputy Minister of Finance sat in on the meetings, two

civil servants. I went to a meeting on behalf of the Minister of Finance back in

1990 but I think I am a shareholder.

MR. J. BYRNE: With respect to saving a few

dollars for the government, last year - now I don't know if this is the right

spot but I am bringing it up anyway because it is a pet peeve of mine let me

tell you; and that is the situation with the cancer clinic at the Health

Sciences. There is certainly a general train of thought or a belief that the

cancer clinic should come under the St. John's Health Care Corporation and be

managed by them, because we have administrators, we have duplication with the

administrator and what have you. We all know the situation that went on last

summer and the havoc that was caused by it and the undue hardship on a lot of

people. So is there any - maybe I should be directing it to the Minister of

Health - but is there any -

AN HON. MEMBER: You should be.

MR. J. BYRNE: No, I should not necessarily, I

mean we are talking about saving money here now. Has there been any talk or

discussion with respect to bringing that under the wing of the health care

corporation and how soon is it going to happen?

MR. DICKS: Well it is a question that the

Minister of Health can answer more directly. All I can do is just comment on

what is public knowledge anyway. There is some wisdom, or some people suggest,

that all the administrations of the various hospitals in St. John's should be

brought together and there is some degree of resistance to that notion. I think

there is fairly broad public support for bringing all the administrations of -

what? - five different institutions together? Not only that, but there is the

Janeway, the Grace, St. Clare's, the Miller Centre and - maybe seven, I forget.

I think what you say is within the realm of probability.

CHAIR: Okay, Jack, that was your free question.

MR. J. BYRNE: No, that was number three. I was

going to ask a fourth one right here now.

CHAIR: Free, I said.

MR. J. BYRNE: Free. One more and I will be

finished.

With respect to tax harmonization -

MR. DICKS: Which page is that on Jack?

MR. J. BYRNE: You're the Minister of Finance,

aren't you?

MR. DICKS: I was until seven o'clock.

MR. J. BYRNE: With respect to the tax

harmonization: Now the logic that you put forth, and I have read the brochures

and what have you and you are talking about the tax being a break for the

taxpayers of the Province type of thing. Now me, I don't personally see

government bringing in something like that if they are not going to get more

revenue out of it.

MR. DICKS: Jack, that speaks of our different

philosophies of government.

MR. J. BYRNE: Hang on now. You have, for

example, a tax going on electricity rates, clothing for children and what have

you. In my mind, it is going to be bringing in more money to the provincial

government, definitely. So it will be a burden on the taxpayer more than -

MR. DICKS: No.

MR. J. BYRNE: With respect to `in due course' -

we know that when the income tax was brought in years ago for the First World

War or Second World War or something that -

MR. DICKS: 1917.

MR. J. BYRNE: Whenever. It was only a temporary

thing.

MR. DICKS: A temporary measure, yes.

MR. J. BYRNE: Temporary measure. Now we have

the harmonization coming in and it won't go on food and other such issues, but

how long will it be before it is on food, on essential items?

MR. DICKS: I think it may go the other way, in

fact. I think there is probably going to be an effort to start taking things out

of the GST as opposed to putting them in. Through this (inaudible) lobby for

books for example, I am told, and not at an official level so I can tell you,

that I think there is some sense that the federal government might have taken

the tax on books out of the GST. So merely because the tax is there does not

mean that you cannot reduce it. In my personal point of view, and it is probably

not yours from what you have said, we should be looking to lessen the tax burden

of the Province, not increase it. We are going to pay a lot less tax in this

Province as a result of harmonization. The federal government did its own

analysis and agreed to compensate us for our losses and they did not -

MR. J. BYRNE: For the short haul.

MR. DICKS: Oh yes, but that's $105 million. In

fact it would have been more like $175 million if we had not made adjustments on

alcohol, tobacco and a few others. I mean this is a substantial tax reduction.

The hardest thing about doing this is the government is going to lose revenue at

a time when we need money. The federal government burden is going to carry us

over the short term, for about four years or so.

MR. J. BYRNE: I will believe it when I see it.

Meet back here in ten years time.

MR. DICKS: Is your middle name Thomas, Jack?

MR. J. BYRNE: Pardon?

MR. DICKS: I said is your middle name Thomas?

MR. J. BYRNE: It should have been.

CHAIR: Yes, Bob?

MR. FRENCH: Just one thing, when you answered

the question on the personal services under Public Service Commission on the

$249,000, in actual fact what you are saying to us is that we are probably not

going to use this money or all of this money?

MR. DICKS: I hope not. What I have said is, at

this stage we will review the role of The Public Service Commission. We told

them to take $750,000 out of it. My recollection is that that figure is monies

that they use to do various things. For example, they commissioned a service

quality thing in the past year and there were other studies that they get done.

Purchased Services generally is what that money is used for.

MR. FRENCH: Would they not have been better off

then, rather than putting that into salaries, if they would put that down under

Professional Services or Purchased Services?

MR. DICKS: Yes, I think so.

Some of these entries I am not quite sure about, to

be honest with you. Sometimes Purchased Services and Professional Services, in

point of fact of what is spent, are very close. But why they put it in one as

opposed to the other, I don't know. I guess professional services might be

restricted to certain groups like doctors, lawyers, accountants, that kind of

thing,

whereas purchased services includes anything other than - maybe

engineers. I am not sure why we have both categories, because very often they

seem to me to be the same when I find out the details.

MR. FRENCH: If it is not another position that

we are creating then I do not know why it is in there.

MR. DICKS: No, it is not another position, it

is monies that we pay for contractual services; you go out and hire a lawyer or

you go out and hire an engineer. Work, Services would a fairly large one there

as well for engineering services. My recollection is that in the Public Service

Commission it has to do with things like hiring someone to do a study of service

quality in government and things like this. I was surprised that the figure was

that high. They had a lot of money last year, so we have just given this

distribution for the time being.

MR. FRENCH: Okay. Thank you.

MR. DICKS: Okay. Thanks, Bob.

CHAIR: Okay it appears that nobody else wishes

to speak.

On motion, Department of Finance, total heads,

carried.

On motion, Public Service Commission, total heads,

carried.

CHAIR: I want to thank the Minister and his

staff for being here and I also want to thank the recorder and the Clerk, whom I

failed to mention at the beginning, for their tolerance and their expertise.

I now ask that there be a motion to adjourn.

AN HON. MEMBER: So moved.

AN HON. MEMBER: Seconded.

The Committee stands adjourned.

Document details

Collection	Newfoundland and Labrador — Committees
Citation	1996-05-21
Type	committee
Volume / chapter	committees_standingcommittees_govservices_ga43session1_1996-05-21_gsc-fin-psc_.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	bcd30e3f5109f60d38306f0406b471edde31b125

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