Government Services Committee

2010-05-10

Newfoundland and Labrador — Committees

May 10,

Pursuant to Standing Order 68, Wade Verge, MHA for Lewisporte, replaces Kevin

Pollard, MHA for Baie Verte-Springdale, and Tony Cornect, MHA for Port au Port,

replaces Ed Buckingham, MHA for St. John's East.

The Committee met at 9:00 a.m. in the Assembly Chamber.

CHAIR (Forsey): Good morning, everyone.

What we will do is introduce each other first and then we will have a motion

to adopt the minutes of our last Estimates meeting. We will introduce, but

before you make your presentation we will adopt the minutes. You can introduce

your staff now, just an introduction.

MR. MARSHALL: Good morning, everyone.

I am Tom Marshall. I am the Minister of Finance, and the Minister Responsible

for the Public Service Secretariat, the Public Service Commission, and the

Office of the Chief Information Officer.

I am joined to my left by Mr. Terry Paddon, who is the Deputy Minister of

Finance; to his left is Laurie Skinner, who is the Assistant Deputy Minister for

Financial Planning and Benefits; right behind me is Linda Vaughan, who is

Director of Finance for a number of departments.

MS VAUGHAN: Five departments.

MR. MARSHALL: Five departments.

To Linda's left, from the OCIO, is Jean Tilley, who is the Acting CIO; with

Jean is Shelley Smith, who is the Executive Director of Information Management;

to her left is Ronalda Walsh, who is Communications consultant, Director of the

Department of Finance and the Public Service Secretariat. In the back, at the

extreme right or my left, is Mr. Ed Walsh, who is the Chair of the Public

Service Commission. He is joined by Ann Chafe, who is a Member of the

Commission, a Commissioner, and Raelene Thomas, who is Director of Appeals and

Investigation of the Public Service Commission.

Usually most of the questions, if I recall correctly, are for Finance, so I

was going to propose that we do the Public Service Commission and the OCIO first

so they do not have to sit and wait through the whole of Finance. If that is

acceptable, we can do that first.

This is the seventh time that I have done the Estimates as a minister. I have

done four in Justice, and this will be the third in Finance. Apart from Anna

Thistle, I think, Kelvin, you have been the critic for most of that time and I

have attempted to enthrall you with my speeches each time, but I had a feeling

that you were not really all that interested. I think today, as a change of

pace, I am not going to make a speech and we will get right into it, if that is

okay with you.

MR. KELVIN PARSONS: You move around but I keep following you.

MR. MARSHALL: What's that?

MR. KELVIN PARSONS: You move from department to department but I keep

following you.

MR. MARSHALL: Yes, I know.

CHAIR: Okay.

Lorraine.

MR. MARSHALL: If we could do the Public Service Commission first and then

the OCIO, then they can (inaudible).

CHAIR: Okay, the rest of the introductions.

MS MICHAEL: No problem.

You just want the introductions now, right?

CHAIR: Yes, please.

MS MICHAEL: Lorraine Michael, MHA, Signal Hill-Quidi Vidi.

MR. KELVIN PARSONS: Kelvin Parsons, MHA, Burgeo & La Poile.

MR. LODER: Terry Loder, MHA, Bay of Islands.

MR. CORNECT: Tony Cornect, MHA, Port au Port, replacing Ed Buckingham,

MHA for St. John's East.

MR. DINN: John Dinn, MHA, Kilbride district.

MR. VERGE: Wade Verge, MHA, Lewisporte district.

CHAIR: I am Clayton Forsey, MHA for Exploits, and Chair.

I would like to welcome everyone here.

I will ask for the adoption of the minutes of May 5 for the Department of

Labrador and Aboriginal Affairs.

MR. DINN: So moved.

CHAIR: Moved by John Dinn.

On motion, minutes adopted as circulated.

CHAIR: It has been the consensus that we will review the Public Service

and the OCIO, if that is okay with both parties, Lorraine and Kelvin? Yes, okay.

Minister, we welcome you and your staff this morning. We will begin by

calling the subheads, please.

CLERK: 1.1.01.

CHAIR: 1.1.01.

We will start with the Public Service.

To the members asking questions, the last time, Kelvin, we got into a little

bit of a longer question period by one of your colleagues. Usually we pass it

around after fifteen minutes or so, but that is entirely up to you people and

whether you want it. I know Lorraine got caught up in time the last time, with

time restraints.

Mr. Parsons, if you want to begin.

MR. KELVIN PARSONS: Ms Michael is going to start off with the Public

Service Commission questions.

CHAIR: Okay, that is fine.

MS MICHAEL: Yes. Thank you.

I actually do not have many questions for the Public Service. Just in terms

of the line items themselves - of course, when we are talking about the Public

Service we are talking about 1.1.01. in Purchased Services, line 06., there

was a difference between the budget and the revision. We went down $124,800.

What did not happen that one would expect to happen? Then this year you are

going down even further. So what is changing with regard to Purchased Services?

MR. WALSH: A primary reduction in expenditure was caused by the

modification in the way we advertise our job opportunities.

MS MICHAEL: Could I have a repetition? The earphone was not working

initially. Sorry.

CHAIR: Okay.

Also, when you are responding to a question, it would be a good idea to

introduce yourself so that we know who is answering the question, seeing that

the minister has a big staff there this morning.

You would like the answer repeated, Ms Michael?

MS MICHAEL: Yes, please. (Inaudible) was not working.

CHAIR: Okay, if you do not mind.

MR. WALSH: My name is Ed Walsh. I am the Chair of the Public Service

Commission. The reduction in expenditure in that area was caused by the

modification in the way we advertise our job opportunities.

MS MICHAEL: Could you explain that, please?

MR. WALSH: Surely. Historically what we would do in terms of the public

distribution of the job ads is we put an ad in the weekend edition of The

Telegram and the regional papers. That would contain all of the language

associated with the description of the job and the qualifications required:

closing date, salaries, and so on.

What we have done is for efficiency and in recognition of the fact that the

primary means of access for most people today in terms of information about job

opportunities is on-line. We have been advertising and putting a greater focus

on our Web page, where all of that information is included, and putting in a

more condensed version of that job information as a lure piece to try and

attract people to our Web site. As a result of that, the cost associated with

the publication of those advertisements has been reduced substantially.

MS MICHAEL: What has the result been in terms of numbers of applications

and quality of applications?

MR. WALSH: Quite frankly, we have seen no significant difference. On

average, the number of applications per competition is about the same as it used

to be. In terms of the quality, the individuals making application, we see again

no significant different. Our rates of success in terms of identifying and

attracting individuals remain high.

MS MICHAEL: Okay, that is good. Well, it is good to save money and yet

still have the same service and quality of service.

MR. WALSH: Yes, ma'am, I agree.

MS MICHAEL: Okay. I really have no more questions for the Public Service

Commission. That was the main one that I had.

Do you want me to do OCIO as well? Okay.

Under OCIO there were some staffing variations. I guess I would just like an

explanation of those under 4.1.01.01., Salaries. It looks like maybe you were

understaffed last year, because there is an under spending of $191,200.

MS TILLEY: Jean Tilley.

During last year, yes, we had a number of client services consultants. They

were new positions, and it took us until March to get those positions filled,

but now the people are in place. That was four positions.

MS MICHAEL: Okay. Great.

Maybe it is the same thing under 4.1.02. Salaries; also there it is a greater

amount, $291,400. What would be the positions there?

MS TILLEY: In that case, there were a number of employee turnovers to

maternity leave, and we also lost one or two staff to the new Department of

Child, Youth and Family Services. So there were some vacancies throughout the

year while those positions were being filled.

MS MICHAEL: Okay. Thank you very much.

Under 4.1.03.05. Professional Services, it was under spent by $128,800. Could

we have an explanation of that? It is going up by $3,411,000 in this year. So,

could we just have a full explanation across the board for Professional Services

there?

MS TILLEY: The increase from the previous year was due to some projects

that we started up that we had not originally planned, such as we developed a

system for the mass immunization registry for the Department of Health. We also

did a Disaster Financial Assistance system, some work for the Canada Student

Loans Program, so there were a number of different projects like that, that we

had not anticipated, which we did in 2009-2010.

The new funding increase for this year, for 2010-2011, is due to new funding

to set up the new Child, Youth and Family Services department. That would be

associated with new computers, that sort of thing.

MS MICHAEL: Right.

MS TILLEY: Also, we are starting a new system, a clinical referral

management system, for Child, Youth and Family Services, and a number of other

projects such as the Human Resource Management system, a new budgeting system

for the Department of Finance, a Vital Statistic system, and we have a number of

different projects there.

MS MICHAEL: Right. So you are quite busy with very specific projects.

MS TILLEY: Yes.

MS MICHAEL: Some of which you had not anticipated?

MS TILLEY: Yes, that is right.

MS MICHAEL: Okay. Thank you very much.

How does that affect the regular goals that you have in the department with

regard to changeover of older systems, the new work that is coming on?

MS TILLEY: We try to move ahead with both. In some cases we can delay

some work to get started on others, depending on departmental priorities and

that sort of thing. There is always some flexibility in terms of how fast we can

move ahead with a new system. It can take multiple years to get done, and that

sort of thing, so we are moving ahead with replacing the legacy systems while we

are also doing new things.

MS MICHAEL: Is it moving as quickly as you would have hoped?

MS TILLEY: It is moving quickly. Some of the systems we have to replace

are fairly large, like the Human Resource Management system we are moving ahead

with this year, that is replacing government civil service payroll and teachers'

payroll, and a new fully integrated HR system. So they are fairly large and they

are multi-year. That would be an additional four years before that system is

completed.

MS MICHAEL: Four years?

MS TILLEY: Yes. So it is a huge piece of work for us.

MS MICHAEL: Okay.

MR. MARSHALL: (Inaudible).

MS MICHAEL: I cannot hear you, Tom. You need to

MR. MARSHALL: It is a $32 million project.

MS MICHAEL: Okay. Thank you.

That is for the changeover?

MR. MARSHALL: That is for this new Human Resource Management system.

MS MICHAEL: Just that one piece?

MR. MARSHALL: That will take four years to implement.

MS MICHAEL: Right, okay. Thanks.

Under 4.1.04., Salaries again, it was quite under spent last year. Could we

have an explanation of that?

MS TILLEY: That explanation is just delayed recruitment and employee

turnover. Within OCIO, a lot of our people move within different branches. So,

because all IT is within the OCIO, when one position is filled it usually

creates a vacancy somewhere else.

MS MICHAEL: Right.

MS TILLEY: That can be two or three positions become vacant as a result

of one. So that would be just turnover within that branch.

MS MICHAEL: Under subsection 05. in the same head, it was overspent last

year by $930,400. Could we have an explanation of that over expenditure?

MS TILLEY: Yes. That is Professional Services, correct?

MS MICHAEL: That is correct.

MS TILLEY: It has to do with the AMANDA licensing system, which is a

system we use in Government Services and Fire and Emergency Services. There was

some work done there.

This branch provides our systems support, so it would be systems support for

a client referral management system in the Department of Health. There was some

extra work that had to be done there; some mainframe support and some additional

support in some of the Executive Council and financial systems.

MS MICHAEL: Okay. Thank you very much.

Under 4.1.05 - I will take each one separately, because maybe there is a

different answer for each one - the first one I want to look at is the

Transportation and Communications which was overspent by $142,400. That is

subhead 03.

MS TILLEY: Yes, and that would be due to the increase in the number of

government offices that we put on the wide area network, which includes: the

Public Service Commission when they moved to Mundy Pond Road; the new Office of

the Comptroller General on Kenmount Road, Pippy Place and Topsail Road; and the

Newfoundland and Labrador Research Development Council. There are a number of

new areas offices that we put on the wide area network there.

MS MICHAEL: Okay, thank you.

You do not seem to expect anything major this year, because you are

maintaining the budget you usually maintain.

MS TILLEY: Right, no major changes.

MS MICHAEL: Right. Would the supply line then that probably connects to

the same reason, does it, because you overspent on the next line, Supplies,

$383,500?

MS TILLEY: Supplies - those were software licensing costs. So, there were

additional costs with our Microsoft licensing, which is Microsoft Office and

Word and that sort of thing, and our Oracle licensing. ESRI is our Geographic

Information Systems software. So, some of those costs were higher than

anticipated.

MS MICHAEL: Okay, thanks.

Under subsection 05. Professional Services, you seem to be continually going

downward there. The Budget last year was $5 million, it was revised to almost

$4.6 million, and now this year it is down to $3.4 million. What is the

difference with regard to the Professional Services that you were accessing?

MS TILLEY: For last year we repatriated some of the services. We used to

contract them out, and we have brought them in-house so now the work is being

done by OCIO employees. That has saved some of the funding there.

For next year there is a reduction mainly due to some projects. Our project

work, we are trying to do most of it under the Solutions Delivery Branch. We

have just moved some funding around so it can be done under that branch and keep

all the projects there together.

In both of those cases and, actually, Purchased Services, we moved some

funding from Professional to Purchased Services because it was more

appropriately allocated there. That was our server hosting.

MS MICHAEL: Good enough, so you have answered both of my questions. I

figured the second one was going to be connected to the first one.

MS TILLEY: Oh, okay.

MS MICHAEL: Yes, the Purchased and the Professional. Thank you.

Under 4.1.06., application development, subhead 04. Supplies was quite under

spent last year, by $2.8 million, and then is going up this year to $1.6

million. Could we have an explanation for that?

MS TILLEY: Yes, the under spending was due to a number of projects not

proceeding as quickly as we had planned. They included the Human Resource

Management system, which I mentioned previously, the budgeting system and

statistics; there is a system for vessel management. A number of pieces of work

we did not get as far along as we had anticipated. Then the increase would be

due to pretty much the same systems. The work is planned to be completed in this

fiscal year.

MS MICHAEL: Okay, thank you.

In the next line, 05., you have also gone up quite a bit in the budget for

Professional Services. You are going up by $4.1 million over last year's

estimated budget.

MS TILLEY: Right, and that would be related to the same thing.

MS MICHAEL: To the same thing.

MS TILLEY: Usually, when you are doing a system, it includes professional

services, software and hardware.

MS MICHAEL: Sure.

MS TILLEY: So it is related to the same reasons.

MS MICHAEL: Okay, thank you.

Under 4.1.06., subhead 07. Property, Furnishings and Equipment, you are

increasing the budget substantially this year, by $1 million.

MS TILLEY: Right.

MS MICHAEL: Could you give an explanation?

MS TILLEY: That is the hardware associated with those same systems, Human

Resource Management, budgeting, vessel management - the same projects.

MS MICHAEL: Okay. I have one question, more of a specific question. In a

recent report, the Auditor General noted the need for a training plan to be

developed with regard to information management. Last year we were told, in

committee, that you are in the process of hiring a training officer. Did that

happen, and how is the training going?

MS TILLEY: Shelley might be better able to answer that question. I know

the officer was hired.

MS SMITH: Yes, we did hire a staff person, and we have developed a number

of on-line training tools, one of which is about to be launched on the OCIO Web

site, and one for managers in government, which we are working with the Centre

for Learning and Development on, to integrate into their management resource

package. We also have quarterly meetings with the entire IM community for

government which numbers, at this point, just over 100 people, and provide them

with opportunities both to have training from OCIO from outside vendors in some

cases and also to share information themselves across departments, because

departments are at different stages in their information management maturity at

this point. So, we have made good progress in that area.

MS MICHAEL: Good.

The one training officer is adequate to do the work that is needed?

MS SMITH: Yes, it seems to be, at this point anyway.

MS MICHAEL: Great. Thank you.

They are all of the questions I have for OCIO.

CHAIR: Thank you, Lorraine.

Kelvin.

MR. KELVIN PARSONS: Just a couple of questions for Mr. Walsh of the

Public Service Commission. Just for the record again, re-educate me on the

difference between the Public Service Secretariat and Public Service Commission.

MR. WALSH: The primary focus of the Public Service Secretariat is to

represent and act on behalf of the employer, particularly in terms of some of

their program focus and responsibilities. So they would, if you will, be the

avenue wherein government HR policy is created, collective bargaining is

negotiated, classification compensation issues are established and developed,

learning and development.

The Public Service Commission operates more as an arm's-length independent

agency primarily focused on the protection of merit, the running of the job

competitions, if you will, for the filling of positions within the Public

Service, and the creation and approval of policy associated with that. In

addition, the Commission is also focused on the provision of other supports and

services that would require an independent arm's-length type of agent,

particularly employee assistance, respectful workplace programs, and our appeal

and investigation groups.

The Commission operates more independently and arm's-length, and the

Secretariat operates as an agent of the employer.

MR. KELVIN PARSONS: Thank you.

Just so I have an understanding again of who does what hiring for government,

the Executive Council, as I understand it, the Premier, is responsible when it

comes to deputy ministers, assistant deputy ministers and directors. How far

down does it go that the Executive do the appointments in the departments?

MR. WALSH: Responsibility for executive appointments rests with the

Lieutenant-Governor in Council.

MR. KELVIN PARSONS: What do you classify as executive appointments?

MR. WALSH: Positions that would be on the Executive Pay Plan. That sounds

like a loop of logic, and I apologize, but positions on the Executive Pay Plan,

which would normally include deputy ministers, assistant deputy ministers and

executive directors.

MR. KELVIN PARSONS: Okay.

MR. WALSH: Regular - if you will - director level positions fall within

the scope of the Public Service Commission.

MR. KELVIN PARSONS: Okay, so explain the difference to me now between an

executive director level and a director level.

MR. WALSH: Okay.

A director operates as an agent of the department or the organization, and is

not a chief executive officer or a chief operating officer. The director would

take the focus and responsibility of a particular program area and is

responsible for the implementation of that program area.

MR. KELVIN PARSONS: So the director, as you say, would be PSC?

MR. WALSH: A director position would be under the PSC; that is correct.

MR. KELVIN PARSONS: Okay.

Everything that comes outside of the executive level falls to the PSC?

MR. WALSH: With some restrictions, yes.

MR. KELVIN PARSONS: What would those be?

MR. WALSH: The restrictions, according to our legislation, are positions

that are filled on a short-term, temporary basis, some contractual employment

opportunities that might be available. Those would be positions that would be

outside of our scope.

MR. KELVIN PARSONS: So the short-term, you are talking thirteen weeks or

less?

MR. WALSH: Yes, that is generally the

interpretation.

MR. KELVIN PARSONS: Who does those, if you guys do not do them?

MR. WALSH: They would normally be the operational requirements of a

department or an agency. Those departments and agencies would be responsible for

doing the recruitment and the selection of those individuals on their own.

The best analogy I can use, and one that has been used a thousand times

before, is that if you are operating a particular organization and you need

somebody on Monday morning because of a snowstorm please, God, not this week -

if you are operating that kind of an organization and you need somebody to clean

the driveways, you cannot wait for us to run a formal competition and post it

and advertise it and screen; you need somebody that morning. You need the

freedom and the flexibility to be able to go out and hire people on that kind of

a short-term basis to respond to immediate emergency needs.

MR. KELVIN PARSONS: Albeit the short-term we are referencing here comes

under the responsibility of the departments, for example, who hire short-term

contracts, is there any body of guidelines or rules around the hiring of such

short-terms, that you are aware of, or is that left totally to the department?

MR. WALSH: The normal expectation is, and clearly from an operational

perspective the primary focus would be, to ensure that the person you hire has

the skill and the qualification and the capacity necessary to be able to perform

the job.

MR. KELVIN PARSONS: So, even though you do not actually do the process

for temps, we will call them, thirteen-weekers', is there any body of rules

that the Public Service Commission has or administers with respect to the

expectations of the level of qualifications of those persons? Albeit you do not

look after the hiring, is there any body of guidelines that the departments are

expected to follow when they hire thirteen-weekers'?

MR. WALSH: None that are prescribed by the Public Service Commission.

MR. KELVIN PARSONS: Okay.

Are there any rules that are prescribed that you are aware of? Albeit you are

not responsible for them, is there anything that you are aware of?

MR. WALSH: The only other potential, if you will, would be those are the

discretionary judgements that have to be exercised by the chief executive

officer of the various organizations and agencies, because the hiring

responsibility in that situation would rest with the deputy minister.

MR. KELVIN PARSONS: Okay.

Back to my question; you do not control the rules, but are you aware of the

existence of any rules or guidelines that

MR. WALSH: No, I am not.

MR. KELVIN PARSONS: Okay.

You seemed to be a bit evasive there; that is why I questioned you.

MR. WALSH: I apologize; I did not mean to be evasive.

MR. KELVIN PARSONS: With respect to the government's recruitment and

retention policies, where exactly does the PSC fit in that? I will explain where

I am coming from. We hear a lot from government about we are trying to recruit

physicians, for example, or recruit professionals and so on. Is that recruitment

and retention policy in your shop, or is it somewhere else in government, or is

it left to be administered by the respective agencies? For example, when it

comes to medics, is the recruitment and retention piece left to Eastern Health

or Western Health? Explain to me the interplay of recruitment and retention

vis--vis the PSC and the other agencies in government.

MR. WALSH: I will start by indicating that the Commission's jurisdiction

in that area is limited. We are limited just to those organizations and agencies

that are scheduled to the Public Service Commission Act under our legislation.

That would mean, for example, in normal circumstances, government departments.

Other organizations and agencies outside of government departments come in on a

voluntary basis if they wish to avail of the supports and services that we

provide. That would not include and does not include Eastern Health. So we would

not be responsible, if you will, under normal circumstances, for the hiring of

any kind of a process for doctors.

More broadly, the responsibility of the Commission is focused on the

recruitment side. It is focused on the processes to be followed in the

identification, the recruitment and the selection of those individuals.

The recruitment and retention strategies from the perspective of

compensation, from the perspective of employee-employer relations, would be the

responsibility within the Public Service of the Public Service Secretariat. Our

role would be to provide focus in the area, particularly as it relates to

ensuring that the mechanisms that we put in play are non-discriminatory, that

they treat everyone equitably, and that there are no barriers in our process

that would restrict individuals who are interested in accessing from being able

to access those opportunities.

MR. KELVIN PARSONS: When the PSC advertise for a position, do you go

outside the Province on a regular basis? I realize now you have on-line, which

is outside, but other than - you see this in The Telegram every weekend,

for example, jobs that are available and so on, and you have explained about why

the costs are less: you put less in the paper, you put more on-line.

What about external advertising? For example, do you restrict yourself to

just Newfoundland and Labrador applicants first, and then do you go outside

after, or do you do it all the one shot and put some in The Globe and Mail ?

How do you work that system?

MR. WALSH: Under normal circumstance, we advertise provincially. I am

talking about the public medium. That provincial advertisement would normally

include - as I indicated in a response to an earlier question - The Telegram ,

and normally then that would be on the Saturday edition of The Telegram

and a number of the provincial regional weeklies.

We do not advertise outside of the Province unless we feel and, based on our

experience, have identified that some of these opportunities would be - I will

use the words - hard to fill, particularly if we are looking for individuals

with highly-specialized qualifications, or individuals who we feel there would

be an insufficient pool of qualified candidates in the Province to be able to

give us the kind of market, if you will, that we can identify fully qualified

and competent individuals. So, it would be rare that we would advertise outside

of the Province.

Again, I go back to your point, with access to our Web page being

international, we find that particularly a lot of the public competitions that

we advertise, we are getting applications from not just throughout Canada but

often from around the world.

MR. KELVIN PARSONS: Thank you.

I have no further questions of PSC, just a couple on OCIO. I notice the lady

who is answering the questions; I think the minister said you were in an acting

capacity. Who was your predecessor?

MS TILLEY: Peter Shea.

MR. KELVIN PARSONS: Okay.

MS TILLEY: Peter retired March 31.

MR. KELVIN PARSONS: Okay. He was not there very long, was he?

MS TILLEY: He was there for over five years.

MR. KELVIN PARSONS: Oh, okay. I remember reading when he got the job; it

just seemed like it was only yesterday.

MS TILLEY: No, in 2004 he started with the government.

MR. KELVIN PARSONS: Okay.

Again, I like these broad questions. Could you explain to me the overview,

your involvement in the privacy piece? I am talking about privacy protocols and

so on that government follows. We brought in the act that had the privacy

provisions in it, of course, back some years ago. It took four or five years to

get everybody ready, the municipal agencies and health boards and all that

stuff, to roll it out. Where are we right now, in terms of the rollout of the

privacy provisions, from your perspective?

MS TILLEY: I am going to let Shelley handle that question. She is in

Information Management, so she is probably the appropriate person.

MS SMITH: The legislation that you refer to, I guess, is the Access to

Information and Protection of Privacy Act, and that legislation is the

responsibility of the Department of Justice. So, while the OCIO works closely

with the Department of Justice, because we put in place security measures in our

IT systems that protect privacy and enable privacy to be protected, we do not

have a primary role in the protection of privacy. That role falls to the

Department of Justice.

MR. KELVIN PARSONS: We have had several examples, and I cannot remember

now who was the minister at the time, but I remember that Minister Kennedy came

out I do not know if it was in his capacity as Justice or as Finance, because

he has been in both as well but we had these breaches referenced, security

breaches; I think somebody stole a laptop off somebody or someone left it in

their vehicle, and somebody else was using this LimeWire and whatever.

MS SMITH: Yes.

MR. KELVIN PARSONS: Is there a reporting procedure when that happens,

from a security perspective, or are we just hearing about this because the media

picks up on it?

MS SMITH: No, there is a formal reporting procedure both for laptops and

for BlackBerries as well, in fact, for government BlackBerries. Once a laptop

has been stolen, obviously we are dependent on the person who has had the laptop

stolen to make the call, the initial call; otherwise we would not have a way of

knowing. As soon as that call comes in, we have put a formal protocol in place

so that the people on the service desk who receive the call know what they are

supposed to do. The first thing we would do is make sure that the user name and

password of that individual is changed, so that if they are able to somehow

crack in and get access, or if the laptop was stolen by somebody who might have

already known that - although they are not usually; usually they are

snatch-and-grabs - then we change the user name and password.

In the case of a government BlackBerry, we actually are able to wipe the

BlackBerry. If you have a government BlackBerry if my BlackBerry was stolen

and I called the service desk, we can actually disable the BlackBerry remotely.

We have also put a lot of other protocols in place around what we do as we

build new IT systems now, as well, so that we are making sure that if

information that is being put into those systems is sensitive, then we take

extra precautions as we are building the systems, to build some of those

safeguards in.

I will say that in cases like LimeWire, the biggest challenge we have is

always the human challenge. So there are certain things that technology will

never be able to fix. Those are things that we, as human beings, will do. In

both of those cases they were purely accidental. There was no malice, but they

are people who really did not understand the technology of what they were doing

and therefore accidentally made confidential information available.

MR. KELVIN PARSONS: I realize it might seem like a contradiction; we were

talking about privacy and protocols but at the same time disclosure. Is there

any requirement or process, protocol, to disclose? Albeit not the details of it,

but to let the public know like what percentage, for example, how often would

you have incidents that we never know about until it comes up in The Telegram

or CBC? Is there an openness and transparency piece that, without

divulging what was involved, you can let people know that the system was

compromised? Because sometimes if you do not know, if people outside do not know

that it has been compromised, you are sort of operating behind the scenes and

nobody knows what goes on here.

MS SMITH: Right. In that case the focus is certainly around personal

information, and that is a judgement that the ATIPP folks and the Justice folks

will make. If, for example, there were information compromised, they get called

in at the same time that we are called in. They have a protocol that they go

through to determine whether or not the information is personal information as

defined in the act, and whether or not the disclosure of that personal

information in the manner that it may have been disclosed, whether it was on the

Internet or whatever the case may be, actually constitutes a violation of

privacy for an individual or a group of individuals. Based on what their

determination is, then notification may be done. If it is one individual or two

individuals, that notification would obviously be done to those individuals.

In the cases of the breaches that you are referring to, we were in a

situation with a large number or potentially a large number of individuals, and

in those cases the notifications were more public because it was reasonable to

assume that we might not be able to contact everybody individually because we

may not have all their contact information. So, it really is the judgement call

based on the individual situation and the assessment primarily by the Department

of Justice and the ATIPP office of the extent of the harm that might be caused

by a breach like that.

MR. KELVIN PARSONS: Thank you.

I have no further questions.

CHAIR: Lorraine.

MS MICHAEL: I just have one more for OCIO, sort of a follow-up. Maybe it

is a question for the minister, I am not sure, but you talked about the HR

management system that is going in over four years, and the $32 million that it

costs. I am just wondering, Minister: Is it taking four years because of how

resources are being allocated, or is it taking four years because of the nature

of the work?

MS TILLEY: It would be the nature of the work. It is replacing civil

service payroll and teachers' payroll. There are probably, I think, seven or

eight modules, so it is a fully integrated HR system. Pensions' payroll will

also run on there. Any other things that are HR related would be part of it as

well. A lot of different modules have to be implemented along the way in

conversion from the current systems and that sort of thing.

MS MICHAEL: Right. Is that conversion and the different modules a

step-by-step kind of thing?

MS TILLEY: Yes, it is done on a phased approach. I believe it is going to

be at least seven phases that are planned right now.

MS MICHAEL: Okay.

MS TILLEY: The payroll could be implemented over two years and then the

other parts will be added on. So it will not be four years before there are any

benefits, but it will be over a period of time when different modules will be

implemented.

MS MICHAEL: Having more people doing the work would not necessarily

change things.

MS TILLEY: No, that is right.

MS MICHAEL: Okay.

Thank you very much.

That is all.

CHAIR: Okay, that is it for the Public Service and OCIO.

I will call for the subhead.

CLERK: Public Service Commission is 1.1.01.

CHAIR: Public Service Commission, 1.1.01.

Shall it carry?

On motion, subhead 1.1.01 carried.

CLERK: OCIO is 4.1.01 to 4.1.07.

CHAIR: OCIO is 4.1.01 to 4.1.07.

Shall it carry?

On motion, subheads 4.1.01 through 4.1.07 carried.

CHAIR: Shall the total carry?

On motion, Public Service Commission and the Office of the Chief Information

Officer, totals heads, carried.

CHAIR: Shall I report the Estimates of the Department of the Public

Service Commission and the Office of the Chief Information Officer carried

without amendment?

On motion, Estimates of the Public Service Commission and the Office of the

Chief Information Officer, carried without amendment.

CHAIR: Okay. So that is fine; we are finished.

Minister, thank you very much, for the two departments.

I will call for the subhead.

CLERK: 1.1.01.

CHAIR: 1.1.01. We are doing Finance and Treasury Board.

Kelvin.

MR. KELVIN PARSONS: Thank you.

Minister, I usually start with the line-by-line stuff and then later I will

come back to more probing questions, we will call them.

On page 33, 1.2.01., Executive Support -

MR. MARSHALL: Just bear with me. 1.2.01.?

MR. KELVIN PARSONS: That is right, Executive Support.

MR. MARSHALL: Okay.

MR. KELVIN PARSONS: Subheading 06. I just noticed here a very substantial

increase in what was budgeted and what was actually spent last year. I am

wondering what that might have been.

MR. MARSHALL: Purchased Services?

MR. KELVIN PARSONS: Yes.

MR. MARSHALL: The Budget amount was $3,500 and the Revised amount was

$28,000. It is an increase of $24,500 due to unfunded requirements related to

pre-Budget consultations. It was advertising and facilities rentals, along with

a development day for the department. There was catering and communication

equipment.

Under General Administration there was $2,600 and that was made up of general

Purchased Services, such as meeting room rentals, catered food, photographic

services of $1,400; entertainment of $900; printing of $200; and equipment and

repair was $100. The development day was $14,100; the pre-Budget consultations

was $6,800 and Public Service Week was $700, and other estimated expenditures.

The actual costs here were less than the revised. It was $3,800, for a total of

$28,000.

MR. KELVIN PARSONS: I am just curious, if you do pre-Budget every year,

you have only budgeted $3,500 this year - your pre-Budget you talked about there

was $6,800 or something - why would you be budgeting only $3,500 for this year

when again you have to have pre-Budget consultations next year? I would assume a

lot of the things you alluded to in terms of renting rooms and whatever,

catering, are not going to change. So why would we be back to $3,500?

MR. MARSHALL: It is anticipated for next year that the unfunded

requirements for pre-Budget consultation and the development day will be sourced

from other savings of the department's overall operating budget next year.

MR. PADDON: When we first started doing pre-Budget consultations there

was no funding in the department. It was intended, I guess, or perhaps thought,

it was going to be a one-off type of thing. Historically, then, we managed the

pre-Budget consultations within our existing envelope of funding for the

department, savings in salaries through recruitment or turnover, those sorts of

things. Really, what we are doing is funding pre-Budget consultations out of the

general resources provided by the department.

MR. KELVIN PARSONS: I am just curious as to why you would continue to do

that if it is a pretty set process. We were doing it now for at least ten or

twelve years.

MR. PADDON: Yes.

MR. KELVIN PARSONS: Why would we not just budget it and then it is done?

MR. PADDON: At best what we would do, if we were going to do that, we

would just reallocate from somewhere within the department. I do not think we

would provide any more funding in the total envelope. At the end of the day it

is, I guess, six of one and half-a-dozen of the other, but I understand what you

are saying.

MR. KELVIN PARSONS: I thought that the whole purpose of budgeting was to

say this is what our expenses are, certainly anything that you know of on an

ongoing basis,

whereas now it seems like every year you have to go look at what

the pre-Budget consultations find, because you can slip it wherever.

It is not very open. If there are pre-Budget consultations, the public ought

to be able to see this is what it costs for pre-Budget consultations. If we are

looking this year under Purchased Services of Executive, because that is where

it happened to be in your savings, next year if your savings happened to be

somewhere else and that is where it gets shoved, it is not very helpful to the

public when you have to go look every year to find out where it went and what it

cost. That is all I am saying. It is more open and transparent if people can

actually see where it was.

MR. PADDON: Typically, the actual expenditure will show up in the

Purchased Services amount, but the amount in the budget is not bumped up to

reflect what we spent. The actual expenditure, typically, always would show up

in this area.

MR. KELVIN PARSONS: Moving along, page 34, 1.2.03., Administrative

Support, 06. Purchased Services again, up $35,900 to $65,000.

MR. PADDON: The large variance is the cost of the Budget householder that

is sent out shortly after the Budget. It is, essentially, the Highlights

document that is printed with the Budget that is sent out to households in the

Province. The cost of that was included there.

MR. KELVIN PARSONS: It costs almost twice as much, you are saying, to do

that?

MR. PADDON: It costs about $39,000 to $40,000 to send that out.

MR. KELVIN PARSONS: I am confused now. You had $35,900 budgeted; it cost

you $65,000. You are saying it is in relation to the householder? My question

MR. PADDON: The householder is only one component of what the $65,000 is.

There is also the cost of printing the Budget Speech itself, the cost of

printing The Economy document, The Economic Review, those sorts of things, plus

the mail-out to the householders.

MR. KELVIN PARSONS: My question is: Did you produce more of them for

distribution, or did the cost of producing what you produced last year go up by

that amount?

MR. PADDON: The cost would be roughly the same. We do not necessarily

know we are going to do the householder every year, so we do not budget

specifically for the householder. It is a decision that is taken year to year.

MR. KELVIN PARSONS: What would determine such a decision? Why would you

feel, for example, next year, I guess it is convenient yes, this is for this

year's Budget, right?

MR. PADDON: Yes.

MR. KELVIN PARSONS: Any tie-in between election years and when you send

out a householder? Is that a governing factor?

MR. PADDON: It would not be a decision that I would make whether we are

going to send out a householder anyway, but if a decision is taken by the

government that they would like to send a householder out, this is where the

money would be reflected.

MR. KELVIN PARSONS: Next, page 35, Government Personnel Costs, 1.3.01,

the Salaries piece there. This is, appropriations provide for the payment of

government's share of employee benefits for employees in government departments

and retired public employees, compensation and contract adjustments, with

relevant funding transferred to departments and boards during the year. Now, we

had budgeted $3.1 million and it looks like there was nothing required there,

but yet we have budgeted $2.4 million.

Could you explain that to me again: how that works here, what it was for, why

we budget it, and why we did not have to use it?

MR. PADDON: If I am not mistaken this is the money for the generally

speaking, departments should have funding available within their salary vote if

somebody retires, for argument sake, and you pay them their severance and any

accumulated vacation pay and those sorts of things. If departments, say, have a

run of retirements in a particular year and they do have sufficient funding to

be able to accommodate those costs, this pot of money is available then to be

used by departments to cover those costs. We typically may use it; we may not

use it. It really depends on the particular department and whether they have

their own savings to accommodate the costs.

MR. KELVIN PARSONS: So, does each department have their own little pot

built in to cover off for this, and this is like an extra in case they overrun

it? I understood that you fellows in Finance always had the pot. If someone

retired from Justice and severance was required, Justice would come over to

Finance automatically and say: We need this amount of money.

MR. PADDON: This is the pot, I guess, you are speaking of. Departments do

not have their own pot, so to speak, but they would be expected to utilize any

savings they might have from turnover or those sorts of things before they would

come and access this pot of money.

MR. KELVIN PARSONS: Last year would it be fair to say that, according to

this, you did not spend any on severance?

MR. PADDON: That is right.

MR. KELVIN PARSONS: So, any time any department had retirements last

year, or severances, they covered it off from savings in their own departments?

MR. PADDON: That is correct, yes.

MR. KELVIN PARSONS: Okay.

How far does this extend in terms of who can access this pot of money? I

realize you are talking departments, for example, but what about other agencies,

health boards, when there are severance issues? I know in the House of Assembly,

for example, which is covered off separately, they have their budgets, they deal

with all the officers of the House and so on.

MR. PADDON: This would only be available for government departments. It

would not extend to agencies or boards or commissions. If an agency or a board,

for argument's sake, had a shortfall because of severance or whatever, they

would have to come to the sponsoring department and make an argument for

increased funding, and it would be done through some other mechanism. It would

not come from this pot itself. This is really just for within the core

government.

MR. KELVIN PARSONS: So, I will give you an example; you tell me what

would happen. Three of the officers of the House of Assembly - we will say the

Auditor General decides that he is going to walk and retire, the Child and Youth

Advocate decides it, and the Citizens' Rep - all decide in one year that they

are going to move, they are going to retire, and they all get severance as a

result of that decision. The House of Assembly did not have it built into their

budget to look after it. Where would they go? They would come back to Finance

and say we need more money?

MR. PADDON: Yes.

MR. KELVIN PARSONS: How would that get approved then? Is that special

warrant stuff then?

MR. PADDON: That would not be a special warrant because there is a

provision in the Supply bill, I guess, to transfer this money to other

departments. Typically, you cannot transfer money between departments; you have

to operate within your own float.

MR. KELVIN PARSONS: Yes.

MR. PADDON: In this particular instance, the Supply bill would allow you

to transfer from the Department of Finance to whichever department required the

funding. They would make a request to the Department of Finance, and I am not

sure if it would go to Treasury Board or if -

OFFICIAL: (Inaudible).

MR. PADDON: Typically, it would go to Treasury Board for approval.

MR. KELVIN PARSONS: Have you ever had a case where the departments did

not have enough savings to cover it off, they came back to you people to dip

into your pot, and your pot was not big enough?

MR. PADDON: Not in my memory.

MR. KELVIN PARSONS: Okay, so there have never been mass severance issues?

MR. PADDON: No.

MR. KELVIN PARSONS: Page 36, Pensions Administration, 2.1.01., I notice

on both 05. Professional Services and 06. Purchased Services there was quite a

substantial savings on both. I wonder if you might explain the reason for that.

MR. PADDON: On the Professional Services, the primary reduction is the

significantly reduced cost for actuarial services during the year.

On the Purchased Services, this really relates to information technology,

hardware and software, those sorts of things, just considerably less than we had

anticipated, and we just did not need.

MR. KELVIN PARSONS: On the Professional Services piece, the actuarial,

could you explain that to me, how it works, how you need an actuarial, why you

did not need as much last year?

MR. PADDON: We have an actuary on retainer. We go out periodically with a

Request for Proposals, so we have somebody who provides actuarial services.

Every three years the actuary would look at all pension plans to do a complete

evaluation. Those are in progress right now, in fact.

Also, if there are specific things that we are looking to find out the cost

of a particular item that we might be looking at, the actuary would be the one

who would provide the costing. So, we would go to the actuary and say: Here is

the parameter; here is what we are looking for. Could you tell us how much this

would cost or what some of the issues around it are?

They would charge us a fee for service depending on the particular item, so

it really depends on how much we would expect, or in a particular year go out

and ask the actuary for information.

MR. KELVIN PARSONS: Under the same heading there, down in the amount, it

talks about 02. Revenue - $2.6 million, an anticipated $2.3 million came in -

where is that revenue coming from?

MR. PADDON: That comes from the pension plan itself. The costs of

administering the pension plan are charged to the Pooled Pension Fund, so the

money that is in the fund actually covers the cost of administering the pension

plan. The net cost to government, so to speak, is zero to administer the plan

because the plan itself pays for those costs. So, we would send an invoice to

the Pooled Pension Fund for the cost of administering the plan and they would

reimburse us 100 per cent.

MR. KELVIN PARSONS: Yes, because the two lines, the amount to be voted

and the provincial revenue, are identical. So, you send the bill, they write it

off, they pay it.

MR. PADDON: Yes, they will always be identical.

MR. KELVIN PARSONS: Always be identical.

MR. PADDON: Normally, it would be identical. There might be some costs

that we would incur in the pension division that might not be

MR. KELVIN PARSONS: Eligible?

MR. PADDON: - appropriately charged to the pension fund, but generally

they are.

MR. KELVIN PARSONS: That does not indicate the total amount of revenue we

receive from our Pooled Pension Fund?

MR. PADDON: No, no, that is just the recovery of the cost of

administering the plans.

MR. KELVIN PARSONS: Okay.

The same page, 2.1.02., Budgeting, Supplies, again it seems to be three times

as much as budgeted.

MR. PADDON: I guess there are two elements that contribute to this. One

is, the movement toward colour printers has also moved towards colour toner

units, which are considerably more expensive than the black and white. That is a

fairly significant part of that $23,000: almost $10,000. The other item is a

fairly significant item for supplies, food items. Our budgeting people generally

work considerable overtime from early January to whenever the budget is

finished. Typically, they will work through suppertime, so they will eat here.

MR. KELVIN PARSONS: I thought it was a case of blue colouring costs more

than red.

Financial Assistance, page 37.

MR. PADDON: Yes.

MR. KELVIN PARSONS: Looking at the Grants and Subsidies there, we had

$10.2 million budgeted last year but we only spent $1.9 million. Could you give

me some insight into that, what happened here?

MR. PADDON: Do you want to take this one?

MS SKINNER: Laurie Skinner.

In this particular vote, I guess, it includes the subsidy to Hydro for

electricity rebates. It also includes the provisions for the Community

Development Trust, and block funding is in there to provide economic assistance

to support some business development opportunities. So if there is not a program

within a particular department and an entity would come forward to government

requesting financial assistance, then there was a pot of funds there that would

provide us with some flexability to provide them with funding. So, that was $2.9

million that was budgeted.

The $1.5 million was spent with respect to the Newfoundland Hydro subsidy,

and the shortfalls exist within the block funding. The $1 million block funding

was not spent during the year, and the provisions under the Community

Development Trust, which are completely offset by revenue, there was no spend on

that either. So the $2.9 million versus the $1.9 million is primarily the block

funding for the $1 million for economic development.

MR. KELVIN PARSONS: Okay, I am going to have to get you to walk me back

through this now. We are looking at $10.2 million to start with. What portion of

that $10.2 million was for the Hydro subsidy?

MS SKINNER: $1.5 million.

MR. KELVIN PARSONS: $1.5 million, and that was used?

MS SKINNER: Yes.

MR. KELVIN PARSONS: Okay. The other, we will call block funding, was how

much?

MS SKINNER: $1 million.

MR. KELVIN PARSONS: $1 million, and was that used?

MS SKINNER: No.

MR. KELVIN PARSONS: Okay, I will just get the basics first. The other

one, was that the Community Development Trust?

MS SKINNER: Yes. Now the Community Development Trust is completely offset

by revenue from the Community Development Trust

MR. KELVIN PARSONS: Correct.

MS SKINNER: So, that is a zero sum. The item that you are probably trying

to reconcile to is an additional $400,000, which is a subsidy to Newfoundland

Hydro to offset the rate increase in isolated diesel communities on the Labrador

Coast and the Island.

MR. KELVIN PARSONS: Okay. Let me come back again, now, because you know

this stuff inside out; I am just trying to piece it together.

MS SKINNER: Okay.

MR. KELVIN PARSONS: The Community Development Trust Fund was how much?

MS SKINNER: $7.3 million.

MR. KELVIN PARSONS: $7.3 million. The Newfoundland Hydro subsidy was $1.5

million.

MS SKINNER: $1.5 million for a subsidy on electricity rates.

MR. KELVIN PARSONS: That is electricity rates.

MS SKINNER: And $400,000 to offset the rate increase for diesel on the

Labrador Coast and the Island.

MR. KELVIN PARSONS: Just a second now. Hydro - that was for diesel on the

Coast in Labrador, and how much was that, $400,000?

MS SKINNER: $400,000.

MR. KELVIN PARSONS: And we had the $1 million in special projects. So, we

had the $1.5 million hydroelectricity subsidy spent.

MS SKINNER: Yes.

MR. KELVIN PARSONS: We had the Newfoundland and Labrador Hydro $400,000

spent

MS SKINNER: Yes.

MR. KELVIN PARSONS: which is $1.9 million

MS SKINNER: Right.

MR. KELVIN PARSONS: which equals the figure on your Revised column.

MS SKINNER: Right.

MR. KELVIN PARSONS: So, I take it we did not spend any money out of the

Community Trust Fund, $7.3 million, or we did not spend the $1 million?

MS SKINNER: That is right.

MR. KELVIN PARSONS: Okay. Because when I asked questions about this last

year, it was my understanding that the feds gave us the $7.3 million and

departments did not know at that particular time whether they needed or did not

need it, so they parked it here to see if we needed it. You had somewhere to go

dip into.

MS SKINNER: That is right.

MR. KELVIN PARSONS: So, we did not have any need to dip into that. Where

was it put in the meantime? Was it invested?

MS SKINNER: No, that is a trust that we basically as we expend the

funds or the projects materialize, we will actually request a drawdown on the

funds from the trust and then that money comes into these particular voting

areas.

MR. KELVIN PARSONS: So we do not have the money; the feds have the money.

MS SKINNER: Right.

MR. KELVIN PARSONS: If, for example

MS SKINNER: We have the money but it is held in trust.

MR. KELVIN PARSONS: So I take it, even though it is in trust, there must

be some interest component somewhere.

MR. PADDON: Yes, it would earn interest on the trust.

MR. KELVIN PARSONS: Okay. Where are the revenues from the interest being

shown here?

MR. PADDON: Ultimately, when you finally draw out everything from the

trust, the revenue would be part of that amount that comes in.

MR. KELVIN PARSONS: Okay. So you do not show it on an annual basis that

we had revenue of $50,000 on our $7 million or whatever?

MR. PADDON: No.

MR. KELVIN PARSONS: Okay. Is there any particular reason, Minister, why

we did not need the money? What was the reason we did not spend it? For

infrastructure stuff, did we have enough money elsewhere? We did have a deficit

of $300 million, almost. Why did we have a deficit of $300 million in some areas

of government when we have $7 million that we are not spending?

MR. MARSHALL: It would not affect our deficit, I do not believe.

MR. PADDON: It would not be in and out, because what the Community

Development Trust money can be spent on is fairly specific. It would be

articulated by the federal government that these are the types of programs that

you can spend for this particular area. So at some point in time government will

determine what they want to spend the Community Development Trust money on and

it will flow, but for 2009-2010 there was no spending.

MR. KELVIN PARSONS: I am assuming this was a multi-year program from the

feds.

MR. PADDON: Yes.

MR. KELVIN PARSONS: How much per year?

MR. PADDON: There is really none per year. You can spend it as you see

fit.

MR. KELVIN PARSONS: Okay. We were going to get $7.3 million last year. It

is in the trust fund. How much did the feds commit to for this year?

MR. PADDON: It is not a question of how much you commit. Once it is in

the trust, we can draw it out of the trust as we see fit.

MR. KELVIN PARSONS: No problem, but if they gave us $7.3 million last

year that we could have drawn down but we did not, that is still in there.

MR. PADDON: That is right.

MR. KELVIN PARSONS: How much are they going to give us this year?

MR. PADDON: $7.3 million would still be available.

MR. KELVIN PARSONS: Okay. So why are we showing in our Estimates only $7

million? How much is in this pot overall? How many years have we been getting

this CDT money? If it is building up in the trust, if we did not spend it, I am

assuming there is $7.3 million in there plus interest. We get another $7 million

this year that we can draw down, it is in the trust, so that gives us $14.3 -

MR. PADDON: No, there is not another $7 million this year.

Maybe Laurie can take you through the -

MR. KELVIN PARSONS: Yes, explain to me how it works.

MS SKINNER: Okay. The original funding that was provided and the fund

actually expires at the end of this fiscal period, in 2010-2011 is $23.4

million. So each year we will decide how the allocation of those funds will be

reflected in the Estimates.

In 2008-2009 the actual expenditure from the trust was $1.6 million. The

projected revised for 2009-2010, there will be a $6.2 million amount spent. So

we have $15.6 million left available for allocation in 2010-2011. Of that amount

- and you probably were asking these questions here, amounts that are reflected

directly in individual department Estimates - there is $4.5 million in INTRD;

$1.3 million in Fisheries and Aquaculture; and $4.9 million in Natural

Resources. That is $10.6 million. The remaining $5 million is reflected in

Finance. That is what you will see in the $7 million; $5 million of that $7

million for 2010-2011 is the Community Development Trust component.

MR. KELVIN PARSONS: Where is the other $2 million?

MS SKINNER: The other two in Finance is the $1.5 million, again, for the

Hydro subsidy, and there is also the $1 million amount for economic development

initiatives. The pot that we had in Finance, we have actually reduced that from

$1 million down to $500,000.

MR. KELVIN PARSONS: Okay.

MS SKINNER: So you have $5 million for Community Development Trust, $1.5

million for Hydro, and an additional $500,000 that is there this year to support

economic development opportunities.

MR. KELVIN PARSONS: What is the interplay here with these Hydro

subsidies, electrical or diesel, and Nalcor? Is there any interplay?

MR. PADDON: Only that Hydro is a subsidy of Nalcor. So we are providing

these funds to Newfoundland and Labrador Hydro to provide, I guess, the

assistance that is necessary on the electricity rates.

MR. KELVIN PARSONS: Nalcor does not make enough money to pay for the

whole shot itself? Why is the government if Nalcor is supposed to be an

independent agency, of which one of its subsidiaries is Hydro, I would think

that the principal responsibly of paying any shortfall or giving any subsidies

to a subsidiary of Nalcor would come from Nalcor as opposed to coming from the

government.

MR. PADDON: Well, I guess Hydro itself, as a regulated utility, on the

regulation side itself, is intended to be separate from the Nalcor, the oil and

gas, side and those sorts of things. If there is a decision taken that the

Province is going to provide some kind of a subsidy to, I guess, transition

rates, or whatever the rationale for it is, it is really a provincial decision

then that they are taking to or the Province's decision - to provide the

subsidy. So the Province then is the one that is providing the regulated utility

with the funding to cover it, as opposed to taking it from the oil and gas side

or whatever.

MS MICHAEL: Could I just ask a question following that?

MR. PADDON: Sure.

MS MICHAEL: Clayton is not there.

It is directly related. I am just interested from it is more or less from a

bookkeeping perspective, actually. This trust fund which has allocations for

different departments, I am assuming that as a trust fund that would show up

it may not show up in name, but would show up - in the Consolidated Revenue. Is

that where we would find that trust fund? If you are looking for money that is

held in trust, usually that money shows up in Consolidated Revenue; is that

correct?

MR. PADDON: We typically would recognize the revenue from the trust in

the year that the related expenditure is made.

MS MICHAEL: Right.

MR. PADDON: Which is why last year we did not have an expenditure, so we

do not see recognition of the revenue for the amount that was in the Department

of Finance. From an accounting perspective, this year when an expenditure is

made, say, in the Department of Fisheries or in the Department of Natural

Resources or Finance, we would recognize the revenue in the same proportion as

the expenditure was made. We are trying to match the expenditure with the

revenue in the same year.

MS MICHAEL: When you got the original money, you got $23 million up

front.

MR. PADDON: The fact that the money was available did not trigger the

revenue recognition.

MS MICHAEL: Oh, okay.

MR. PADDON: At best, it would be recorded as a deferred revenue item

until an expenditure is made, and then we would recognize the revenue at that

point in time.

MS MICHAEL: But we still have that money?

MR. PADDON: The money is still available. There is a difference between

having the cash and how you are going to account for it.

MS MICHAEL: It is just availability.

MR. PADDON: Yes.

MS MICHAEL: Who manages that money that is available? Is that money still

federal until you use it?

MR. PADDON: The federal government actually put it in a separate trust

that is managed by some trust company in Ontario.

MS MICHAEL: Okay, that is the answer I am looking for. That is why it

would not show up, then, in Consolidated Revenue here because it is being held

by the federal government there. Okay.

MR. PADDON: Even if we took the money out and put it in our own

Consolidated Revenue Fund and had the cash sitting in our bank account, we would

still not recognize the revenue from an accounting perspective until we had the

related expenditure to go against it.

MS MICHAEL: No, I recognize that, but it would still be in the

Consolidated Revenue.

MR. PADDON: You would still have the cash, yes.

MS MICHAEL: That is right, but that is the difference. Okay. That was not

clear from before.

Thank you very much.

Okay, you can go on, Kelvin.

MR. KELVIN PARSONS: Concerning the uptake on this, or lack of uptake on

this community development trust, is it a case that you just did not have

applicants or was it a case that the applicants did not meet the very limited

criteria that the feds have set down, or how many applications did you have?

MR. PADDON: I do not think it is a question of having applicants as such;

it is a question of having projects - I guess projects is probably the best way

to describe it - that would meet the criteria.

MR. KELVIN PARSONS: Yes, because the minister made a comment that it

would not affect deficits, but to me, if we have $7 million over here sitting in

this Ontario trust that we can access, we have a budget over here, revenues and

incomes and expenses, if we have spent $1 million, for example, over in some

department over here for a project that could have been funded from over here,

that would impact our deficit. If we have spent a million dollars that we would

not have had to spend if the program that we spent it on, or the item we spent

it on, could have come out of the trust fund, that is directly impacting our

deficit.

That is why I am asking the question: Did we fund stuff from other

departments that should have come under the Community Development Trust? That is

my question, and I think there is a direct linkage here. Maybe I am screwed up

in my thinking, but if. I understood, for example, we talked to Tourism, and

the minister last year said: Well, we are going to build a stadium in Torbay.

That is the kind of stuff that would fit, was the explanation we got.

God knows that we built stadiums last year, and we bought fire trucks,

whatever - I am just assuming fire trucks was an eligible expenditure - but we

have done it on stuff that I understood from previous Estimates were eligible

things, like capital projects such as recreational facilities. So why are we

saying we have a $294 million deficit if we had $7 million over there that we

could have accessed in the community development but we did not? That is where I

am confused.

MR. PADDON: I guess it would be really a question of what the criteria is

for use of the money, and I know what you are saying. Do existing expenditures

that you are normally doing, would some of those qualify for the Community

Development Trust?

MR. KELVIN PARSONS: That is right.

MR. PADDON: Perhaps some of them would.

MR. KELVIN PARSONS: That is why I ask about the interplay, because if we

have this pot of money sitting over here and we have the departments going and

doing these projects, and they are having expenditures that we need not have on

the provincial side because we can access this federal pot, who oversees all of

this, and the interplay, so that we do not spend seven million bucks that we did

not need to?

MR. MARSHALL: While it has not been spent this year, the money has been

identified for certain projects. Because of that, the money is not available to

do something else which you say is causing the deficit. So, while there is money

sitting there, there is a purpose to which government intends to put that money.

MR. KELVIN PARSONS: Can you tell us what the purpose is? Now you are

telling me there was a purpose for not spending it, a reason it was not spent.

MR. MARSHALL: Sometimes the people who are doing the project are not

ready; they have not reached the point where they can receive the money yet. I

will mention the Shorefast Foundation in Fogo. There is money going there and it

is being held until they are ready. There is money for Central Newfoundland.

There is money for the Kruger purchases. Money has been identified, but it flows

out at different times.

MR. KELVIN PARSONS: You mentioned the Kruger purchase. That is the $30

million that government put in this budget.

MR. MARSHALL: Part of it.

MR. KELVIN PARSONS: Part of it, yes. That is what I am saying. You just

mentioned two. Can you provide us with the details to show where the $15.6

million that we have sitting in the pot has been allocated but not yet spent?

MR. MARSHALL: I can undertake to make the inquiries, yes.

MR. KELVIN PARSONS: Okay. Thank you.

That is why Estimates are so valuable. Sometimes it is not a case that there

is anything improper; it is just that we do not have an opportunity to ask these

questions and get an understanding as to how these things work.

MR. MARSHALL: I think you are under the impression that these trust funds

come every year. I do not think that is necessarily the case. I think there is a

pot and the pot is held in trust, and then government has the right provided

the projects are eligible to allocate from that pot. The pot is not

replenished every year.

MR. KELVIN PARSONS: I agree. I understand. Now that it has been fully

committed and done by the feds, that is the end of that program as such, I would

say, what you have there.

My problem is trying to figure out we see a government announcement, for

example, that might come out of Executive Council saying we are going to do the

Fogo project. You start to say: Okay, which department is paying for that? You

ask the Minister of Natural Resources: Are you paying for that? No, we are not

paying for that. Okay, where is it? It is just that trying to understand where

it is all coming from and how it all works is the problem.

For example, Kruger, I had no idea until now that was where government was

going to fund a portion of the Kruger purchase: from this pot. I would have

assumed that it would have come from Natural Resources, but that is not what we

understand now.

MR. PADDON: It is voted in Natural Resources, and the trust revenue is

also shown in Natural Resources, so net zero to Natural Resources, but you would

have the amount that is coming from the Community Development Trust voted in

Natural Resources in related revenue offsetting.

MR. KELVIN PARSONS: Likewise, I would have thought the Hydro subsidy

stuff would have been over in Natural Resources somewhere rather than in

Finance, because that is who Hydro or Nalcor reports to. It is just confusing,

and that is why we ask these questions. It is not because we think there is

anything improper; we just do not how you got the books done.

MS SKINNER: I would like to clarify, as well, there is a ministerial

committee that oversees the administration of the Community Development Trust

and the projects are evaluated annually. So if a project did not proceed in one

year, it is evaluated in the following year to see if it is at a stage where it

will proceed and the funds will remain allocated in that particular department

if it is not spent in one year, just to make sure that it is not sitting there

and not utilized.

MR. KELVIN PARSONS: The next page, 38, 2.1.05., Financial Assistance.

Provide for loan and equity financing to support business opportunities and

promote industrial development, with relevant funding transferred to departments

during the year. I notice you have this one under Capital,

whereas the other one

is under Financial Assistance generally. Could you explain the difference to me?

MR. PADDON: Yes, they are both related, the million dollars that Laurie

talked about previously and this half a million dollars here, and no money spent

on either one. The reason one is classified as capital is to provide us with the

option to provide a loan or an investment in a particular company, something

that would tend to be repaid or hopefully be repaid,

whereas the million dollars

that was in the previous amount would be more for grants, things that would not

be intended to be repaid. So, it is really just a question of what you were

going to use the money for. If you were just going to provide a non-repayable

grant you would pay it out of the million, if there was an opportunity. If it

was going to be an investment in a company, or a loan that is going to be

repaid, it would come out of the capital amount, the half a million dollars.

MR. KELVIN PARSONS: If someone has a project, for example, and they go to

the Minister of Natural Resources and they want a grant, and the Minister of

Natural Resources says: Yes, I think that is a great idea; do the due diligence

on it, Cabinet process, whatever is necessary; and Cabinet says: Yes, we are

going to kick $100,000 into that project. They could come back to this $1

million pot and get it approved here under Finance.

MR. PADDON: Typically, people would apply for grant funding or for loans

through the regular government programs, say, through Natural Resources or the

Department of Business or INTRD. This is intended to be if a good idea comes

forward that does not fit within the parameters of existing programs, it just

provides some flexibility to be able to deal with it, but it would go through

the normal sort of due diligence process, the Cabinet process and that sort of

thing.

MR. KELVIN PARSONS: Yes, it is just an extra pot, like you say. Instead

of parking everything in Business, it might not fit there, so let us leave a

little fund over here and

MR. PADDON: That is right. So, at least you have some flexibility to deal

with something if you feel that is a reasonable idea.

MR. KELVIN PARSONS: We used to call it the Premier's play money. That is

how we used to define it years ago.

Moving right along here, on page 40, Tax Administration, 05. Professional

Services, $32,300 was allotted, $15,300 spent. I am just wondering: What kind of

professional services would be involved there again?

MR. PADDON: Generally speaking, these would be legal costs related to

collections, Sheriff's costs, those sorts of things.

MR. KELVIN PARSONS: What is anticipated to bump it up to $200,000 this

year?

MR. PADDON: We have an issue with a particular taxpayer that we feel we

need some external advice on, that is outside the sphere of expertise that you

would typically have within our group. It relates to transfer pricing issues

between corporations operating inter-provincially. So, we do know we have an

issue, and we do know we need some expertise or expert advice on it.

MR. KELVIN PARSONS: Are you at liberty to say who it is?

MR. PADDON: It would be probably inappropriate to say. It is an issue

with a particular taxpayer.

MR. KELVIN PARSONS: Has it reached the litigation stage yet?

MR. PADDON: Not from the department's perspective, no.

MR. KELVIN PARSONS: Explain that to me: not from the department's

perspective.

MR. PADDON: There may be some litigation external to government related

to this, but we have not started any litigation. Really, all we are trying to do

is to do our normal audit work, but we do not have the expertise and our audit

staff in this particular area to be able to do it internally.

MR. KELVIN PARSONS: Thank you. Rather evasive.

MR. MARSHALL: I do not think he is being evasive. I think it would be

inappropriate for him to name the person, under our tax legislation. The company

in question is involved in litigation. We are not involved in litigation.

MR. KELVIN PARSONS: What is our involvement in it? Why are we going to

spend $200,000 if we are not involved in the litigation? I just do not

understand. We either are or we are not involved.

MR. PADDON: The taxpayers self-assess, so they provide a tax return and

say: Here is how much tax we owe.

Based on information we are aware of, we conclude that there is likely an

issue where they may have under-reported their tax; so, in order for us to

determine what we think is the appropriate amount, we are going to have to go

out and engage in the audit process or do the normal tracking and digging to

come to our own conclusion. Because it is a specialized area, our own staff do

not have the expertise to be able to do that, so we are going to have to engage

some external party to give us assistance along this line.

Once that is completed, then we would issue an assessment if we feel the tax

is under-reported. Then it is a question, if the company agrees with us, they

would pay the assessment. If they do not, then we would have to take it to the

next step, which is likely litigation.

MR. KELVIN PARSONS: I take it we are not talking about a mom-and-pop

operation here; we are prepared to spend $200,000 to get that work done to

determine what our assessment should be. I think we must be talking about a

fairly substantial taxpayer.

MR. PADDON: I think that would be a fair statement, yes.

MR. KELVIN PARSONS: Page 41, Special Assistance, on the fuel tank

replacement program, you budgeted $75,000, spent $385,000, obviously up

substantially. Maybe, Minister, if you could just give us an overview of the

tank replacement program, where it is, how many we have done, what is the

status. I know we had a lot of problems with extensions over the years. We had

to continue to extend it because people were not meeting the deadlines that we

had set previously. Could you just give us some idea of where that program is

now? By the way, it is a fantastic program; there is no doubt about it.

MR. MARSHALL: We will be continuing the program for another year. The old

deadline was March 31, 2007. The program was introduced back in 2002 for a

five-year period. It is now due to expire March 31, 2010. The program was

designed to alleviate the financial impact of replacing heating oil storage

tanks by low-cost homeowners whose annual family income is less than $22,397 and

whose primary heating source is fuel oil.

On October 16, 2009, the government announced a new loan program to assist

low-income homeowners register their oil storage tank systems. The new program

changed the deadline for homeowners to register their oil storage tanks. The new

deadline is May 31, 2010, but the deadline to register for residents of Nain,

Hopedale, Postville, Makkovik and Rigolet has been extended to the end of the

2010 shipping season, which will be approximately November of this year.

For budgeting purposes for 2010-2011 we are estimating that there is $200,000

for a continuation of the program. It is an initiative that is complementary to

the Poverty Reduction Strategy, and we will continue the commitment to support

low-income households with this funding.

The program is for people with incomes less than $22,397. The assistance is

50 per cent of the cost of the tank or $300, whichever is the less.

The revision is up because there was, obviously, a greater take-up. After

years of take-up on the same level, there was an uptake last year.

MR. KELVIN PARSONS: Thank you.

Page 42, Office of the Comptroller General, 2.4.01., $4.6 million budgeted

last year, $3.9 million, roughly, spent, estimated to be up about $900,000 or $1

million this year. I take it there was less spent last year because there were

positions that were unfilled; you could not fill positions.

I am just wondering, Minister, if you can give us some explanation as to: the

Comptroller General does a lot of work for the House of Assembly, and given the

Green report that came in, in 2007, it is my understanding, being a member of

the Management Commission, having spoken as well with the Comptroller General,

that one of the major problems he had was that he had so many staff but instead

of being able to do all of the stuff he wanted to do for government, we will

call it, he ends up taking a large portion of his time to do this House of

Assembly stuff.

MR. MARSHALL: Yes.

MR. KELVIN PARSONS: In fact, he asked the Management Commission this year

if it would, through its budgets, the Legislative budget, fund more positions in

his office. Now, that did not happen in the House of Assembly budget. I am just

wondering if you could give us some comment on that. How do you see that

interplay between him in the House, him in the government, saying that he has to

use his staff to do House stuff? Did he get the bodies that he wants?

I am assuming that this extra $1 million here, he did not get it from the

House of Assembly but he got his extra that he wanted here to do it anyway. I

was under the impression that the implication was: if we do not get it from you

guys, do not come to us looking to do the work for you.

What is your understanding of that situation?

MR. PADDON: You are absolutely right; the Comptroller's Office does spend

a fair amount of time on House of Assembly matters. There are additional

positions in the 2010-2011 Budget for the internal audit area. Essentially,

because of the reason that you stated, that he does spend a fair bit of time on

House of Assembly and that does take away from his ability to do the normal work

throughout the rest of government, two extra positions are provided in 2010-2011

for the internal audit area.

In terms of the amount of money that is voted in the House of Assembly versus

all of government, there is probably a disproportionate amount of internal audit

time spent on the House of Assembly versus everywhere else. These two extra

positions now will enable him to continue the work that the Comptroller's Office

is doing in the House of Assembly, but also gives the ability to broaden our

work area throughout the rest of government.

MR. KELVIN PARSONS: Just one more question on the specifics. Page 43,

Corporate Services, 2.4.02.06., Purchased Services, I am just wondering if you

could explain $425,000 last year, they only spent about one-third of that, or

one-quarter of that, what happened? What is this all about?

MR. PADDON: The Corporate Services, we are moving to a model where we are

going to share a number of services government-wide, particularly on the payroll

and on the data entry type of issues on the financial side. We have been moving

toward this. We had anticipated that it would be fully implemented in 2009-2010

and we had expected to lease some premises in 2009-2010 for the shared services

unit. That did not happen until later in 2009-2010, so you have a little bit of

rent and some of the associated costs with getting the lease space in readiness.

We are anticipating that we will be fully in there this summer now.

MR. KELVIN PARSONS: Thank you.

That is it for me, line by line, Mr. Chairman.

CHAIR: Lorraine.

MS MICHAEL: Yes, I have a couple. I do not have to ask a whole lot,

because Kelvin has covered a lot of the ones that I also wanted to ask, but

there are a couple that I still have on the line items.

Under 1.2.03., right back to the beginning, subhead 03., I am just interested

in what the Transportation and Communications covers in this division here.

MR. PADDON: It is basically postage, courier costs, for the whole

department.

MS MICHAEL: It is so standard all the time that the figure just does not

change?

MR. PADDON: Pretty well, yes. It would include our Home Heating Rebate

Program, the postage costs and all of that associated with that, our Parental

Benefits Program, all of those sorts of things.

MS MICHAEL: Okay.

Under 2.2.04.01., the Salaries here, are these Salaries inside the department

that does the Tax Administration?

MR. PADDON: Yes.

MS MICHAEL: There was an under spending of $554,000 this year. Can we

have an explanation? Was it retirements?

MR. PADDON: No, basically you could probably account for it all through

just normal turnover. Both the Comptroller's Office and the Tax Administration

Office generally have a fair bit of turnover during the year. They seem to be

areas that take people in but feed other areas of either the Department of

Finance or government.

MS MICHAEL: The Auditor General complains of the same thing, I think.

MR. PADDON: Yes, there is lots of it going around.

MS MICHAEL: Okay. Thank you very much.

Then a general question with regard to there are a few line items - it has

to do with where you offer executive and support services and you do things for

other departments, and in a number of cases there is provincial revenue. I am

assuming, when you do work for a department, then the department gets billed and

the money comes to you. Is that what it is?

I can give you specific examples, if that would help. For example, let's say

Statistics, 2.3.02., and then you have provincial revenue. It says that you do a

wide range of surveying, spatial analysis and technical services for government

departments and agencies. Is the provincial revenue money that is paid from the

departments that you do the services for?

MR. PADDON: Yes, for the most part. It would be services outside the

normal scope of so, if it was something special, if they wanted a particular

survey done, we would hire temporary staff and then we would bill the particular

department.

MS MICHAEL: Okay, that is what I was figuring. I just wanted to check

that.

I have a question which is a line item but from the Estimates. The minister

is going to smile now. I am finally getting this question answered, Minister. On

page small numeral ix of the Estimates, where we have the analysis of our

revenues, the revenues for this year and for last year, we see that last year in

2009-2010 the Corporate Income Tax revenue was $638.6 million and this year

$306.4 million, so the corporate revenue is down by $332 million. I do recognize

that there was a change in the rate for income tax payment from small

businesses, but it was a really small rate change although 1 per cent,

depending on how large your business is, even with a small business, can be

fairly large and can amount to a bit of money but I cannot see how the change

in the Corporate Income Tax rate for small business explains the $332 million

drop in the corporate tax.

MR. MARSHALL: We have two corporate taxes: one for the big corporations,

which is 14 per cent, and one for the small business, which was 5 per cent, and

we are now going to reduce it down to 4 per cent. That was the only change we

made. We did not lower the Corporate Income Tax this year.

MS MICHAEL: No, I realize that, but I am looking for an explanation as to

why there is such a difference from last year's corporate tax revenue and the

projected one for this year. It is a $332 million difference and I cannot see

how that change in the corporate tax to the small businesses will account for a

change of $332 million.

MR. MARSHALL: No, it is not. The answer is the recession. It is that the

large corporations have been hammered with what happened last year. What you

have to remember is that the bad times were last year, so their incomes all

dropped. They pay their tax on their income, but they are filing their returns

this year - because remember it is always a year later you file the returns. So

we are going to see in Corporate Income Tax a reduction in what they pay us,

even though there has not been any drop in their rates, because of their lower

incomes from last year.

MS MICHAEL: Where are you expecting the worst drop? It certainly is not

in the oil industry.

MR. MARSHALL: No, it is in the mining industry.

MS MICHAEL: In the mining industry. How much have you assessed will be

the drop? I understand what you are saying, but how much have you assessed will

be the drop from the mining industry in their corporate tax?

MR. MARSHALL: Terry, what - breaking it down?

MR. PADDON: The oil industry is probably where you are going to see the

biggest drop, because you are coming from - the previous year, 2009-2010,

reflected the income from the previous year, which was the year when oil prices

were in the $140-a-barrel range. So you had a fairly big bump-up where the

$600-odd million incorporated there, the income tax was, because of high oil

prices. Then, of course, you are moving to the next year where oil prices sort

of came down to $40 and higher, so that is really the predominant reason.

When you then look to the next year and you would expect to see sort of some

moderation in Corporate Income Tax because you have had a recession year and

that sort of thing, which would be more broadly based, you would think the

mining sector would result in some lower taxes. Still, the oil sector, even

though oil prices were down, we are still reasonably buoyant. So that sector

will still pay a reasonable share of tax, just not as high as it was.

MS MICHAEL: Right. That makes great sense to me because the $638 million,

of course, that is the revenues that came in 2008-2009, which was the high year

for the oil industry. You are quite right.

MR. PADDON: That is right.

MS MICHAEL: That makes absolute sense to me, and this is what I have been

looking for, is an explanation of why the corporate drop is so low, so that is

helpful.

MR. MARSHALL: It is also helpful that we have this, because we did not

understand where you were getting that number from. We could not see where you

were seeing this drop. You referred to it as a break for big corporations and,

of course, we did not give them a break. So we could not see -

MS MICHAEL: Without an explanation, that is what it looks like. If you

look at page 9 you see this big drop of $332 million.

MR. MARSHALL: Yes.

MS MICHAEL: Maybe it does not work for government to point this kind of

thing out at Budget time, but noting a drop in the corporate sector, and why, is

helpful, because people do read the documents.

MR. MARSHALL: Sure.

MS MICHAEL: When you see a drop of $332 million, I think it is very

important to have an explanation of that.

We have no idea you have mentioned what seems to me like a pretty serious

case with regard to a corporate body that may or may not be paying the money

that it should be paying. Does that figure at all in what you are looking at

here, the case that you are talking about where you are going to have to bring

in experts to see if this corporate body has reported correctly with regard to

its income?

MR. PADDON: I am sort of careful how I phrase it as well. There are

always differences of opinion as to how you interpret legislation. So in a lot

of cases, or in this particular case, that may be what we are talking about -

how we feel it should be interpreted versus how they would - but in our tax

revenue we have not factored in any increased revenue as a result of this. First

of all, we do not know how much is there; and, second, we do not know the timing

on it as well. This could take a couple of years to play out. Who knows? It is

not factored in the revenue forecast.

MS MICHAEL: It is not factored in the revenue, so that is another piece

as well.

MR. PADDON: Yes, that is right.

MS MICHAEL: That is right. Okay.

MR. MARSHALL: The other thing this shows is that when GDP is growing and

the economy is booming we get more fiscal revenue -

MS MICHAEL: Oh, yes.

MR. MARSHALL: - because everyone is doing better, but when you have a

recession the opposite happens.

MS MICHAEL: Minister, believe me, I understand how the economy works.

MR. MARSHALL: Yes.

I am not saying you do not, but it is when you see numbers like this you see

the impact of it, and it - because you hear GDP, it is a number.

MS MICHAEL: Right.

MR. MARSHALL: You hear recession. It is a statement but it does really

impact us. When times are not good it affects us fiscally.

MS MICHAEL: No, I appreciate the explanation because I really do see now

where the drop is coming from, but there is absolutely no explanation anywhere

in your budget documents of why the corporate tax has such a drop this year. So

it is really helpful to me being able to have this kind of discussion about it.

MR. MARSHALL: Another thing that I have noticed in my reading of it, it

is always helpful if you just look at one year to the next, which is what we do.

Sometimes it is helpful for everyone if we go back and look at it over a period

of time and see the trends.

MS MICHAEL: That is right, yes.

MR. MARSHALL: Because we forget, as Terry mentioned, the year before the

oil incomes were very high. So now they are - not only the recession but also

normalizing.

MS MICHAEL: Right.

I have a couple of more general questions. Do you want to ask yours first?

No? Okay, thank you.

I am actually finished with all the line stuff. I wanted to ask just a couple

of questions, Minister, on the VLTs. I would like to know - the goal of the plan

was to reduce by 15 per cent the number of machines in the Province by

eliminating multi-site establishments. That was one of the major ways, I think,

and it has been reduced by 11 per cent to date, but by the end of this year -

MR. MARSHALL: No, I -

MS MICHAEL: Excuse me, go ahead.

MR. MARSHALL: I was going to correct you. My understanding is that the

policy was for 20 per cent. It was originally 15 per cent, and then we said

another 5 per cent to 20 per cent.

MS MICHAEL: Okay.

MR. MARSHALL: Seventy-one came out on the beginning of the year, April 1.

I do not think you were aware of that. Really, I think we are at 24 per cent

right now. We have exceeded the goal

MS MICHAEL: These are the latest figures we were given by your

department, so you obviously

MR. MARSHALL: Seventy-one more I think it was seventy-one came out on

April 1, this year. So, you would have to add those to the numbers that you

have.

MS MICHAEL: Okay. We will just ask for an update. My staff will get an

update on that.

MR. MARSHALL: I would be happy to give that.

MS MICHAEL: Pardon?

MR. MARSHALL: I will be happy to give you an update.

MS MICHAEL: Great. Instead of us having to call, could that be one of the

items that we get, an update on the VLTs?

MR. MARSHALL: Sure.

MS MICHAEL: Obviously, I know my researcher got the latest that she could

get, but that was probably post-April 1. So, if we could have an update on that

MR. MARSHALL: Yes.

MS MICHAEL: - and make a request, too, Mr. Chair, that anything that

anybody on the Committee requests, if everybody would get that information when

it comes.

CHAIR: Sure.

MS MICHAEL: That is really good to know.

Are there more coming out this year, or is that the number now for this year?

MR. MARSHALL: Well, that is the end -

MS MICHAEL: That is the end?

MR. MARSHALL: That now brings us to the end of that particular strategy

or that particular plan. Now we have to decide where we go from here. While we

have reduced, in a major way, the number of machines, revenues were dropping but

they have gone up again.

MS MICHAEL: They have gone up again.

MR. MARSHALL: From the point of view of the Atlantic Lottery Corporation,

they do not see an increase in revenues. They use the example of: it is not your

father's Oldsmobile. The younger people are bored with these games and they have

migrated, if I could use that word, to games which we do not regulate, which is

this on-line poker, which is coming from illegal sources throughout the world

and we cannot regulate it. The big issue is: What are we going to do about that?

In some jurisdictions they are getting into that, to that particular type of

gaming.

MS MICHAEL: You mean using the gaming as part of their (inaudible).

MR. MARSHALL: No, in other words, they would offer the on-line poker

MS MICHAEL: That is what I mean.

MR. MARSHALL: - so that their residents do not use these sources from all

around the world. So, we are looking that that now. We are going to decide where

we go from here.

MS MICHAEL: It is a very slippery slope if you get into the on-line

gaming. As you know, as opposed as I am to VLTs, I am even more opposed to the

on-line gaming.

MR. MARSHALL: We can shut down the VLTs. We cannot shut down the on-line

gaming. It is out there; it is available to everybody.

MS MICHAEL: Yes, I know, but

MR. MARSHALL: The question is: Should the government offer it so that our

citizens would then use a regulated form of gaming rather than using these

illegal sources coming from (inaudible)?

MS MICHAEL: I guess what I am saying is, you cannot regulate that they

would use just the regulated.

MR. MARSHALL: Pardon?

MS MICHAEL: You cannot regulate who or what they are going to use.

MR. MARSHALL: No.

MS MICHAEL: Why would you get into using a form of gambling which is

maybe even more addictive than the VLTs? I think it is a very serious issue.

Will you be holding consultations on this issue? What is the plan at this

moment?

MR. MARSHALL: There is no plan as yet. We have come to the end of the

other plan. We exceeded the reductions we intended. We now have to look at

everything and decide: What is our next plan? What is our next strategy going to

be? What is the next reduction plan?

MS MICHAEL: In spite of what you said that people are saying about young

people in the latest study that was done - I cannot remember what year that was;

you have it as well -

MR. MARSHALL: It is the prevalence study.

MS MICHAEL: The prevalence study. It shows that the percentage went up

for younger people. The percentage of usage of VLTs was higher for younger

people.

MR. MARSHALL: I think the total went down.

MS MICHAEL: Yes, but the younger went up.

MR. MARSHALL: I think it went from 1 per cent to 0.7 per cent, something

like that.

MS MICHAEL: It went down in general, but not for the younger population.

We are just encouraging more and more of the younger population using I am not

against gambling, and we do not need to get into that; it is a bit of a policy

discussion. I am not against gambling, but it is the proven addictive nature of

certain forms of gambling that is the issue.

I think, from an economic perspective - I do not know if this kind of

analysis has been done - more and more money is going into helping people who

are addicted to VLTs, for example. Getting rid of VLTs removes an expenditure

that government has in taking care of people who have become addicted. You have

people who end up on social assistance because they became addicted and lost

everything through the gambling using VLTs. So it is a major issue but there are

also economic realities to VLTs as well. It might benefit you more by not having

VLTs at all than by having them.

MR. MARSHALL: Again, it gets back to my earlier point where they seem to

be migrating to this new on-line poker. They are bored with the VLTs, the

younger people.

MS MICHAEL: Except the study shows that, in actual fact, they are also

doing VLTs more percentage-wise, so it is complicated.

MR. MARSHALL: It is complicated, but I think they are getting bored with

that, from what we can see, and that they are going to go - it is a different

game. How do we regulate something we cannot regulate? It is a problem. I think

it is going to be much more serious than what we are facing today.

MS MICHAEL: Yes, but I really do think that getting into on-line so that

you can say government has a regulated area that people can use, you do not have

any idea how many people are going to use that. If it is not as exciting as

another game, they do not care if they are playing on-line with a regulated game

or a non-regulated game; they really do not.

MR. MARSHALL: If the ALC gets into this, then people will know they are

dealing with this agency which presumably they can trust in terms of: if they

win, they get their money. Then the profits from that at least would be applied

back into services for the people of the Province, rather than going outside of

the Province.

MS MICHAEL: Well, I will not get into the moral and ethical discussion,

but I think there is a real moral and ethical discussion around how far

government goes in using forms of gambling for revenue.

Thank you, Mr. Chair.

CHAIR: Thank you, Lorraine.

Kelvin?

MR. KELVIN PARSONS: Thank you.

Minister, just a few probing questions, we will call them.

MR. MARSHALL: What did you call it?

MR. KELVIN PARSONS: I usually call them probing as compared to more

general questions -

MR. MARSHALL: Probing. Okay, probe away.

MR. KELVIN PARSONS: - as opposed to the line-by-line stuff for which

there are specific answers.

Just again if you could explain - because I think it is an age factor and I

tend to forget things, too - in 2007-2008 and 2008-2009 we had some fairly

substantial surpluses. How much were they, and what did we do with it?

MR. MARSHALL: We had four years of surplus, if I recall, and I think they

totalled about $4.1 billion.

MR. KELVIN PARSONS: What did we do with it?

MR. MARSHALL: With the money?

MR. KELVIN PARSONS: Yes.

MR. MARSHALL: With the cash, because we are switching from accrual

accounting to cash here.

MR. KELVIN PARSONS: So, we had four point - how much in total?

MR. MARSHALL: I think the surpluses combined - if you added the total

surpluses - I think it was about $4 billion or $4.1 billion over four years.

MR. KELVIN PARSONS: So, what did we do with that money?

MR. MARSHALL: Well, we paid down our debt as it came due. As our funded

debt comes in - we cannot prepay our debt. I suppose we could, but we would pay

a tremendous penalty.

MR. KELVIN PARSONS: Yes.

MR. MARSHALL: So, as our debt comes due, we pay it. We do not have to

roll it. We are not re-borrowing; we pay it down. We are also funding our

deficit and paying cash for the Capital Works Program, the infrastructure

spending that is taking place. We have not had to go into debt for a number of

years, or we have not had to borrow, I should say, for a number of years,

because we have had this cash. We still have cash on hand, and as our debt comes

due this year we expect to pay that down and we will pay for our infrastructure

this year without having to borrow this year.

MR. KELVIN PARSONS: Is there some little chart you can give us? I

understand things much better if it is graphic. If we have had a $4 billion or

$4.1 billion surplus over these years, and this is what you have used it for,

how much do we have left?

MR. PADDON: Yes, that is easy enough to do.

MR. MARSHALL: Yes.

MR. KELVIN PARSONS: Just in a nutshell, it would be very helpful when we

MR. PADDON: One of the problems, as the minister alluded to, that you get

into, is the difference between the accrual surplus, which is not just because

you have $4 billion in surplus, that is not all cash, because there are

accounting adjustments, non-cash items, that are in there, those sort of things,

so you have to disaggregate it, but we can provide a

summary to try to break it

down into sort of the major parts.

MR. KELVIN PARSONS: If you could.

MR. MARSHALL: Always remember, the $2 billion of the Atlantic Accord

2004, well when that came in we had the cash but it was not recognized as

revenue because it had to be earned over eight years. So, the revenue is shown

in Budgets as it is brought into revenue, but the cash was put in the Public

Service Pension Plan four years ago. So there is the difference between the two,

the accrual accounting and the cash.

MR. KELVIN PARSONS: Just following up on that, Minister, in terms of

deficits and surpluses and so on, when your government started out in 2003 we

heard talk of balanced budgets; in fact, legislated balanced budgets some people

were saying. The former Minister of Finance, Mr. Sullivan, for example, when he

was in Opposition, said: If we become government, that is it; we are not going

to cook the books like you fellows are doing. We are going to do everything out

front, open, accessible, accountable, and transparent. In fact, we are not going

to get into deficits because we are going to legislate the fact that we cannot

have a deficit.

Anyway, that obviously went by the wayside; we have not seen any legislation

in seven or eight years on balanced budgets. I think you were on record

yourself, actually, you did not think it was necessary or in favour of

legislated balanced budgets.

Anyway, we are finding ourselves at a point where we had a couple of good

years' run, four years' run, of surpluses and so on, and now we have been the

last two years in deficits. According to my read of the Budget documents we see,

out to 2013, I believe, probably having Budgets based on what I am reading here.

What is your overall view of that? It seems pretty easy to say that one

minute we want balanced budgets and no deficits. We get very lucky when it comes

to offshore prices at $150 a barrel, and we have a slew of cash, plus the

Premier, of course, in the Atlantic Accord, but all of a sudden we find

ourselves in deficit positions and for the foreseeable future in deficit

positions. It seems like the government moves on where they are or are not. I

heard you out one moment talking about sustainability: We have to be very

careful about what we are doing. Then I hear the Premier saying, just before the

Budget is going to be announced: Well, that is only a number. We are not going

to slow down the economy. That is just a number we are talking about here, the

deficit.

It seems to be awfully confusing. You either do have a program or a plan, or

you do not. It seems to be a moving target from year to year.

MR. MARSHALL: Well, first of all with respect to Budget legislation, you

could not have a deficit. Many provinces, or a number of provinces in the

country, have that, but this year they all had a change in legislation or last

year they had to do it because it is good public policy to run a deficit when

you are in a recession or you have a depression. We learned that a long time

ago.

I have always said that, to me, in a normal year, you spend what comes in,

you run a balanced Budget, but whatever comes in you do not keep any of it; you

spend it. You get the money from the people and you spend it back.

When times get bad, when you have a recession or a depression, that is when

you may have to spend more than you are taking in, because demand is dropping

and therefore government has to step in to provide jobs and opportunities for

the people of the Province.

The important thing, of course, is that when the good times come back, like

we had a couple of years ago, in those times you deliberately run a surplus. You

do not spend everything that comes in, and you use that surplus to pay down the

debt you took out when times were bad. I think, over a cycle, overall you will

be in balance. You may be in deficit at some point and you may be in surplus at

another point but generally be in balance over the business cycle.

For this Province, we have a plan that we want to get the Province back in

surplus so that we would have money to pay down the massive debt that

governments all governments have accumulated over the years. That was our

plan, and we had to make some tough decisions to enable that to happen. The $2

billion the Premier negotiated with Prime Minister Martin certainly helped, and

then the high price of oil and the high price of commodities, and the boom in

the world economy certainly helped as well, but then we got hit by this major

recession. I like the expression you used; you called it an economic tsunami.

We have to deal with that, and the way you deal with a recession is that the

federal government, which has control of monetary policy, lowers interest rates

to make it easier for people to borrow money, and pumps more money into the

economy so that people have money to spend. Governments also, on the fiscal

side, will run deficits, which means they spend more than is coming in. That is

a policy I agree with, but you cannot do it forever, of course. You cannot do it

forever. Your spending has to be sustainable. That is why there was the

difference of opinion, or that is why we decided to, last year and this year,

run deficits.

When I was doing the pre-Budget consultations, when we looked at the drop in

revenue from 2009-2010 to the previous year, such a massive drop in so many

areas: personal income tax, sales tax, mineral tax was down tremendously, what

we were hearing - there were signs economic activity was coming back, but yet

there was a lot of uncertainty; the economic recovery was uncertain. There was

talk about, it was fragile. They talked about bubbles in China. They talked

about the economy, that it was not coming back in the US in particular. That is

the people who buy our products, which really impacts rural Newfoundland, like

the fishery and the forestry and any manufactured goods. If the US people are

not working - and they were not - then they do not have the income to buy our

products. So we were really concerned because the growth that was anticipated to

come back here was skewed to the oil and gas sector and to the mining sector,

but fish and forest products and newsprint were getting hammered. Therefore, we

felt that we had to continue to spend money and to provide jobs and to provide

opportunities. That is why we ran the deficit again this year.

MR. KELVIN PARSONS: Just considering some of the statements that were

made, everybody is happy if the predictions that you predicate your Budget on

turn out to be grossly wrong in your favour. We are not so happy when the

assumptions we make go against us.

MR. MARSHALL: That is right.

MR. KELVIN PARSONS: I just found that some of your comments in the Budget

documents this year were really, really optimistic. One, for example, was the

value of mineral shipments was expected to increase by about 60 per cent. Maybe

you can shed some light on that; because my understanding, looking at the mining

industry, Voisey's Bay, which would have been a big piece of that, they have

been on strike now for months. We do not know if they are going to be off strike

or whatever. That would be a big, big factor. We have, in terms of mining

developments, for example, both of the ones in Wabush and Lab City have been put

on hold by the major companies there because of the economy again. What would

cause you to be so optimistic with that 60 per cent figure, given the state that

we were in when we wrote that Budget?

MR. MARSHALL: Well, to answer your question - you said you; but, of

course, we rely on our experts to tell us what they think the future is going to

be, and they, of course, talk to the mining companies. You mentioned Voisey's

being on strike. They are on strike, but they are operating. You mentioned the

cutbacks in Wabush and IOC, but now IOC has just announced it is going ahead

with its expansion, so I guess it is driven by demand; and, from what we are

told, demand coming out of China and India is very high. Now, we could be wrong.

I heard your address on the Budget when you expressed concern about those

predictions. I have always said that I cannot predict the future. I am not very

good at it, and no one is really and Terry can answer this better than I can

but this is what the mining companies tell us they are going to do. That is what

it is based on. It still could be wrong.

MR. KELVIN PARSONS: How recent is this announcement from IOC? I missed

that: that they are going to go ahead with it again.

MR. MARSHALL: It was two days ago, I think.

OFFICIAL: Yes, last week.

MR. KELVIN PARSONS: Okay. I was not aware of that.

MR. PADDON: Just to follow up on the minister's comments on the mining

sector, the increase in value of mineral production, two things are obviously

impacting that. One is an expectation that the actual level of production will

be higher in 2010 versus 2009. In 2009 you obviously had downtime taken by the

major mines, either consciously or strike related, and those sorts of things.

The other thing that is factoring in is prices as well. There is certainly an

expectation that of the two major commodities that we have, iron ore and nickel,

that there will be an increase in price in 2010. There are certainly indications

on the iron ore side that prices will be considerably higher this year than last

year, plus increased production compared to last year, and on the nickel side as

well nickel and copper, I guess an expectation of increased prices as well.

So both of those things combined would lead us to the conclusion that we would

expect an increase in that range.

MR. KELVIN PARSONS: Minister, I had a quote here from the Throne Speech

this year, "My Government is determined to advance the province's expertise in

the discipline of capital investment management. To this end, it has invested

resources to research the investment of large pools of capital, such as pension

funds. My Government is exploring options that will support the development of

professional investment expertise in areas such as portfolio management. This

research and evaluation will lead to the development of a framework that will

guide our province in building the level of investment capacity required to

manage our own wealth over the next seven years."

I wonder if you could expound upon that.

MR. MARSHALL: Sure. We have a lot of money in our pension fund, for

example, $5 billion. There is an investment committee that consists - I think

Terry Paddon is the Chair. The unions are all represented. NAPE, CUPE, the

nurses, all have representatives on it, and they work with a company called

Russell in terms of how that money is invested. The money is invested; the

assets are allocated over a number of different industries and different

investment strategies, I suppose, if you could call it that. Every one of those

companies that invest their money, they are not here. I think the fee we pay

every year to these managers in Toronto and New York and wherever they are, is

$14 million. It would be nice to see some of that being done here in

Newfoundland and Labrador so we can pay fees to local people. This was an idea

that Mr. Templeton, who was with the Board of Trade, pushed.

I think Terry has had discussions with Memorial University to come up with a

program where we could train more Newfoundlanders and Labradorians to do that

type of work. New Brunswick, I know, is one province that does a certain

proportion of their investment in-house; they do it locally, and I think that is

an area where we would like to see more and more of that work happening here.

MR. KELVIN PARSONS: Just information on preparation of the Budget, and I

will come back and explain the reason for my question. In the Budget documents

you always show a budgeted amount, for last year, for example, and you show a

revised amount for last year, and then you show the budgeted amount for this

year. What are the rules around what goes under the Revised heading?

For example, say your Budget is going to be delivered and I will just use

some examples - say the Budget Day is March 1, you obviously need input back

from the departments in order to get your revised, in order for you to put it

into the Budget. Say you pick that cut-off as February 1, (inaudible) figures on

February 1. I take it that the information the departments give you back to go

into their revised would be whatever the actuals were as of February 1, because

that is what they know they spent.

MR. PADDON: And a projection for February and March.

MR. KELVIN PARSONS: Okay. So a projection is okay, is it?

MR. PADDON: What we will ask them to do, perhaps in January, is to say:

Give us an estimate as of a particular point in time - say February 1 or January

31 - of what you expect you will spend for 2009-2010. It is their process as to

how they come up with that projected number.

I know the Department of Finance, for which I would have to do the same

thing, I would look at what we have actually spent up to that point in time and

then I would look at - salaries is our primary expenditure, so I pretty well

know how much I am going to spend for the next two months. So, I can come up

with a reasonable amount.

When you are delivering programs, like most of the line departments, you

would look at the types of programs, the timing of the programs, and come up

with a reasonable estimate then of what you would expect to spend. They would

then feed that information back to Laurie's area, actually, and they would sort

of probe with the departments to give and take: Why do you expect this? Why

don't you expect that? and that sort of thing. Then that is the basis for the

revised estimate that is in the Budget documents.

MR. KELVIN PARSONS: The reason I ask is we had an experience in the

Business department here this year where the minister was out with press

releases about the successful year, and all of this stuff, and, sure enough, the

Budget documents said last year we had estimated, under the Business Attraction

program, $25 million, and under the Revised it said $6 million. So, the logical

conclusion of that was that we spent $6 million. That is under the Revised.

In fact, it is taken to be gospel to the fact where even a story that was in

The Telegram this past Saturday about the boot factory relied upon the

Budget documents in terms of amounts spent. When I got in Estimates this year

and I asked the Minister of Business: Could you give me the breakdown on where

the $6 million that you spent went? He said: Oh, we did not spend $6 million. He

had given the revised based upon what he thought he was going to put out the

door. The problem was, there was a $4 million difference. I said: You are out

there having the public believe that you spent $6 million in Business

Attraction; you spent $2 million. That is a pretty significant difference. You

are going to put out a press release? You did not tell anybody you did not spend

the $4 million, and you have people even as recently as this Saturday thinking

that department spent that kind of money and they did not.

How do we get a handle on that, so we have some accurate figures that

everybody is relying on? Do not let people think that we are a successful

department. In Business we spent $6 million, which is not very successful at

all; it is still only one-quarter of what you are allowed to spend. On top of

that - that is not even accurate - you only put out $2 million of your $25

million. That is kind of misleading.

I did not realize that there was consultation back between Ms Skinner and the

department to finalize those figures. To me, that is a case of a minister trying

to make his department look good.

MR. MARSHALL: Well, the actual numbers come out of the Public Accounts.

That is when you get the actual numbers; that is when you get what was spent.

These are estimates. They are revised estimates, but they are still estimates.

MR. KELVIN PARSONS: Agreed, but what I am saying is we do not have the

Public Accounts documents when you put out the Budget documents. We are not

going to get those until later. Yet, you have the people of the Province running

around thinking that we put six million bucks into investments and we did not.

There must be some reality and relationship between what you put in the revised

my understanding was, as you said, you take it up to a certain point whe

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2010-05-10
Type	committee
Volume / chapter	committees_standingcommittees_govservices_ga46_2010-05-10_20_gsc-finance_.htm
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Format	html
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