November 14,

PUBLIC ACCOUNTS COMMITTEE

The Committee met at 2:00 p.m. in Room 5083.

CHAIR: I will bring the meeting to order, our public hearing. I want to

just mention again, if the media need to do any photographing or footage, if the

cameras are here, to do so during a break, or prior, or at the conclusion,

rather than during the hearing.

I would like to start by introducing the Committee members. I am Loyola

Sullivan, MHA for the District of Ferryland, and Chair of the Committee.

Vice-Chair.

MR. JOYCE: Eddie Joyce, Bay of Islands.

MR. T. OSBORNE: Tom Osborne, St. John's South.

MR. FITZGERALD: Roger Fitzgerald, Bonavista South.

MR. WALSH: Jim Walsh, Conception Bay East & Bell Island.

MS M. HODDER: Mary Hodder, MHA Burin-Placentia West.

CHAIR: Auditor General.

MR. NOSEWORTHY: John Noseworthy, Auditor General.

MR. JAMES: Claude James, Audit Manager.

CHAIR: Mr. Press, yourself and your members.

DR. PRESS: Harold Press, Deputy Minister.

I would like to introduce to my immediate right, Jack Thompson, Director of -

CHAIR: I should mention, Mr. Press, for everybody's benefit, to make sure

you press on the top button when speaking and press again when you are finished,

and just identify yourself, first of all, for Hansard purposes, to make sure we

attribute the appropriate statements to the proper individuals.

DR. PRESS: Thank you.

I apologize. I am Harold Press, Deputy Minister. Perhaps I will let the

others introduce themselves, if that is okay.

MR. THOMPSON: Jack Thompson, Department of Education, Director of

Financial Services.

MR. YOUNG: Bob Young, Assistant Deputy Minister, Finance and

Administration.

MR. HATCHER: Gary Hatcher, Senior Director of Schools Services and

Facilities.

DR. PRESS: If I may, I will introduce Carmel Turpin, our Director of

Communications, who is occupying the entire front row behind us.

CHAIR: Elizabeth Murphy is Clerk of the Committee; Mark Noseworthy is

Executive Officer with our Committee; and Kevin Collins is recording here with

our office of the House of Assembly. I would ask Elizabeth if she would have the

witnesses sworn in, and if Ms Turpin would be giving any responses we will have

her sworn in. If not, we will just have the four of you.

Swearing in of Witnesses

Dr. Press

Mr. Young

Mr. Thompson

Mr. Hatcher

CHAIR: With members here from the department being fairly familiar with

the purpose, I will not go into any lengthy aspect of the role of our Committee.

Today, of course, we are looking at

section 3.13, the Monitoring of School

Boards, in the Auditor General's report.

I will ask the Auditor General, Mr. Noseworthy, if he would like to have any

particular opening statement.

Mr. Press, if you would like to have an opening statement from your

departmental perspective?

DR. PRESS: Thank you, Mr. Chair, and thank you for the opportunity to

discuss the Auditor General's report.

The department is generally quite pleased and concurs with the Auditor

General's observations. I would like to make just two observations of my own, if

I may. The Auditor General's report included information on school board

revenues and expenditures between 1996, prior to reorganization, and 2001. I

draw your attention to page 119 or, I think, page 2 in the pages that you have.

On the second paragraph, under Operating Results, it quotes, "Using 1995-96

as the base year which was the last full year that the former 27 school boards

operated, school board provincial revenues have declined by $18.4 million...."

That is factually correct but it infers that over that six-year period there was

a 3.6 per cent decline in provincial grants to school boards.

The next paragraph goes on to say, "Using 1995-96 again as the base year

which was the last full year that the former 27 school boards operated, school

board expenditures declined by $17.8 million...." Again, that is a fact, it is

indisputable, but it infers that there was a 3.4 per cent decline.

In Figure 2, I just wanted to offer some facts as well but they might present

a somewhat different conclusion from you. Under Total Provincial Grants, you

will notice that between 1996 and the following year, 1997, that is when the

reorganization took place and twenty-seven school boards were consolidated into

ten anglophone and one francophone. In fact, there was a $28.8 million

reduction, but in the period since then there was a $10 million increase in

provincial grants.

Much the same thing is happened under the total expenditures. In that first

year there was a significant decrease in the expenditures, but in the year since

then there was a $10 million increase in expenditures. So it just presents a

different perspective, but again these are facts and they are indisputable.

The second point I would like to address speaks to the inclusion of the $97

million for accrued severance in accumulated operating deficits. In response to

recommendations from the Office of the Comptroller General, school boards were

advised not to set up a corresponding receivable from government to offset this

transaction. This is based on a matter of accounting principles. The result is

that school board statements report a $100 million accumulated operating

deficit. It is our position that the accumulated operating deficit as of June,

2001, was $3.3 million, not $100 million. We would further state that this

deficit affected seven boards.

The department has worked closely with the school boards and is pleased to

inform you that as of June, 2002, five of the seven boards have either

eliminated their deficits or have implemented reduction plans which will see the

deficit eliminated over time. Only two boards remain in a deficit position.

Since June one of the two boards has implemented a debt reduction plan and we

anticipate the remaining board will have a deficit reduction plan in place in

the very near future.

We have been working with school boards and, excluding the note related to

the severance issue, as of June, 2002, the school board deficits were at $1.9

million, which is less than one per cent of the total school board operating

grants. It is not perfect, but we are pleased, certainly, with the direction and

we will continue to monitor the school board finances to ensure these positive

results continue.

CHAIR: Thank you.

We will begin now with any committee member who may wish to start with any

particular question. We will just throw it open in no particular order.

Mr. Osborne.

MR. T. OSBORNE: Thank you very much, Mr. Chair.

I will ask the first question. The department indicated that after the three

year commitment to the boards for school closures that the department was to

retain savings and operating costs, have all of those savings gone into the area

of school utilities? If not, where were those savings utilized?

DR. PRESS: Bob can speak to the where it went, but after those three

years they were allowed to keep their funding. Before those three years they

were allowed to keep their funds for one time expenditures and after those three

years the funds were put into a pool that went back to, on a proportional basis,

all the school boards. Bob can answer the specifics but it was (inaudible) into

the general operating grants to school boards.

MR. YOUNG: The answer is yes, the vast majority of those expenditures

have gone back into the payment of 100 per cent of the utility costs at the

school board level.

MR. T. OSBORNE: Second question, for the school board years ending 1998

and 1999, there were surpluses of over $6 million for the two years combined.

Can the board comment on what the size of those surpluses and what has happened

to that surplus money?

CHAIR: The department comment, I guess you mean.

MR. T. OSBORNE: Sorry, the department, yes.

MR. YOUNG: I am sorry, Mr. Osborne, could you show me where you are

referring to the $6 million?

MR. T. OSBORNE: For the year ending June 30, 1998 there was a $2.9

million surplus.

CHAIR: I think it is on page 47, I believe in that document there.

MR. T. OSBORNE: The Avalon East School Board, page 47, item 10. There is

$2.974 million surplus for 1998 and $3.315 million surplus for 1999.

MR. YOUNG: Those surpluses are retained by the school board for whatever

purposes the trustees and the board itself would choose to use those surpluses

for. When you want to put on special scholarship programs or special initiatives

in the school, it is the responsibility of the boards to administer those funds.

Some of those funds are in the area of trust accounts and so on, as I

understand, that have been given over the years to the boards. We don't monitor

that closely. We do in the audited statements of the board. There is a comment

by the auditors on those numbers, but we at the department do not monitor or do

not have any say, really, in how those funds are expended. It is a board

decision with the trustees.

MR. T. OSBORNE: Okay, so there would be no accounting back to the

department on the expenditures of those surpluses?

MR. YOUNG: Yes, there is the accounting back in the audited financial

statements of the board.

CHAIR: Mr. Osborne, before you move to another one, I just have a

question on that specific topic there. Did you have another one right on that

topic?

MR. T. OSBORNE: No, you go ahead.

CHAIR: If there is a surplus carried, I would assume, when the board

submits its budget for the next year and their needs are, let's throw an

arbitrary figure of $37 million, and you had a $3 million surplus, well, you may

end up receiving $34 million then. Like they are carried over, an ongoing thing.

Would that be an accurate statement, or is this a surplus that is specially

earmarked or just a part of the normal allocation?

MR. YOUNG: We do not treat the surpluses as a reduction from the grant

that the Department of Education will provide to that board. That board is

treated in the fiscal year as any other board would be treated in our grant

allocation. If they have a surplus in their accounts, that is, as I said

earlier, a matter for the trustees principally and the school board as to how

they want to disperse or dispense with that surplus.

CHAIR: Okay, their grants would be uniform based on square footage, for

example, based on the number of students per assignment of support staff, and

obviously, of course, teachers based on numbers would be the same.

MR. YOUNG: That is correct.

CHAIR: Mr. Osborne.

MR. T. OSBORNE: Thank you, Mr. Chairman.

WITNESS: That is a good news item, the fact it is going to stay.

CHAIR: Yes.

WITNESS: I wasn't aware of that.

CHAIR: Mr. Fitzgerald.

MR. FITZGERALD: Thank you, Mr. Chairman.

I would like to ask the department if all school boards are required and if

they do submit annual reports.

DR. PRESS: They are required to submit an annual financial statement.

They are not required at this moment, I do not think, to submit an annual

report, although all school boards do submit annual reports.

MR. FITZGERALD: Without exception.

DR. PRESS: Without exception.

MR. FITZGERALD: Not all of them necessarily filed on time?

DR. PRESS: Absolutely.

MR. FITZGERALD: The sale of real property when we reduced the number of

school boards and a number of schools became surplus to the department's needs,

what happened to the cash that was realized from the sale of excess property?

Did that go to the individual school board from which the sale happened?

DR. PRESS: It really depends upon who was the original owner of that

facility. If that was church-owned property, it is turned over to the church,

the episcopal corporation, whoever the owner is. If that facility belonged to

the board, as a number were in the integrated system and so on, they are the

property of the school board and any revenues accrued to that from the sale of

that property will go directly to that board.

MR. FITZGERALD: So, in the case of the Vista School Board, which was an

integrated school board -

DR. PRESS: For the most part.

MR. FITZGERALD: - I know there have been a number of sales realized

there, and all the money that they realized from the sale of that property

stayed within that board (inaudible) able to spend within their budget, and they

would direct that money.

DR. PRESS: Yes, for those that did belong to them, but there were several

schools, there were certainly several communities, King's Point and so on, that

are not integrated and so on, so those properties would not belong to that board

if they closed.

MR. FITZGERALD: It is my understanding that school boards are responsible

to take from their own budgets, payments for computer technicians, the people,

the support staff, to look after their technical needs. It also my

understanding, in talking to one of the school board members, that they were

little bit dismayed that the money they had saved by those people when they were

on strike, when we witnessed the strike last year, that the department is now

coming and looking to receive that money back from their budget rather than

allowing them to maintain it in their budget, even though it was a budgetary

item that was not surplus or extra money supplied by the department. Why would

the department be looking for something that would come directly from their

budget, and if it was a saving within their budget and it was not an extra cost

to your department?

MR. YOUNG: Let me deal with the two issues that you asked, one was IT and

one was savings from the strike.

In terms of the IT -

MR. FITZGERALD: They are both related, because some of the savings -

CHAIR: That was Mr. Young, for the record. I just want to mention that

for Hansard.

MR. YOUNG: Yes, Bob Young.

There is no specific allocation in the current funding formula for

information technology. At the end of the NAPE strike - since we are talking

about the NAPE strike as a second item - there was an agreement signed that a

study would be undertaken between NAPE and the Department of Education to

examine the funding for support workers that went on during this activity. One

of the issues there is the funding that has possibly been transferred - I say

possibly because we are investing that - from other areas of the allocation to

provide for IT support, and Dr. Phil Warren was commissioned to head up that

study group. He is in the process of finishing up his work and will be

presenting a report to the department some time during the month of December -

probably early December to the middle of December - in which area I understand

he will be making some recommendations about the use of formula to accommodate

IT support in the school boards. You are correct in saying that at the moment

there is no specific allocation for IT support in the school districts.

MR. FITZGERALD: So the school districts that are responsible and have

hired IT support take that allocation from their own budget.

MR. YOUNG: They take that from their current budget.

MR. FITZGERALD: So, why would you be looking for them to put those

savings back and be taken from their budget when it was a cost that was directly

incurred by a budget that was already approved and it was an extra funding

provided by you to that board anyway?

MR. YOUNG: When the NAPE strike was finished, we had a direction from

Treasury Board that funds saved during the strike had to be returned to the

provincial Treasury. The exception to that was, we were permitted to charge off

expenses that were incurred during the strike. So, for example, management staff

who worked overtime, or specialized equipment that had to be borrowed, or

persons who were hired for security and that sort of thing, could be allowed to

stay with the Board for those purposes; but, on balance, the funds had to be

returned. So we work with the boards to make a determination as to what, on a

net basis, should have been returned, and they had to be returned as per

direction we received from Treasury Board.

MR. FITZGERALD: School buses -

CHAIR: Mr. Fitzgerald, while we are on the topic, before we shift to

buses, I was just wondering, with reference to the sale of assets when a school

is closed, are there any restrictions set on how these funds can be disbursed

and utilized by the board? What are the limitations, if any, or is it completely

at the boards discretion how they spend that? Are there any other repercussions

or clawbacks as a result? If there was a school, for example, being built that

costs $4 million and they realized $500,000 from the sale of an asset of a

school, would there be an expectation to utilize funding in this regard or any

regard as far as that matters?

DR. PRESS: None, that I am aware of. It has not come up in the year and a

half or so that I have been here. I am really not aware that it went on before.

If there is a closure and sale of a school where the students would go to an

alternate school and there are obviously certain repairs and renovations that

might need to be done to that other school, there certainly will be an

expectation on my part that they would take any revenues they got from one

nearby school and apply it to what they are doing in a school that is close by.

CHAIR: Has that happened, for example, in cases in the past? There have

been a fair number of school closures, I know, and a fair cost in getting those

new or expanded schools or renovated schools ready. Have there been instances

where there have been a utilization of funds for that purpose?

MR. HATCHER: There are different answers to your question, I guess,

because schools prior to 1966 where all owned by the churches. After school

board integration in 1966 the Protestant schools were vested in the boards.

However, there was an agreement that if the schools were ever sold the churches

would get the first right of refusal. That has happened in some cases. The

Protestant schools that were built after 1966 were vested in the board and if

they were sold, and some of them have been, the board has free rein on how they

use the money. Generally speaking, boards have put that into repairs,

renovations, extensions of new schools to accommodate the children from the

schools that were closed.

Schools that were previously operated by Roman Catholic School Boards are

vested in the Roman Catholic Episcopal Corporation and all of the boards have

entered into an agreement, as required in the Schools Act, with the Episcopal

Corporation to deal with disposition of those buildings should that become

necessary. In those cases some of the money goes back to the church if they are

sold. First of all, they have to decide and agree how much church money was in

the building and how much government money was in the building. If that was

50/50, then if was sold, 50 per cent would go back to the church, 50 per cent

would go to the current school board and they would be free to use that as they

see fit. Again, most of them use it for capital improvements on an existing

building. The same would apply to the Pentecostal board.

MR. WALSH: The same subject.

CHAIR: If it is on the same topic, sure.

Mr. Walsh.

MR. WALSH: You partly answered the question that I had with respect to

the ownership of the church by the church. Has there been any case where the

ownership by a church, for example, may have been 40 per cent, government

investment was 60 per cent, that the numbers would have been reversed or the

churches would have received more than the actual investment that they had?

MR. HATCHER: Not that I am aware.

MR. WALSH: And the policy still continues?

MR. HATCHER: Yes. In the case of the Roman Catholic church, each school

board has entered into an agreement with the Episcopal Corporation and that

agreement stands from the time of consolidation forward.

MR. WALSH: Would there have been any allowances made - for example, we

build a building in x year, we maintain it for twenty years out of public funds,

government funds, the building now, because it has not deteriorated over that

twenty years, is worth xy dollars - on the sale of the property based simply on

the input of funds from both groups? By that, I mean, is the government getting

its fair share of what it has cost to maintain those properties less what

anybody else has put into it? If you are following what I am saying. In other

words, are we getting back for the taxpayer the fair allowance of money that has

gone in? Not just for the building, the construction purposes, but for the

maintenance and the ongoing repairs? Has that been deduced from the other side?

MR. HATCHER: The answer to your question is, no. The formula for

disbursement of funds at sale is based upon the proportion of investment

(inaudible) the construction of the building, or any extensions that might have

come since.

In the case of the Roman Catholic boards, some of the schools were built with

100 per cent church monies. Some had a percentage of government monies in it. It

is the proportion of the funds at the time of construction that determines the

proportion of disbursement.

MR. WALSH: So it has no bearing on who maintained it and who paid the

cost all the way through?

MR. HATCHER: That is correct.

MR. WALSH: I will leave it for now. I will come back to it.

CHAIR: Okay. Mr. Fitzgerald, I think you were on a series of questions.

MR. FITZGERALD: School buses; my understanding is that some boards

probably maintain or operate all the school buses that operate within their

regions. Others have some, probably others have none. There must be a tremendous

savings to be able to be realized by contracting out school bussing. There has

to be, when you see the expenses incurred by the department having their own

school buses. Is the department actively looking at that, or is it a situation

that will be done by attrition, that people who normally operate the buses now

or is the status quo going to be the order of the day?

DR. PRESS: We are not actively looking at that, although we are working

with school boards because some of them, for the most part, would have all

contracted services or all board-owned services. There are a few with partial,

one or the other. As they feel they want to go to contracted services, we will

support them in a system in that process but there are advantages and

disadvantages to both. Certainly, the disadvantage is one of cost but an

advantage of board-owned services gives you more flexibility to deal with

afternoon bussing and some of the other things. Some of them actually would

prefer it but it brings with them a bigger headache in terms of maintaining

those buses and keeping them safe and running in the board; but, it is their

decision and we will support them. We have not told them we want to go one way

or the other but we will support them, local decisions.

MR. FITZGERALD: It was certainly quite evident during the NAPE strike

what buses were owned by school boards and what buses were privately operated

when you saw students coming to and from school. It was a great issue in the

district where I live because here there has been a mixture of contracts and

school-owned buses.

Most school boards have seen double-digit drops in enrollment, all except

two, I think, over the past year. How does enrollment drop affect budgeting that

is allotted to school boards?

DR. PRESS: I will just make a comment on the drop, if I could, and Bob

can speak to the actual grants themselves.

The enrollment drop, I think, is probably one of the more serious things

facing us as a Province because not only has it doubled-digit dropped in

enrollment but it has been dropping since 1972. That is almost thirty years and

we have gone from a fairly significant young population where the median age -

and that is where half your population is below that and half is above that -

was, I believe, sixteen years. So half our population was school age or

preschool age, and now we are at a point where our median age is about thirty.

What it has meant in schools is, back when the Chair was teaching, probably, we

had 16,000 births; so that means five years later we had about 16,000 coming

into kindergarten. Now we have 5,000 and soon to be fewer than 5,000. In another

eight years, it is likely to be fewer than 3,500. Part of the challenge for an

education system, and it is not the department but our school boards and so on,

is: How do we manage in an era of those kinds of significant declines? It will

become evidently more challenging in the future as fewer and fewer students are

in small schools which cannot be consolidated, because we have seen significant

consolidation over the last five or six years. In the next five or six years we

will not have those efficiencies where you can consolidate and merge a couple of

schools together to have a much more diverse program and so on.

In terms of the specific parts of the grant, Bob?

MR. YOUNG: The allocation process that we provided to boards for those

pieces that are driven by enrolment, typically over the last number of years we

have gone back to the previous year's annual general return. For example, when

looking at our budget for 2003-2004, we would look at the enrolment that was in

the school at the end of September, 2002.

In order to leave more money in the education system and in the hands of the

school boards, we have not gone back one year for the last two to three years.

We have gone back two years, so that there is a greater population upon which we

base the allocation. As a result of doing that, we are leaving more money in the

hands of the boards.

In recognition of why we have declining enrolments, it is not always a nice

one-to-one relationship. I mean, if you take one student out of every class, it

really does not matter a heck of a lot in terms of the total scheme. So what we

try to do is leave as much money as possible in the system, and we do that by

going back two years instead of one.

CHAIR: I would like to ask a question with reference to a statement you

made. There are two boards that have deficits, District #1 and District #7, I

think.

DR. PRESS: District #1 and District #3.

CHAIR: District #1 and District #3, okay. District #7 has been

eliminated, because they had a fairly high one. That is a considerable

turnaround. I know there are certain concerns. District #1, for example. With

the allocations, are they sufficient to be able to operate there? If there is an

ongoing deficit, there is neither an inherent problem with allocations or they

need to do certain things in their operation that are going to be more

efficient. I think you indicated that there is a plan in place to achieve that.

What were the concerns or what were the problems in getting to that, and what

are the remedies, basically, in trying to eliminate that?

DR. PRESS: I didn't mention the boards, but since you did, District #3

has a deficit. Right now, they have a deficit reduction plan in place to

eliminate that deficit, the one that we are still working with. Our view is,

work with the boards as opposed to a stick model and what you can hang over them

to force them to come through with a deficit reduction plan. Our view has been

to work with them as close as we can to identify the issues and the challenges

they face and see if we can get a deficit reduction plan in place. The minister

has clearly said to them, each of them, that she will not be going to her

colleagues to find the funds to underwrite any debts that they have. That

clearly has been communicated to them, and what we have tried to do is work with

them to let them know how serious this is, the matter that we have, and what are

some of the things we can do to eliminate it.

In Labrador, there is no doubt there are challenges that they face there that

some other boards do not have to the same extent. Certainly travel is one, but

at the same time we have allocated an additional $100,000 for each of the last

three years just for travel, to assist them in board travel, meetings and so on,

travel that the executives and the staff at the board have to do in going back

and forth.

A big challenge has been maintenance in their schools and so on, but for most

of the coastal schools now they have new schools, for the most part, and a new

one is being built now in Postville. They have challenges in relation to

housing. What they have, and what we have talked to them about, is, look,

housing is not an issue that is important to them. They have been into it for a

little while, and housing is a significant component of that deficit that it has

maintained. They want to get out of housing but they know they need to do that

so it does not have a negative impact on attracting teachers into there. One of

the things that we have done over the last year is provide, for example, coastal

teachers with an additional $5,000 to their salary in order to deal with things

like the high cost of food and accommodations and so on.

Hopefully, in working together, we will be able to come up with their school

district deficit reduction plan which will eliminate that deficit and at the

same time not jeopardize programs and services to students, because first and

foremost that has been the goal that we have set in sitting down with all of

these boards: whatever deficit reduction plan they put in place, that it is not

to significantly affect the programs and services of children in their schools.

CHAIR: Thank you.

Mr. Walsh, I think you said you had some others.

MR. WALSH: Just a question that reflects upon the school boards, but I

think also reflects upon the department itself.

In terms of students who are facing both physical challenges, and

mentally-challenged children as well, over the last number of years - and it

ties somewhat to what we are doing here today but it is an opportunity for me to

ask the question - I have had parents who go through the nightmare every

September of trying to find the funds necessary to allocate help within the

school for their children. I am wondering, is there any reason why the

department itself, or indeed the school boards, have not, at the end of a school

year, completed an assessment on a child so that when September rolls around

they are not going through this horrific: child is back in school, no idea who

is going to doing the help that is required, no idea whether or not it is going

to take a day, a week or three months? Is there any reason why those funds are

not allocated in advance or, more important, that families do not have to go

through this constant annual trauma? The child starts in Grade 1. At the end of

the year the teachers know if the child is going to Grade 2. If they are in

Grade 5, they know if they are going into Grade 6. They know exactly where they

are going to be come September, and yet parents are forced to go through this

horrendous ordeal of calling upon anyone they can, including their members,

their MHAs, to try to solve the problem. It takes up a lot of time and energy on

our part, which, I guess, all of us would be delighted to do. It takes up a

tremendous amount of time and energy with us chasing down department officials,

hours and weeks in some cases, to come up with the same conclusion that we had

the year before. We are three or four weeks late getting something started for

these children and yet we always end up solving the problem. I am just wondering

why the assessments are not done at the end of the year by the department and/or

the department instructing school boards to do it?

DR. PRESS: The answer to the question is, I think a lot has been done. I

think the calls that you talked about, and so on, you probably have not seen in

the last year or so. Up until now, the ISSP process, which is an Individual

Student Support Plan, which is done by everyone involved who has an influence

over that child, including the medical profession, the teacher, the principal of

the school, the parents and even students, if they are old enough and capable

enough to participate, that is done throughout the year and updated as timely as

necessary.

For the most part what you are talking about, I think, are student assistant

support which comes out at the end of each year. For those who have severe needs

and so on, we now provide a three-year commitment to them. So, in fact, what we

have done now, beginning last year, was, we gave out three-year commitments to

most of those who had severe needs. To those who have what we call severe

emotional behaviour, which has been a significant increase in student assistant

support over the last four or five years, the information gets out to parents by

June. That has been a significant improvement over past practice, which happened

last year and, I believe, the year before. They know that they are getting

student assistant support, they do not necessarily know who, and that is for

collective agreement.

It is pretty difficult to assign somebody for a school if somehow over the

summer months - apparently, with this particular group, there is a significant

amount of bumping and so on that takes place and somebody may move into a job

and so on. So it is very difficult to say to a parent that you might get x

student assistant even though there may - realistically, you still might,

because you have to respect the rights of student assistants if they want to

change, if they want to go to a community which is in their home community and

so on, as opposed to getting in the car and having to go to a different school

or whatever. That is why the boards cannot tell them, until they go back to

school in September, who they would get and the total number of hours. They are

informed by June, at the end of the school year before they go home, whether or

not they will get student assistant support in September when they come back. I

think that is a significant improvement. Going the next step is problematic for

us simply because it is very difficult to make those commitments and then find

out in September that people have moved and so on, that you cannot deliver on

those commitments.

MR. WALSH: So that is the reason why - even though the parents are aware

that something will be waiting for them in September, it may not be the

individual the child has grown accustomed to.

DR. PRESS: Absolutely; or it may be that the total number of hours may

change. For example, if somebody transfers to another community. There may be

five hours for that particular student - and I am just giving a hypothetical

example now. Five hours for a particular student, and if another student

transfers into that school over the summer - and most of the transfers occur

during the summer months when schools are shut down - then that would influence

the total number of hours for the school. We do not assign hours - even though

parents seem to think so - to individuals, we sign hours to schools and

teachers. They are called teacher assistants in Nova Scotia and New Brunswick

when really they do exactly the same thing as our student assistants do. That

would mean that the number of hours would still remain - they might remain at

five hours for that school. So, that might be the change in the total number of

hours that would be there for that student.

MR. WALSH: That is where some of the arguments may have come in this year

because I know some parents who were expecting, we will say the five hours, and

suddenly ended up with a lesser amount simply because another student with need

had moved in. What is the greater concern here? I say this not necessarily

tongue in cheek. I do not really care about the teachers. I really do not care

about the school board and I probably care less about the student assistants. It

is the child who has the need that would be my greatest concern. If we are

meeting that need it should actually domino effect to look after all of the

other ones that I said I do not care about. They should fall into place as the

child's needs are met.

It seems to me that the emphasis is still on - the child is at the end of the

domino as opposed to the beginning of the domino effect. The child is there - we

know the need is coming, if somebody has transferred in. I understand if

somebody transfers in September and all the decisions are made, but the child

who was there with five hours may now end up with two-and-a-half, and the

racket, as I refer to it, starts again. It is the school board dealing with the

department, dealing with the student assistant. It seems like we have to solve

all their needs while the student is still being met. Is there a way to heighten

the response or quicken the response to meet those needs, or is it just going to

be an arduous affair as we go along?

DR. PRESS: I do not think it is as arduous as you have presented it; no

disrespect. It has improved a significant amount. We have an advisory committee

with all of the stakeholder groups at the table where we are sitting down,

rolling up our sleeves, and trying to come up with the best solutions that we

can, given the tools and the resources that we have to work with. Barring

throwing any more money at it, right now the system is working, I think

reasonably effectively, in getting information out to parents and children; not

just before school closes but three weeks before school closes we get out the

information from the school boards, even earlier than that. It is not perfect

but I think it is a system that has much improved over the past two years.

CHAIR: I guess final decisions cannot be made until September anyway,

until students move in. If you get two of a certain criteria or three, there are

economies in the number of hours within a school. A school might be assigned -

three hours assigned, for instance, in three different schools at five hours.

All in the one might only necessitate nine hours or eleven hours. Those are the

types of things, I guess, you are referring to when you say that you have to

look at a specific school. They are attached to the school based on the needs of

the school rather than to an individual, that is a transferable hour from one

location to another. I think that would be accurate, would it?

DR. PRESS: Yes it would.

CHAIR: Mr. Osborne.

MR. T. OSBORNE: Thank you, Mr. Chairman.

Over the past number of years there has been a significant decline in student

enrollment throughout the Province. Has the department done any projections to

determine whether or not that trend is going to continue? If so, to what extent?

I guess to focus even more clearly, what areas of the Province do you see

suffering the highest levels of decline if that is to be the case?

DR. PRESS: I will not comment on the suffering decline, but we have done

projections. I am going to try and do this from memory now, because I have seen

them. Enrollments are going to decline well into the foreseeable future. To give

you some prospective, we have gone from about 163,000 when it peaked in 1972,

this year - we do not have the final figures in but the preliminary figures are

about 84,000. Now that is not comparing apples and apples because in 1972 we had

a K-11 system. So if you had a Grade 12 cohort there, then 163,000 probably

would have been closer to 170,000. It is about 170,000 down to 84,000.

Our projections are that by the end of this decade, which is eight years

away, it will be fewer than 60,000. Again, these are projections only. So you

can get two people doing two different projections. If you wrote it out five

years from that, then it is likely to be closer to 50,000. Just to give you some

contacts, the Toronto Metro School Board is 300,000, which is one school board.

While a lot of school consolidation has already taken place, we feel there is

not, other than some instances, probably one or two instances, in many of the

boards now where they probably can consolidate one or maybe two schools, but for

the most

part it is done. You cannot consolidate Grey River. You cannot

consolidate Gaultois. You cannot consolidate Norman Bay. So that presents to us

challenges that are even greater than in the past few years in trying to meet

the needs. That is why, in my view, the Center for Distance Learning and

Innovation, is not the answer, but it is an important tool in trying to provide

diversity of program.

In very small isolated schools, that you can all identify in your own

districts, it will not replace the teacher in the classroom. What it will do is

enable the students in it to do chemistry, which they otherwise could not do -

or physics, or advanced mathematics and so on, some of these courses - by some

of the best teachers in the Province. Even if you could recruit a chemistry

teacher it is unlikely you are going to recruit that teacher to go to Gaultois,

even if you had the allocations here. I mean this is a tool that we must develop

and further develop and make it available throughout the Island and not just the

rural areas either, because I think to make it acceptable to rural Newfoundland

- I think part of that challenge is putting it in urban Newfoundland. That is

why Holy Heart has been piloting courses and so on. That then enables every

student - no matter where you are, you have access to a high-quality curriculum

and a diverse high-quality curriculum that will enable you to go into

engineering and go into medical science and so on. For many of these small

communities, these courses and these opportunities would never, ever be

available without that.

MR. T. OSBORNE: Thank you.

A question extending from that is - as you said, some areas are not going to

be consolidated. It is impossible to consolidate them. School costs are going to

continue. School busing is going to continue. In fact, students may have to be

bused even greater distances than they had been in the past. How does the

declining population into the future, considering our geography, how is that

going to affect grant allocation? Because it is only so thin you can stretch the

thread before it breaks.

DR. PRESS: You are absolutely right, and it does present challenges. How

the grant allocation will be affected in the future years, that is an area I

really cannot speak to, but certainly all we can do, as an organization, is

understand the environment, present the implications to those who are resourcing

us, whom we resource further and so on, and to make a very strong case to the

Cabinet and so on during the budget process so that when decisions are made,

they are made with their eyes open. But certainly there is not a one-to-one

relationship between the reduction in students and sort of a concomitant

reduction in costs. It is just not there because you may have to keep certain

schools open even though there will be fewer schools. Normans Bay is a good

example. Normans Bay has eight students, K through 12. We have allocated two

teachers there and it is a very, very expensive operation. So, even if that is

down by one, to seven students, it is really not going to change too much your

bottom line cost of delivering the program to those seven students.

I am not answering your question directly, but indirectly what it does is, it

presents challenges to us that we have to present to our leaders in terms of

what the challenges are and so on, so that sort of a concomitant decline in

costs, or decrease in costs, is probably not possible and not doable.

That is one of the reasons why I pointed out with my opening remarks that

what we have seen over the last five boards, when we created these boards, has

not been a similar cost in provincial grants to these boards. In fact, the cost

has gone up. In fact, the cost per student has gone up right now from the lowest

in Canada. Ten years ago it was probably $4,000 compared with $1,000 more per

student than the rest of Canada. Right now, we have increased 30 per cent in ten

years in the per student cost of schooling, which is now at about $6,500, which

is probably close to the Canadian average. That has all been because of having

to do deal with the high cost of delivering programs and services to rural

Newfoundland.

MR. T. OSBORNE: Thank you.

CHAIR: I guess the point you made there, too, Dr. Press, is that it is

not a one-on-one, the same as increases are not one on one, basically. There is

a certain base you have to start with overall.

The trend, basically, if you look at the tables and charts, is that there

have been usually 2,000 now, on the average, less coming in than going out. That

is current, and I guess we can only really safely project back for five years, I

suppose, because the people who are going to come in are not yet born or moved

here, whatever the case may be, or what the migration trends are. Your

projections, I guess, would be fairly accurate over a five-year period, I would

assume. Would it be safe to draw that conclusion?

DR. PRESS: With any projection there are always unknowns that you cannot

predict, if you will, but projections as opposed to predictions where you simply

just use your best guess to predict. Projections are based upon trends, and what

you do is project out those trends and make certain assumptions around them. In

the first five years, yes, you can, because you know what the births are. They

are already there. They show you, and you can roll out those numbers based on

some assumptions on migration, but five years out and so on, if the births have

been declining at a reasonably constant level at one way or the other you can

project them fairly accurately as well.

There is no doubt that the projections will be less valid over time. The more

you move away from year one to year five or year ten, yes, they become less

valid. Have they given us some indication of direction in terms of where

enrolments have been going? Our projections have been fairly accurate when you

roll out five or ten years, but are they a prediction of the actual numbers? No.

CHAIR: Okay. Thank you.

Any particular questions?

MR. FITZGERALD: Yes, just a quick question.

Most capital projects now, school board funding when it comes to new school

construction, how is that financing done? If there is a new school to be built,

does that funding come from government directly to that school board, or to the

Department of Education, for new school construction and major renovation?

DR. PRESS: I will let Gary speak to the specifics of it, but the funding

of school boards in the last five years is done through the EIC, which is the

Education Investment Corporation, which allocates monies for these projects. I

do not think the money goes directly to school boards. The money would simply be

managed through the EIC.

MR. FITZGERALD: Has it caused problems the way that this particular

funding is now carried through with Works, Services and Transportation being the

engineering firm that carries out the studies and does the engineering work? It

seems to me to be a level of bureaucracy that did not exist before. Has it been

troublesome to you to have Works, Services and Transportation dealing there

rather than directly with the school board looking after its own affairs?

MR. HATCHER: The Department of Works, Services and Transportation

provides us with consulting services, project management services. The actual

engineering studies and the design work for schools is done by independent

architects. They are hired or appointed and are under contract with the

Department of Works, Services and Transportation.

The staff of the Department of Education, we have two engineers on staff and

we work with the consultant and the school boards in the design of the school.

The Department of Works, Services and Transportation helps us through the actual

mechanics of it.

The funding, as Dr. Press mentioned, is held in the Education Investment

Corporation and, just as the mechanics of it work, a contractor is out working

on a project and at some point in time sends in claims for expenditures or for

contract costs, sends the invoices through the project manager, the Department

of Works, Services and Transportation, who verifies that in fact the work is

done, and then these are sent to the Department of Education for budget approval

and the cheques are actually cut by the Department of Finance.

MR. FITZGERALD: With the Department of Works, Services and Transportation

involved, it is not causing any problems? It is working quite well, in

comparison to the way it was before.

MR. HATCHER: That is correct. Before, it was handled through the

churches, through the Denominational Education Council. Since government took

over the full responsibility for school construction in 1996-1997, Works,

Services and Transportation has expertise that the Department of Education does

not have, project management expertise, and they are quite helpful to us.

CHAIR: On that topic, before, I guess, the DEC's made the decision on

school construction, on what got constructed. Now, basically, I guess, it is

made by the department. Would that be accurate, looking at how much money is

allocated in line with looking at the board's priorities that they submit?

MR. HATCHER: That is correct. Under the denominational system, if

government allocated $10 million for school construction in a particular year,

it was distributed on a percentage basis to each of the denominational groups,

based upon the census and the population of that particular faith in the

Province. Currently, the money is voted to the EIC. The EIC is given permission

to raise that money, and its decisions as to which projects are funded are made

with the Department of Education and the Education Investment Corporation. Our

determination is usually based upon assessments and needs prioritized by the

boards and throughout the Province.

CHAIR: Yes. So the boards all prioritized theirs and submit them. Some

have varying amounts of priorities and the department decides how much you are

going to get, and one board might get its number one and two priority, and

another board might get its number one and two, but the numbers in these boards

may not be the top provincial priorities. Number four with one board might be a

higher priority than number one with another. So I guess that comes down to the

channeling of money. That probably falls more into the political circle than

into a need then. My concern is the number one priority for a school should get

it and number two should get it, whether they are all in Labrador or Corner

Brook or on the South Coast, wherever they are.

Whereas before, I think, the

DECs got their money based on their specific boards, and they had freedom all

over the Province to put their priorities in place then.

Whereas right now that

does not really happen. There are more boards than there were DECs. So right now

there are more opportunities for priorities not to get served in that aspect. If

you would like to comment on that.

DR. PRESS: I will, if I may. You raise an important point. There is no

doubt that in a perfect system we would have sufficient numbers of engineers

located throughout the Province and so on. So every identified need, we would go

out and get an independent assessment of that and we could rank that then into a

pool which would include all 323 schools and so on, and be able to come down and

actually pick which are the more important projects.

Admittedly, we do not have the tools to be able to do that. When they send in

priorities for us, certainly the large projects, the major roofing projects, the

main renovations and so on, we will usually get one of our engineers, or hire an

engineering firm, to go into this facility and give an independent sort of

assessment of what the problems are, what the need is, and what the cost is of

rectifying that.

There is no doubt, you don't always make perfect decisions with all of the

available information. I think there is sufficient knowledge, particularly by

the engineers here and in Works Services, who have visited most of the schools

around the Province now, who have a good indication of where some of the

significant need is and so on. It is not perfect, but I think there are enough

safeguards in there that we are making some of the good choices around what are

the important provincial priorities.

CHAIR: Would it be safe to say that a board's number one priority will

get done before number a number two priority?

DR. PRESS: In a board's case, absolutely correct.

CHAIR: So the board would have the final say, that its number one

priority gets done before its number two priority.

DR. PRESS: That is correct. I was really speaking about sort of

competing, if you will, number one priorities.

CHAIR: Oh, yes, I know. This was a different question then, just a

follow-up.

MR. FITZGERALD: Another quick question, as it comes to mind. School

board, I guess you would call them, directors or board administrators now serve

at the wish of the Department of Education, that they are employed by the

Department of Education rather than the school board.

DR. PRESS: No.

MR. FITZGERALD: They are still as an employee of the school board, not

the Department of Education?

DR. PRESS: Absolutely correct.

MR. FITZGERALD: Okay. So is it up to the school board what wages the

administrator receives and what benefit they receive, because I understand it is

far ranging and quite a difference exists between a lot of the school boards in

the Province?

DR. PRESS: You are correct on the first and second part of your question.

There is a wide-ranging difference among the salaries of the individual

directors and so on, as there is a wide-ranging difference in the salaries among

the deputy ministers and the executive of government. It is based on the Hay

system. The Hay system has a number of guidelines, which are based upon your

experience and your qualifications and so on. You are ranked according to so

many points and put on a place on the scale. So that would mean that somebody in

one board who might come forward with qualifications and experience, that might

pay somebody higher than in another board. That is the case, yes.

MR. FITZGERALD: Isn't it also the case that some of those school board

administrators or directors even get paid higher than the highest scale on the

Hay scale and get many other benefits?

DR. PRESS: They are not outside the Hay scale but there have been - I

will give you an example. In board nine, the assistant director was hired who

came from the University of Windsor and because of his particular qualifications

and because his particular salary coming into it was at a certain level it had

to be honored and he could not get a lower salary. So he came in on a

significantly higher income level than somebody who might be in a similar

position in another board. Those are some of the anomalies that exist with the

Hay system not necessarily with directors and assistant directors.

CHAIR: Just a comment: The matter pertaining to that with a specific

board - actually, two boards came before Public Accounts prior to my term here I

know. I think that was an issue about two years ago. It was addressed with one

if not two specific boards. I am not sure.

I guess one of the concerns that I know was alluded to in your opening was

with the severance aspect, basically. Boards are showing, if you look at the

Auditor General's Report of 2001, a $96.7 million severance liability. Of

course, their operating liability was, I think, $3.2 million, $3.3 million

almost, which is pretty well eliminated now, I think, except in two. That is

back on course, I think. Some of the higher ones have all been dealt with.

I think you mentioned the Comptroller General, the recommendation came that

it should be carried that way. Could you just elaborate on that ? It is a cost

that is going to be paid from the Province, and we are talking about the

severance of all employees, I gather, from teachers down which would be the main

group there. It is really a cost on the board. There is a receivable going to be

due from the government to eliminate that as it comes due, I guess, on an annual

basis. What is the rational there based on the Comptroller General's advise? Why

is this? I know that is an issue that the Auditor General raised here. Could you

comment first? I would certainly like to hear the Auditor General then on this

particular item.

MR. YOUNG: I guess in the accounting practice, generally speaking, if you

set up an accrued liability like this you would also set up a receivable, for

example, coming from government. In this particular case it is the issue of a

grant versus an entitlement. The Comptroller General has, from an accounting

practice or an accounting principle perspective, said to the Department of

Education that you will be voted, on an annualized basis, a sum of money through

a grant for severance cost. It is not an entitlement that necessarily will -

because we do not know on a year over year basis the specifics of retirements

and severance related to that and so on. So, we will vote that in the

Legislature on a year over year basis and as a result, the receivable that is

set up, if you want, is only of the order of $6 million or $7 million per annum.

It is dealt with on a per annum basis rather than on a true account receivable

basis as typically would be set up if you use accrual accounting. From the

department's perspective - I mean ideally, we would like to see it set up as an

accrual, and we commented on that in our observation back to the Auditor

General, that we take no exception to this. It is just that the Comptroller

General, responsible for the accounting practices of government, has indicated

to us that this is not an entitlement but rather a grant and therefore it should

not be set up as a receivable by the school boards but left as we have

identified.

CHAIR: I would like to hear from the Auditor General on that one.

Mr. Noseworthy.

MR. NOSEWORTHY: The Comptroller General is correct in suggesting that a

receivable not be set up. The Province prepares consolidated

summary financial

statements which would include all of the operations of these boards and gets

reported that way in the House of Assembly, which is the way it should be.

To put this in perspective, the hospitals also have deficits. They do not

record receivables from the Consolidated Revenue Fund. They have deficits out

there, and that is the way you record them. If you are not going to fund them,

you do not set up a receivable. The Consolidated Revenue Fund is an appropriate

place to record those grants, but in this particular instance the recording of

the severance here, without the receivable, is the way it should be. It is

appropriate, and we support that.

CHAIR: No questions? If not, we thank you for your time today. We will

give Dr. Press an opportunity, if you want, to have any particular closing

comments.

DR. PRESS: There is none that I can think of right now.

Thank you very much. It has been a delight to be here.

CHAIR: Thank you, and the Auditor General, Mr. Noseworthy.

Thank you all. The meeting is adjourned.

On motion, Committee adjourned.