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

CHAIR (Wiseman): Order, please!

My name is Ralph Wiseman, I am Chair of the Government Services Committee. With me this morning is the Vice-Chair, Mr. Jack Byrne. With him is Mr. Ottenheimer, Mr. French, Mr. Lush and Mr. Sparrow. Mr. Oldford is unavoidably late. He should be along shortly.

I want to welcome the minister and his staff. The purpose of this meeting of course is to review the Estimates of the Department of Finance and the Public Service Commission. The procedure has been that the minister will have fifteen minutes for opening remarks, if he so desires. The Vice-Chair will have fifteen minutes to respond, or his colleague, Mr. Ottenheimer, if he has indicated. We will interchange questions back and forth at ten minute intervals.

When you are ready, Mr. Minister, you may proceed. The Clerk will call the head.

CLERK: 1.1.01.

CHAIR: Mr. Minister, you may proceed.

MR. DICKS: Thank you, Mr. Chairman. I really don't have any opening remarks except to say that I am pleased with the way the Budget is progressing in the Province. We have been meeting our targets. It has been a difficult time over the last couple of years with the economy shrinking, but I think we have reasonable prospects, I should say, for financial success over the next couple of years.

The major challenges facing the Province will be declining equalization. Also I think we have a lot of challenges around the Province due to out-migration, which means that we have to provide services in a lot of communities that have been shrinking. There are a lot of demographic problems around the Island and in Labrador.

Having said that, I think there is a lot of optimism. I think the economy will accelerate substantially over the next couple of years. Although it won't yield as much revenue as it will generally in the Province because of the equalization offsets in particular, I believe it is the time when the Province will be seeing a greater period of prosperity.

I will just note as well that our employment figures, which are critical to the government, have been improving over the last couple of years, and it is always nice to take credit for it. I think to some extent part of that is due to some of the actions we have taken over the last couple of years, including the HST merger of our Retail Sales Tax with the federal GST.

Having said that, I would just like my staff to introduce themselves, starting with Sheila to my right, and I will move around in a clockwise direction.

MS DEVINE: My name is Sheila Devine and I am with the Public Service Commission.

MR. O'NEILL: James O'Neill, Manager of Financial Operations, Executive Council.

MR. BENNETT: John Bennett, Assistant Deputy Minister of Finance for Pensions and Debt Management.

MR. CLARKE: Robert Clarke, ADM for Tax Administration.

MR. WALL: Phil Wall, Deputy Minister of Finance.

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

CHAIR: Mr. Ottenheimer, do you want to respond? Or you can go into questions. It's your choice. The Vice-Chair has indicated that you are the critic, he would prefer that you did (inaudible).

MR. OTTENHEIMER: Thank you, Mr. Chairman. Mr. Minister, in your few opening comments you spoke of, I guess very briefly, the changed role in terms of RST and now the federal role obviously that is played under the HST implementation.

When we look at, for example, the Related Revenues, and this is on Roman numeral ii at the very beginning of the Estimates, under Provincial Taxation we see Personal Income Tax.

MR. DICKS: Sorry, Mr. Ottenheimer, (inaudible), could you use to the page number as well?

MR. OTTENHEIMER: It is Roman numeral ii, almost at the very beginning under Statement II, Comparative Summary of Current and Related Revenues.

MR. DICKS: Yes.

MR. OTTENHEIMER: When we look at Provincial and then under Taxation, Personal Income Tax, we see a figure of $627 million and Sales Tax, $450 million, for a total of over $1 billion. As I read it, these are monies received - largely this is a federal role for both those categories. So what we have here are significant amounts of money which are now essentially federal jurisdiction.

I am just wondering, with the shift in terms of monies being received by the Province, particularly over the last year with the implementation or the changes in sales tax provisions, what changes have taken place in your department to reflect such a dramatic shift in the way monies are collected, and the change in the role vis-à-vis the Province and the federal government?

MR. DICKS: Yes, let me respond. First of all, these are still provincial jurisdiction. What has happened is that in both the personal income tax and the sales tax the federal government administers and collects it at the present time. We had approximately 150 people working in tax administration. As a consequence of the changeover to the HST system, which was the only relevant change in terms of personnel, because the personal income tax has always been collected by the federal government, I guess, going back many decades, but as a consequence of that the federal government absorbed about seventy of our employees. Bob, what is the current number of employees we now have?

MR. CLARKE: Eighty.

MR. DICKS: Eighty, so that is roughly it. We had close to 150, we now have about eighty. A number of those are contractual because they are still occupied with doing the assessments and collections under the Retail Sales Tax. That is the main administrative change in our tax administration as a consequence of the merger of the two taxes.

We probably have about thirty contractual employees, and after we finish collecting the RST we will be town to about fifty people. Having said that, it won't happen overnight. We are still trying to collect school tax from the change that occurred in 1991 or 1992, was it, Bob? 1992. Tax collections services have a way of persisting, to the disappointment of many taxpayers.

MR. OTTENHEIMER: You just mentioned the RST wind-up. How is that progressing and what sort of termination date do you see?

MR. DICKS: Probably I would ask Bob to respond to that. I am not really current on that. Mr. Clarke.

MR. CLARKE: We expect to finish down-sizing by the end of this fiscal year. That will mean collecting receivables and doing audits.

MR. DICKS: I think Mr. Ottenheimer's question was directed to when we see the total effort, all the money being collected, as well as when we would not need the personnel to do it, Bob. Do you think we will have it done by the end of this year, or is that going to be a three- or four-year effort?

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

MR. DICKS: Yes.

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

MR. DICKS: I should say what we do each year, in the case of school tax, for example, and I hate to say that we will all be finished up for this year. I would probably find that overly optimistic. In the case of school tax what we do each year is access the amount we are collecting and the cost of it. Last year, for example, we collected about $2 million, and the cost of collecting was about $800,000 for the people we had employed.

MR. OTTENHEIMER: In school tax?

MR. DICKS: In school tax last year. I had a little surprise. I came in one morning and I had all these phone calls. I found the department had sent out 35,000 wage attachments for school tax. It caused a little bit of an uproar but we did collect a substantial amount of money as a consequence.

MR. OTTENHEIMER: The reason I asked the termination date is because you mentioned school tax. It was in 1991 and 1992, of course, when the whole arrangement with respect to the collection of school taxes was taken over by the department. Here we are some five or six years later and we are still collecting school tax. I guess my question to Mr. Clarke is: What is the reason for the optimism in terms of having the RST procedure terminate within a year, when we see school taxes and its collection taking some five or six years.

MR. CLARKE: The school tax was a bit of a problem. We had about 157,000 accounts and a lot of these accounts were not valid. We had to try and establish a valid receivable. That took quite a while. Whereas in sales tax we had more people and we know the receivables are valid.

MR. DICKS: The number of accounts is more limited as well. I think we had about - was it 16,000 accounts, Bob? The regular remitters were in the range of 8,000, multi-remitters?

MR. CLARKE: In sales tax?

MR. DICKS: Yes.

MR. CLARKE: Yes.

MR. DICKS: So you have a more limited number to deal with and it is a more identifiable segment of the population. Having said that, whether or not we will finish it all by the end of the year I suspect that may be a little optimistic. Bob is right, I will say.

MR. CLARKE: Well, there will be receivables carrying into the next year but the bulk of it should be taken care of this year.

MR. OTTENHEIMER: I am just wondering, on the copy of school taxes, do you have the breakdown? For example, I know we are going back a few years but obviously it is a continuing process. Do you have the breakdown as to, for example, the first thirty days after wind-up and then the first sixty days? Because what I am wondering is here we are five or six years later and we are still in the process of collecting school taxes. The procedure, by and large as I see it, tends to take care of itself.

For example, in a real estate transaction a law firm must request a school tax clearance. That is something which is done largely through the efforts of a third party. I understand there are set-off provisions as well. For example, if an individual receives or ought to receive or is supposed to receive monies from government and there are school taxes owing, there is a set-off provision. Through collection procedures available to third parties a lot of the work, it seems to me, is being done, and here we are five or six years later. What I am wondering is what are the figures - thirty days after wind-up, sixty days after wind-up, ninety days after wind-up - compared to what we are collecting today? Keeping in mind that there are other mechanisms available to in fact collect monies which are owed government. Do we have a breakdown of that?

MR. CLARKE: We had a breakdown. I know back in 1992 we collected about $8 million to $10 million in the first year and it has declined since then. In 1996-1997 we collected $3 million and in 1997-1998 $1.7 million, and this year we will probably collect $1.2 million to $1.5 million.

MR. OTTENHEIMER: Has the adjustment been made for the collections cost? The minister just mentioned that I think there was some $800,000. That figure takes that into account, does it?

MR. CLARKE: These are revenue figures I just mentioned then. The expenditure figures have come down from $1.5 million down to $350,000 for this coming year, so we are still collecting $3 for every dollar spent in school tax.

MR. OTTENHEIMER: Is that including those other collection procedures which are available?

MR. CLARKE: No. That is the total -

MR. OTTENHEIMER: That is the total.

MR. CLARKE: - collected which will be from your third party demands.

MR. OTTENHEIMER: Let's break it down further. Do you have some idea of what the cost would be, or the benefit to government, when one deducts those procedures which are taken into account and would take place automatically whether or not there is a school tax collection avenue available? Do we have a breakdown of that figure?

MR. CLARKE: We do not have a breakdown of what would be collected other than through interceptions or from real estate transactions. It could be fifty-fifty. The method that you outline is the easiest way to collect. Other than that we have to attach wages or somebody's bank account, that type of thing, which is difficult because there is a lot of small accounts. You do not necessary want to take a $30,000 machine for a $300 balance. It is more difficult to collect that way.

MR. DICKS: I should say wage attachments have been our most successful way of collecting this. Remittances from third parties are most successful in case of commercial. John, I am not current with the practice - I have been out of it now since 1989 -, but is it necessary now to obtain a school tax clearance when an individual buys property?

MR. OTTENHEIMER: On a real estate transaction.

MR. DICKS: On a real estate transaction. Because you only had to do that formerly for commercial school tax because that was the only one that attached to property at the time.

MR. OTTENHEIMER: It is my understanding it is a general requisition on closing. I guess, Mr. Clarke, you don't foresee that same sort of time frame in terms of RST collection as we are now witnessing in school tax collection.

MR. CLARKE: No, it definitely won't be, because we know the balances are valid and we have a trained staff collecting. We have audit assessments being set up as we wind down, but the collections will gradually wind down. This could go on for several years but it is not going to be a major problem.

MR. OTTENHEIMER: This is a question of a general nature, Mr. Minister, and it has to do with numbers. Again, you referred to it earlier in terms of the total number of personnel in the department. Approximately ten years ago the total number of personnel within the Department of Finance was 326 employees, according to my rough figures here. The year 1998-1999 shows approximately 180, so we see a significant reduction, almost 50 per cent, in the total personnel within the Department of Finance, yet we see an increase in senior personnel within the department.

For example, ten years ago I believe there was one Deputy Minister and two Assistant Deputy Ministers. Today it is my understanding there are three or four ADMs in the department. I wonder how we rationalize that. We see a significant reduction in the overall personnel within the department. We now have approximately one half of what it was ten years ago, but yet the department enjoys the services of four Assistant Deputy Ministers and a Deputy Minister.

MR. DICKS: Just let me respond first of all. There was actually two deputy ministers some years ago. There was a Controller General which was a DM position, that was Bernard Carew, I believe. Gilbert Gill was there I guess about ten years ago roughly, and there were three ADMs at the time, so actually we have one less senior executive position.

The Department of Finance is a little different than most departments in the sense that you have people with very high skill levels. If you just look at the amount of money we administer and collect we are responsible for almost $3.5 billion worth of money that comes in each year, and the handling of it. You cannot really hire someone for $20,000 and say: Look, here is the money, now make sure it all gets handled and collected properly and so on like that. It requires a very high level of financial adminstration.

If you compare what we pay our senior people with what you would get in a corporate sector we are far below it. Just check Newfoundland Telephone, for example, and see what the wages for a VP there are. Check the wages of the controller down at Fortis for example. Most of these are in the $200,000 range. We are not paying that to any of our ADMs who exercise far greater monetary authority.

If you look at some of the figures, what we administering in sinking funds alone, or going to market, we require people to do very complicated analysis. We have a fair amount of foreign debt. Every time it comes due we have to determine whether in the long-term, given the foreign currency exchange risks, given the differences in interest rates, given the difference in fees - we had to do this analysis on the Swiss issue twice last year. We decided to do one in Switzerland and one in Canada. Very fine margins to determine where you are better off borrowing. We administer a $390 million treasury bill program that comes due every ninety days, meaning the amount of pure fiscal management in the Department of Finance is incredible, not really known to the general public.

What really concerns me is that I think given the financial responsibility we are very thin on the ground. We have some people with very specialized knowledge, but we have one of him or her. For example, how many people do we have in the pensions right now, nine?

WITNESS: (Inaudible).

MR. DICKS: For instance, debt management. We have nine people to manage all the debt and that sort of thing. We have some very good people but we do not have a lot of them, and I would be very concerned if we lose one or two of them. They are very hard to replace.

The other thing I should mention is out of the four ADMs we have, one of them is Beverley Carter who moved from Executive Council when we merged the economic analysis, the people that do up the economy and so on like that. There was a group over in ITT. Bev Carter was in Executive Council, so they just put that function in our department. Essentially we have one less DM than we did ten years ago and we still have the same number of ADMs, one moved from Executive Council. In fact, when that was done, I think ADM Lorne Spracklin retired at the time, so in effect overall there were two less ADMs in those - there is one rather now where there were two.

I do not really have a concern about the executive of the department when I look at the amount of money we handle and the responsibilities and the type of decision making. We need very high level people to handle that kind of thing.

MR. OTTENHEIMER: I certainly know, having dealt with your staff, we are talking about top-notch, first-class individuals. That isn't the issue. Again, I do not think my question has been answered, because again, some nine or ten years ago, we had double the staff. You know, double the Indians and half the chiefs, as it were.

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

MR. OTTENHEIMER: Maybe I could word my question differently. Do you have a breakdown perhaps from a supervisory point of view? We have four Assistant Deputy Ministers within your department. How many personnel would each Assistant Deputy Minister be responsible for?

MR. DICKS: I can answer your question. I can get that information for you, but I think that is a wrong approach to it, if you do not mind me saying so. The difficulty in government is that the way the system is structured they use line management terms for what are really professional qualifications.

For example, if you look at the Department of Justice we have an Associate Deputy Minister and we have an Assistant Deputy Minister to whom we pay - the Associate Deputy Minister in effect does not really supervisor anybody, but is a lawyer with very high level skills and who is given that position in recognition of that. If you want to critique the government system, and I do, I think the trouble is the terms we use.

For instance, the directors, say so-and-so is a director, but he or she only directs two people only directs two people. Therefore we should have less directors. That may be the case if you think in terms of a line management structure, but when you think in terms of the compensation system for people with very high level skills you need to have a certain salary level. Unfortunately the way the HAY system is structured - and I am one of its worse critics - it sets up that type of system. Now you can call them something else, but the point is you still have to pay people at a certain level regardless of the number of people they direct.

If we wanted to hire someone to manage and supervise the management of pension funds we can't hire a manager and pay them $40,000 or $50,000. It would be irresponsible for us to do it because you would not get a person with the talents to do it. We may have some people who may only supervise twenty people or nine people, but at the same time the type of person you need with the type of skill sets and educational level is not someone you are going to get at an entry level position. I think the problem with it is that our terminology in government is deceptive, and that a lot of the positions and the salaries that come with them are not really given solely from line management - the number of people you manage -, but more to do with the skills you need and the compensation levels.

I agree with you in terms of calling people directors, ADMs or whatever. I would be happier to call them something else and set up a line supervisory authority, but whatever you call them you still need to have an appropriate salary level. In fact, my concern in recent years - and it has not been the case, but because we have had a long period of wage freezes in the public sector - is I think a lot of our senior executives are underpaid. My concern is that as the economy expands we are probably going to lose a lot of people who are not going to be easily replaced in this economy. It's not happening yet in government, but if you look at the IT sector we are losing all kinds of people. The trouble is the more we lose the more we lose because they get down in the States and they are paid a bonus for people they can recruit, so they are trying to recruit back here.

We have to be very careful. We can be a little niggardly about it and say: You are overpaying this one, you should not have so many directors and so on. The consequence of that, whether you call them directors or choose another term that does not imply line management authority, you are going to lose some very high level people who cannot be replaced.

CHAIR: Thank you, Minister.

MR. DICKS: Thank you, Mr. Chair.

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

MR. OLDFORD: I have a question here. If you could go to Section 2.1.02 on page 35, Crown Agencies - Recoveries, please.

MR. DICKS: I'm sorry, 2.1.02?

MR. OLDFORD: Yes, 2.1.02, page 35. Last year you budgeted $46,800,000. The revised figure is $16,800,000. This year you are anticipating $69 million. Can you tell me where the bulk of that would come from?

MR. DICKS: That is the Hydro dividends that we have been getting in each year. What has been happening is we did not need the revenue last year so we moved it forward into this year.

MR. OLDFORD: It is just Hydro?

MR. DICKS: Yes. I can give you an exact breakdown of that if you like. It is the Hydro regular dividend of $34 million this year. We estimate that will be higher than it was last year, so that is an absolute increase from about $12 million last year. There is a special dividend this year of $15 million, and the CF(L)Co pass through of $20 million. That gives you a total of $69 million.

The reason that the $34 million is high - Phil is just pointing it out to me and it's probably a point that needs to be made - is that when we made the deal with Hydro Quebec on the Lower Churchill, part of that was we had the immediate recall of the 130 megawatts of power which we immediately sold. I think the gross was around $36 million. The net from that after - because we own two-thirds when it is in the low twenties - so that plus the $12 million regular dividend gave us the current $34 million that we are now getting in Hydro dividends.

The additional $22 million or so is a direct consequence of the Lower Churchill agreement with Hydro Quebec that we are working on at the present time, and we have a special dividend that we have been demanding from Newfoundland Hydro. It would be nice if we could get them from Hydro Quebec as well. It is $15 million each year.

MR. OLDFORD: Money from agencies like the Newfoundland and Labrador Liquor Commission, where would that be, where would that show up in the Budget?

MR. DICKS: Newfoundland Liquor Corporation?

MR. OLDFORD: Yes.

MR. DICKS: That is in current account revenue. If you go to page Roman numeral ii that Mr. Ottenheimer referred to, if you look under General Revenues, the second category, the second large group from the top, you will see Newfoundland Liquor Corporation, $81.2 million.

MR. OLDFORD: Thank you, Mr. Chairman.

CHAIR: Mr. Byrne.

MR. J. BYRNE: Thank you, Mr. Chairman. Before I get into some of my notes, on the topic alone on page 35 you referred to Newfoundland and Labrador Hydro. Can you tell me much money you have been taking out of Newfoundland and Labrador Hydro over the past few years and how much you are planning on taking out this year?

MR. DICKS: This year we plan to get $69 million out of them. Last year I think we took $16.8 million out. That was the regular dividend of $12 million and the CF(L)Co pass through of $4.8 million.

MR. J. BYRNE: Newfoundland and Labrador Hydro itself.

MR. DICKS: Yes. Because CF(L)Co's dividends come through Newfoundland and Labrador Hydro which owns two-thirds of it and then it comes through the Province. It actually came to us from Newfoundland and Labrador Hydro as $16.8 million.

MR. J. BYRNE: Last year.

MR. DICKS: Last year. There was also another guarantee fee of $11 million which is not in our Estimates, rather, it is in Consolidated Funds. In other words, we charge every group out there that has a guarantee from government a 1 per cent guarantee fee, so we have guarantees at Hydro roughly in the range of $1 billion or so. We collect an $11 billion guarantee fee. It does not show up here, but in terms of charges to Hydro, that is one of the guarantee fees. Well, the guarantee fee they pay is separately accounted for than the general dividends we receive from them.

MR. J. BYRNE: Just a few years ago you were talking about privatizing Newfoundland and Labrador Hydro.

MR. DICKS: I was not talking about it.

MR. J. BYRNE: Your government was talking about it.

MR. DICKS: Yes, when I was Speaker.

MR. J. BYRNE: Whatever. Your government was talking about it and most of the Cabinet ministers who are there now were there at the time. Now you are taking money out of it each year. How long before we get to a point where Newfoundland and Labrador Hydro is going to be at a point where you can say it is not a moneymaker anymore? Because if you are taking out this kind of money it has to be affecting the bottom line for that Crown Corporation.

MR. DICKS: Not really. I do not think it will ever reach the point where Newfoundland and Labrador Hydro is not a money making corporation. It is a monopoly. It charges on the basis of an interest cover. In other words whatever is -

MR. J. BYRNE: It has debt too.

MR. DICKS: Pardon me?

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

MR. DICKS: That is how its returns are calculated, in fact. It needs an interest cover that is basically calculated on the size of its debt. I do not see a point at which Newfoundland and Labrador Hydro will not return money to the Province. In fact if the Churchill Falls agreement goes through, which we now have, it will yield substantial revenues for the Province in the range of billions of dollars. It will be a moneymaker for the Province.

MR. J. BYRNE: In your opening remarks you talked about the decrease in equalization payments. That is partly due I suppose to out-migration and what have you, the numbers are down.

MR. DICKS: There are a number of factors.

MR. J. BYRNE: Yes, I know there is a number of factors, but to continue for a second. We hear the term these days, structural deficit, and the Province will be facing it in the upcoming budget, probably in the next few budgets. Some of that is probably related to the decrease in the equalization payments; the one-shot deal that I think was $50 million from the privatization of the South Coast transportation ferry system - you have so much money there that was utilized to help balance the Budget; money from Hydro to help balance the Budget. There is another one. Wasn't it Term 29 that you have dipped into that won't be there in another year or two. Maybe it is not there now. I am just wondering how you are planning on facing all of these one-shot inputs into the balancing of the budgets, and how you are going to handle that in the next year and the year after.

MR. DICKS: The same angel must be sending you the same nightmares at time. You identified a number of factors and so on. The money we had for the South Coast ferry service was the year before last when Mr. Baker was finance minister and that was in the Budget, I think, we brought down in 1995-1996. We did in fact balance the Budget that year. We had to take some measures at mid-year because we were about $70 million down. We had about a $35 million increase in expenditures and a $35 million loss in equalization in the fall and we took measures to correct that.

Now to a structural deficit to which you refer. All a structural deficit is, to my way of thinking, is you have these many fixed expenses and you have an income shortage that won't meet them. You can do one of two things. You either expand your revenues in some fashion or you shrink the size of your governmental structure. We had Program Review last year, and a part of that exercise was to bring the size and the cost of government in line.

Having said all that, what you do each year in the budget is tinker with things. We gave the Department of Health, for example, a frozen budget of around $906 million. By August last year, three or four months into the fiscal year, we had to give them another $24 million, and this year we gave them another I forget how much, but up around $950 million. You have to respond to needs as they arise.

With respect to some of the one-time payments we have, Term 29 is being phased out, as you know. We expect the economy will grow to meet those revenue shortfalls. Last year we had some shrinkage in the economy, but at the same time retail sales grew by about I think 6.9 per cent or 5.9 per cent. Anyway, in the range of 6 per cent. We expect that over the next several years, given what is happening, the economy will grow and we will make up those revenue losses.

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

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

MR. J. BYRNE: Something popped into my mind that time. With respect to the departmental salaries in your booklet here, just out of curiosity I have been going through some of this. I see some of the departments with the Executive Support, and the critic for finance touched on this, with respect to the numbers of people. I do not know if this should come under the Public Service Commission. You take for example in the Department of Government Services and Lands it is $543,300 for Executive Support, the Department of Education is $744,800, and the Department of Finance is $603,100. You would think each department I suppose would have similar costs in Executive Support. Why such vast differences in the departments at that level?

MR. DICKS: Just let me say first of all that when you look at salary figures for this year versus last year, you have to remember this year we have an extra pay period.

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

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

MR. J. BYRNE: It's that way for every department though, isn't it? Wouldn't that be for every department to have an extra pay period?

MR. DICKS: Yes, that is -

MR. J. BYRNE: I am just wondering why there are such vast differences between departments for Executive Support in that one subhead.

MR. DICKS: From one department to the next?

MR. J. BYRNE: Yes.

MR. DICKS: Some people have more executives, other people have less.

MR. J. BYRNE: Why?

MR. DICKS: Size of departments, type of responsibility. You have some small departments in government in terms of the size of their budget. Some have larger. Some have more ADMs and so on. Probably the better place to look at these things would be in the Salary Details. That is where you can probably make a more valid comparison, as between different departments. I am not making justification, but in general principles a department with two ADMs is going to have a smaller executive support budget than one with four ADMs.

MR. J. BYRNE: Along the same lines, there has been quite a cut over the past few years in the civil service, apparently. I do not know what the numbers are, I am wondering. When I walk through the Confederation Building - I know a lot of people went out the door - but I have seen a lot of new faces around. I understand that, for example with the Department of Education, and other departments, normally over the years the Public Service Commission would have to do the hiring of anybody in the civil service. At certain levels of course they would not go through the Public Service Commission, but now apparently that policy has changed and the departments themselves can hire without going through the Public Service Commission. Can you explain why that policy has changed and what part the Public Service Commission is playing or should be playing?

MR. DICKS: Let me speak to it first and then I will ask Sheila to respond. We had a fairly substantial Public Service Commission. One of the critiques that we did during Program Review was twofold: one was what the proper role of the Public Service Commission was, whether or not it should be doing the hiring, or whether or not it should perform more of an audit function on the departments.

MR. J. BYRNE: Wouldn't that be covered under the Act though, what the Public Service Commission's responsibilities are?

MR. DICKS: Yes, that is right, but the question is how you implement that policy. The second aspect of it was given the fact that we had substantial down sizings and we would not have the type of expanding government economy we had through the 1970s and 1980s, there would not be a great deal of hiring.

One of the critiques I heard in here last year or the year before was why we had thirty-six people I think it was, Sheila, something in that vicinity, working at the Public Service Commission when we were laying people off and not hiring anybody. That was a criticism we considered. When we looked at it we said: We have personnel people in the department. Why are we duplicating that? The hiring probably could be done and should be done at the departmental level. As you know, in the past, the type of hiring review boards had someone from the department, someone from the Public Service Commission. I think, just in response to it, Sheila might wish to expand on that as well.

MS DEVINE: The Public Service Commission Act of 1973 is still intact. It still gives authority and responsibility to the Public Service Commission: the responsibility for insuring that any hiring into permanent positions in the public service is done according to merit principles. Basically that means fairly. The act does provide for a delegation to departments, and in fact since 1973 there has always been a small amount of delegation.

About a year ago we did, in relation to Program Review and some discussions with Executive Council and so on, decide to go with basically a full delegation. As a result what we did was we signed delegation agreements with twenty-six departments and agencies, giving deputies and CEOs the responsibility to carry out the authority of the Public Service Commission Act. We still retain, however, the responsibility to audit what departments and agencies are doing in relation to the legislation. In fact, last year we did a complete audit of every department and agency with delegated staff.

MR. J. BYRNE: Just one more question on that topic before I finish. The minister gave the reason as to why it was done. It is because of duplication within the Public Service Commission and personnel within the department. Now it comes back to policy. If you are talking about the Public Service Commission, which was set up for fairness and balance with respect to hiring in the public service, if there was duplication within the departments themselves - and this is back to policy, to the minister - why wouldn't the department just say: We will hire through the Public Service Commission and we are after having untold thousands of people let go out of government. If you have duplication, why wouldn't you let it stay with the Public Service Commission and deal with the people within the departments, just for the appearance, if not for anything else, of fairness in hiring in the civil service?

MR. DICKS: I suppose there are any number of ways you can do things. In this case, the general view of government, including the advice of officials in departments, was that it should be done in the departments. In a lot of cases you are hiring people with certain expertise. For instance, suppose you wanted to hire a geologist, a mining engineer, a lawyer or someone like that, the public service representative was often there to insure that the criteria set by the Public Service Commission was met. The specialized knowledge as to who the better candidate was, in a lot of cases, or say a type of social worker - take any particular discipline -, you often had to rely on the departmental representatives for that.

What the real role of the Public Service Commission is is to insure that everybody has equal access to government jobs and that the decision is made fairly; but the detailed knowledge as to who has the best skills sets often comes from the people who have that experience within the department.

If I can just say on another side, the other thing we did as well was we delegated a lot of authority from Treasury Board. We used to require every department to come to Treasury Board for numerous things, if you need to get a little $500-grant approved or something. That was all pushed out into the departments as well, so we perform an audit function. What we are trying to do is to push decision making down to the appropriate levels in the department, as opposed to have centralized agencies that make all the decisions for departments. If we are going to have managers and executives you really have to make sure that they make the decisions and that they are accountable for it. If they do not make them, it is very easy to say: It is the Public Service Commission's fault, it's the Treasury Board's fault, or someone else's fault. It is a matter of the type of government you want in the Province.

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

CHAIR: Mr. French.

MR. FRENCH: Minister, I would like to go back to some of the smaller amounts that are in there and find out what they are all about.

Under Salaries in 1.1.01, the Minister's Office, then Transportation and Communications, with respect to this heading, why was the Minister's Office over budget by $41,500?

MR. DICKS: Because the initial amount of $3,500 was really unrealistic. That was too low, and I did not notice that was there until after the Budget went through. Last year we had an awful lot of major issues. For instance we had equalization, on which we were in Ottawa and had a lot of meetings. We had Voisey's Bay. We had the privatization of the Labrador ferry services - last Good Friday I was in Ottawa cluing that up - so there were a lot of unforeseen things. There was hydro, Churchill, Inuit land claims, tax harmonization. There was a lot more travel.

I would have been happier if the figure had been closer to $3,500 than it was to $4,500 because a lot of the travel was inconvenient and at short notice. You will notice from the other categories, if you look at page 37, for example, under Tax Policy, we originally budgeted $27,600 and the amount spent was $60,000.

If you look at Transportation and Communications, under Fiscal Policy, and these people were working with me on tax harmonization, just one area of it, went from $38,500 to $45,000. If you turn over the page, Economics and Statistics again was up by $5,000, from $40,000 to $45,000; and Project and Program Analysis, which were the people working with us on Voisey's Bay, went from $20,000 to $40,000. It was a busy year for Finance, and this does not always occur. Really, in a normal year, I would expect that my travel in Finance would be in the range of $20,000 to $30,000, not $45,000. It is just one of those things that occur, but the department overall was on budget and we made adjustments elsewhere to take account of that.

MR. FRENCH: Of the $45,000 spent in the 1997-1998 fiscal year, how much of that was for travel?

MR. DICKS: Forty-five thousand. That would include plane fares, ground transportation, hotels, normal things that come within that.

MR. FRENCH: Could we have some kind of an estimate as to how many trips were taken, where they were, for what purposes, that type of thing?

MR. DICKS: I think there is a detailed list done up that has been forwarded to, I think, Mr. Byrne. I sent that information to him.

WITNESS: (Inaudible).

MR. DICKS: The Freedom of Information Act. That provided all of that information.

WITNESS: (Inaudible).

MR. DICKS: Yes, so there is no problem supplying it.

MR. FRENCH: In .06, Purchased Services, again can the minister explain why the Purchased Services were over-budgeted by $18,600? What was purchased for the $20,000 spent in the 1997-1998 fiscal year?

MR. DICKS: The two go together. The more you travel, often the more related expenses you pick up. If you have to go to a meeting, you are often required to furnish coffee, refreshments, meals, things like that. A lot of the meetings you have are, unfortunately, over lunch times and in the evenings and so on like that. That is the sort of thing Purchased Services covers in this subhead.

MR. FRENCH: So the $20,000 would actually have been spent for that?

MR. DICKS: Yes, that is right. What you would find, I think, in most departments is the correlation between the two. The more the minister is required to travel, often the more Purchased Services increases. The less you are required to travel, the less need you have for that in most part.

MR. FRENCH: Again, on page 33, expenditures on Salaries are anticipated to increase by $29,600. Why would that be?

MR. DICKS: That is our twenty-seventh pay period this year. We normally have twenty-six.

MR. FRENCH: The department was over-budgeted again on Salaries by $36,600.

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

MR. FRENCH: Yes.

MR. DICKS: Is this in 1.2.01.01?

MR. FRENCH: Yes.

MR. DICKS: I don't think it is $36,000. I think it is about $7,000 is it? $573,500 minus $566,600, is that the -

Oh, you are looking at the bottom amount there are you?

MR. FRENCH: Yes.

MR. DICKS: That is the Total: Executive Support. That does not include only Salaries. It is also the additional Transportation and Communications in Executive Support, which is one I did not point out for $28,465. I don't mind answering the question, but I am just not sure where the $30,000 is coming from.

CHAIR: Bob, are you on the bottom line or are you up in Salaries?

MR. DICKS: Because I think it is actually over $50,000 we were over budget in this area.

MR. FRENCH: Transportation and Communications were up, I guess, $36,000 -

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

MR. FRENCH: We budgeted $28,400 and we spent $65,000.

MR. DICKS: I answered the earlier question of why Transportation was up. I pointed out some of the other portions of the department that had increased Transportation and Communication expenditures. That was true of the Executive as well. Most of the discussions we had, for instance on tax harmonization, required a lot of meetings in Ottawa. Fiscal policy, Voisey's Bay; a lot of our people have been travelling an awful lot to sort of bring these projects together - Churchill Falls and so on.

So inasmuch as the department did not budget sufficiently for the travel that I needed to do last year, the same was true of the Executive and the other people involved. So when you get into these sorts of things - the Labrador Agreement, for example - things like that required a lot of travel to meet with officials in Ottawa. We have had to go to meetings with Voisey's Bay people in Toronto and other places. That is the reason their travel was up, the same reason mine was.

MR. FRENCH: Okay, if we go to page 34, 1.2.02, Information Technology was up by some $210,000. Why would that have been?

MR. DICKS: That is the general amount that is put in our department for computers and so on. I will let Mr. Bennett answer that. He is the ADM responsible for the IT.

MR. BENNETT: Yes, if I could, the $1 million figure there is for a new information management system that they are putting in over all government. The $200,000 was to upgrade the technical support for the auditing group that are going out and doing the old RST returns. It is about $200,000 worth of laptop computers and related equipment purchasing.

MR. FRENCH: Okay. In 1998-1999 we are going to spend another $1 million in Information Technology. What are we going to spend that on?

MR. DICKS: I am surprised we are only spending $1 million.

MR. BENNETT: Basically that is a fairly large comprehensive financial management system that they are putting in as part of the government-wide system. That is being developed, and we are hopeful that this will be the last year that will be (inaudible) implementation by the end of this year.

MR. FRENCH: Who is that being developed by? Is that being developed in-house or are we hiring somebody outside?

MR. BENNETT: It is a combination. It is being built in-house but basically by the Newfoundland Information Services as part of that particular arrangement that we have with that agency. Part of that divestiture we did for Computer Services, and we still maintain their services for a period of seven years. That is being done with their staff.

MR. FRENCH: That is the company that was bought by Newfoundland Tel, or Newtel, or whatever you want to call them now.

MR. BENNETT: That is correct.

MR. FRENCH: So we are going to spend another million dollars this year?

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

MR. DICKS: If I might intervene, and I do not know if you are asking the same question, the actual amount that we are committed to spend at NIS over the seven-year period is about $17 million - $17.4 million or $17.8 million, somewhere in that range - each year.

What we decided - Treasury Board, which is a different part of the Estimates as you know - each year, is where that money is best spent. The IT budgets of some of the departments are substantial because they are trying to put new systems in to manage information and so on.

One of the phenomena, as you know, with most of this stuff, is that as soon as you buy it, it is outdated. The useful life of most computers these days is probably in the range of about eighteen months, depending upon what type of programs you are running on them. There always seem to be new and better products that require - you know, you have Windows 95 and you have Windows 98, and each one is an improvement on the other. Then, if you need certain forms of software, it is geared to run only on the latest system. So you move from a 286 to a 386 to a 486 to a Pentium, and the Pentium 120 to a Pentium something else.

It is challenging but the simple fact is that there are tools of the trade that wear out, as much as a carpenter replaces the tools that he uses from time to time. It is a new concept for us all, but unfortunately it is a major expense to government.

MR. FRENCH: In .02 Revenue - Provincial, there is $75,000. What is the source of that?

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

MR. BENNETT: If I may. Yes, that is the credit that is received from the pension fund. The postage of the pension fund is paid by the fund, initially by the department and recovered from the pension fund. So that basically relates to the postage which is included as part of Transportation and Communications in the figure above of $210,400 and it is 1.2.02.03.

MR. FRENCH: In Government Personnel Costs, the Salaries are going from - well, they were budgeted at $3 million, they came in at $2.564 million, and now in 1998-1999 we are going back up to $3,827,500. Why would that be?

MR. BENNETT: I can only answer generally but I do know they have resolved a lot of the pay equity issues, part of the negotiations of how to implement the programs, and this represents their anticipated expenditure this way for pay equity. It has all been done by Treasury Board as part of the collective bargaining process.

MR. DICKS: These are not personnel per se, these two categories. These are the benefits we pay on behalf of the employees. I will answer your question maybe a little indirectly, but if you look at the line below it, Employee Benefits, $26,290,300, it is now going to $28,319,200. That is as a result of the CPP increases. That is the amount that we pay out to the Canada Pension Plan and Unemployment Insurance. Both of those have gone up, as you know, by a quarter of a percent. If you look at the Salaries, that is the amount of pay equity.

Last year, as you know, there was an issue around pay equity, how much we were (inaudible). We budgeted $3,634,600 and it actually cost us $2,564,600. This year it will be $3,827,500.

I can give you a breakdown of the Employee Benefits if you like. CPP this year will cost us $6,246,000. That is an increase from $5,600,000. Unemployment Insurance is going up from $8,600,000 to $9,127,000. These are increases we bear as much as any other employer. Group insurance, interestingly, has gone up from $5.9 million to $7.1 million. Health and post-secondary education tax is in here as well - this is the payroll tax - it moved from 4.9 to 5.7. Why, you ask? I do not know. I am wondering why myself. Travel insurance is in there, and a few other small amounts - $5,000, $4,000, $29,000 - but the vast bulk of the second one is due to the increases in the general payroll tax in the country.

MR. FRENCH: Before I pass on to somebody else, I have a question which I have to ask. I asked it in committee last year. I was promised an answer but I did not get it. I placed the same question on the Order Paper in the House of Assembly and I did not get it answered, so I am going to ask again today.

When the Chairman of the Newfoundland and Labrador Liquor Commission was hired, I asked for his hours of work; what his contract was; how many hours he was required to work a week; how many hours he did work in the first six months of his employment with the Newfoundland Liquor Commission, and I have not received an answer to that question. There are some weird and wonderful stories going around, so I am going to ask the same question today and I am going to ask that I receive an answer. I have tried twice before and it has not been answered so I am going to ask that question again.

I got elected in 1996, I am going to be here until the next election and hopefully there on, so expect from this member here that until I get that question answered, every year that we meet I am going to ask the same question because I want an answer.

MR. DICKS: Well I can answer it for. I don't recall you asking the question, Bob. I remember that you did ask a question in the House, which I answered, on the president's travel.

MR. FRENCH: No, the one in the House, Mr. Minister, was placed on the Order Paper and I never, ever got an answer. I was told here last year in committee that it would be supplied to me in writing. I am asking - that I would get it in writing.

MR. DICKS: Well, I can give the answer right now. The President of the Liquor Corporation is not a contractual position. It is an appointment, at pleasure, by the Premier of the Province inasmuch as all the executive of government hold office in the same fashion. There is no required number of hours per week. The executive work full time for the Government of Newfoundland and Labrador. Some weeks they get vacation the same as everybody else, depending on the number of years, three to five weeks.

Mr. Lush was with ENL before he was a VP, and he was a teacher before that, so I expect, given his whole government service, it is probably in the range of four or five weeks. The number of hours a person works a week as executive far exceeds - in virtually every case that I know of - thirty-five to forty hours per week.

To answer your question, we don't keep track of people the same way. If you are an executive you don't punch a time clock when you come in at 9:00 a.m. and you don't punch a time clock when you leave at 5:00 p.m. I wish they did because in many cases, unfortunately, there is a sense outside of government that it is a pretty slack job.

My frank assessment, from the official I had the pleasure to work with, is we have people who work very long, hard hours and get very little credit for it. They would be much better paid outside had they done the same thing. That is as true of Mr. Lush as anyone else.

The difference at the Liquor Corporation is that it is a different kind of business. A large part of what people do there is meet with suppliers and so on. For instance, if you have a dinner obligation with an employer or somebody who supplies the corporation, or a luncheon, is that a meeting or not? Is that work or not? Most often when you are into these things you would as soon be at home having a tomato sandwich, in most cases, but we don't keep track of our executive. There is no one in government, if you say: What is Phil Wall's or Bob Clarke's or Sheila Devine's contract? We don't have a contract with them per se. They are hired and they are expected to do their job. If they don't do it, frankly, they are not around.

I don't know if that answers your question, Bob, but we don't require executive to punch in and punch out.

MR. FRENCH: No, I don't expect them to punch a clock but I would like to know what his hours of work were the first six months that he was there. I would like to know what his holidays were, the six months that he was there, and I would like to know what salary he was paid.

MR. DICKS: Well, sure. The salary is in the range of $100,000 or so, I think, for the President of the Liquor Corporation. We will find out the information for you, and I will find out how many... You want to know what his salary is and how many vacation days he took during the first six months?

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

MR. DICKS: And normal hours of work?

MR. FRENCH: Yes.

MR. DICKS: Okay, yes. We will get that information for you.

MR. FRENCH: Okay.

CHAIR: (Inaudible) if you have information otherwise, you should give it to the minister.

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

MR. OTTENHEIMER: Thank you, Mr. Chairman.

On the issue, Mr. Minister, of Transportation and Communications, just briefly, in response to a question from Mr. French you indicated that the 1997-1998 revised figures reflect, I guess, the activities of last year.

MR. DICKS: Yes.

MR. OTTENHEIMER: However, in the Estimates for 1998-1999, for both the Minister's Office and Executive Support - found on page 33 of the Estimates - we see only a slight reduction in anticipated costs with respect to Transportation and Communications.

Last year was special. Last year there was a lot of activity which according to you, Mr. Minister, warranted a significant increase in those costs. Why have those costs essentially remained the same with only a slight reduction for next year?

MR. DICKS: As I said earlier, the amount that was budgeted for me was inadequate. I mean, $3,500 is just unrealistic for anybody who is going to be Minister of Finance; but do not forget that a lot of the things I mentioned still continue, like the Voisey's Bay project. I think we have settled the Inuit land claim, it is up for vote on the MOU, but now we are into it with the Innu to try to get that settled so we can go ahead with the Churchill Falls project. The Churchill Falls project is still there. That involves a lot of high-level review at the Department of Finance.

Most of the work done on determining what the revenue yields to the Province is done in the Department of Finance. We also have the issue of the mining tax with Voisey's Bay, what one we are going to implement, so a lot of major issues are still holding over. That is the reason we anticipate that the demand for travel will be in that range this year.

The other big issue we have, frankly, is that in 1999 we have a review of the equalization. If there is a single issue that is going to speak to the economic well-being of the Province over the next several years it is going to be whether or not we get a better deal on equalization. So there are a lot of officials' meetings coming up over this year, and some additional ministerial meetings, to try to iron that out.

We have been trying to negotiate, frankly, a higher floor. I think Mr. Byrne alluded to one of the problems we have in the Province, out-migration. One of the most difficult consequences is that your equalization is determined by two factors, essentially. One is your economy relative to the federal one, and then it is allocated per capita. We are getting hammered in Newfoundland because I think we are the only part of the country that has dropped in population.

As of the 1996 population year, if we had to get to the level that the rest of the country had increased with on average we would need to add back 8.2 per cent of our population. We declined, I think, by 3.6 per cent. The rest of the country had increased by 4.6 per cent over the same period. That was an average, now, (inaudible) looking at places like Alberta.

What we are trying to do is to persuade the federal government to set a floor on equalization so that if your population drops below a certain level over a certain period of time, you do not have that full impact coming against the Province. That is one of the reasons we lost substantial equalization last year.

We raised it at the ministers' meeting we had, I think it was in February, in New Brunswick. We were due to have a ministers' meeting in Winnipeg this month, I think in May. It will not come off probably until some time in June or July. The officials are actively pursuing it because the ministers agreed to the principle of an equalization floor, but now we have to try to hammer them into getting something that is workable and reasonable and hopefully favourable to the Province. I expect that is going to require a lot of meetings, and that is probably one of the main reasons we have put a little more money in there.

MR. OTTENHEIMER: During these meetings, Mr. Minister, for example, if another minister or another member were to accompany you or your staff or your officials - those related costs - is this included or would this be specific to the department with which the other minister is associated?

MR. DICKS: The officials are accounted for separately. If a member accompanies me, I do not know if that comes out of my budget or someone else's. Do you know offhand, (inaudible)?

WITNESS: (Inaudible).

MR. DICKS: I do not know. I would have to check on that because Mr. Walsh accompanies me from time to time on these ministerial meetings. Whether or not that is in the $45,000 I had last year or one of the others, I do not know.

WITNESS: (Inaudible).

MR. DICKS: That is in my $45,000, I am told, so that is a part of the reason mine was higher as well, because Mr. Walsh has been very helpful on a lot of those issues. In fact, where we had the agreement on the equalization floor was a meeting I did not attend. I think I had to be at one of the Voisey's Bay meetings or one of the - where was I? I was in Ottawa, I think.

WITNESS: Yes, you were in Ottawa with the Premier.

MR. DICKS: I was in Ottawa with the Premier on the Lower Churchill agreement at the time, so Mr. Walsh went in my place. That is where he helped persuade -

MR. FRENCH: You say you were in Ottawa with the Premier. Would all of the expenses, if it was dealing with finance, say the Premier's expenses, or if the Minister of Justice went, would that come out of your allocation?

MR. DICKS: No.

MR. FRENCH: It would just be yours?

MR. DICKS: These are mine. The Premier's would be charged to his account, the Minister of Justice would be charged to his account, and the Minister of Mines and Energy would be charged to his account. The only thing that would be in mine is Mr. Walsh's travel as well.

MR. FRENCH: I just wondered, if any minister travelled with you on finance business, if his expenses would be covered by your department or by his own.

MR. DICKS: By his own. The difference between the ministers - each minister has a separate vote for Transportation and Communications; the members do not. If they travel at a minister's request, or accompany a minister, then of course it gets charged to the minister's vote because members do not have that, except in the House of Assembly there is a vote as well.

MR. FRENCH: Thank you.

MR. OTTENHEIMER: Mr. Minister, there was some discussion a few minutes ago on the Information Technology, under Administrative Support. Again last year we see a revised figure of $1.2 million, and again this year a budgeted figure of $1 million. These are significant amounts, significant costs. I guess my question would perhaps be to Mr. Bennett. For such an incredible cost to the taxpayer, how is it being received? What is the response by your staff, and by various officials within the department and within government generally, as to the success and effectiveness of such an expenditure?

My next question - I have heard reference to the Oracle package - is this specifically what we are talking about? Is that the name on this particular program?

MR. BENNETT: Yes, that is correct.

CHAIR: Where are you, John?

MR. OTTENHEIMER: It is just a general question.

MR. BENNETT: (Inaudible) this particular vote. As you know, the FMIS system, if I can use the term - the management system of government, of course, is separate and distinct from the purchase of computer hardware, laptop computers, which are far more portable, which is one of the concerns. I am going to defer that a bit, as to the usage and the reaction of staff, to Mr. Clarke because it is in his area essentially that a lot of the upgrades were done.

As far as the other system, of course, it is a mainframe system which is far different and is a project of fairly significant cost. The $210,000 basically is the personal computer business, which is the laptop computers and all the support packages which help people move through the system and do audits and complete audits in a far more efficient basis in the offices of potential clients.

Bob, maybe if you could follow up on that.

MR. CLARKE: The only part of this would be the $200,000 for laptop computers. That is the only area that we have had any expenditure on out of tax administration. The new government accounting system is really government accounting, which is Executive Council.

MR. BENNETT: If I could follow up on that, as you know there are two elements to this. The first one, Newfoundland Information Services, for solutions, is a contract arrangement now with government. It has a mainframe computer, which is a huge computer system, of which it handles a lot of the major computer support systems of government, and there is a new financial management system going into that. That is sort of a relationship between the government accounting group and this particular organization, which used to be the old NLCS, Newfoundland and Labrador Computer Services.

The $210,000 that Bob alluded to - Mr. Clarke - we are also upgrading the same way with the new Oracle package, and upgrading the hardware support in all the other aspects of our operations. It is far more efficient and it has far more flexibility, which is the greatest thing. In the branch that I administer, the introduction of these upgraded systems is going on now and the training support in the pension area has just been completed. In some of the other areas it is just starting.

What it does is allow greater flexibility of reporting in the applications of bar charts. The graphical displays can be done far more efficiently, quickly, and on a more timely basis, which unfortunately our minister requires, than the old systems which he probably -

WITNESS: (Inaudible).

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

There is a very positive, I guess, response from staff that we are finally upgrading a lot of these old computer systems that we have, and it will be a process that will be continued over the next couple of years.

CHAIR: Okay.

MR. OTTENHEIMER: Do I have more time?

CHAIR: No, you do not have it but we will let you. How many more questions do you have?

MR. OTTENHEIMER: Two or three.

CHAIR: Two or three?

MR. OTTENHEIMER: Two.

CHAIR: Two. Okay, short questions and short answers.

MR. OTTENHEIMER: Thank you, Mr. Chairman.

A question on the Public Service Commission, Ms Devine. Maybe you could give me some insight with respect to the Employee Assistance Program and other employee support services. I understand that is an integral part of the Public Service Commission and I am wondering specifically what energies are put into that aspect of the role of the Public Service Commission. How extensive is, in fact, the Employee Assistance Program through your offices? And, can you give some idea, approximately, as to the numbers of individuals who would benefit from such a program which is given through the Public Service Commission?

MS DEVINE: The Employee Assistance Program, as you may know, is governed by the labour management agreement between government, the Management Association and NAPE. Last year - the stats I have for you - there were 424 employees, individuals, who participated in that program.

That program also does policy and provides a support on critical instant stress debriefing, which is again a critical instant in the workplace where we go in and try to help the employees. There were 151 individuals who participated in that particular aspect of the program. As well, the program offers workshops related to change and stress in the workplace, and I would say that there would be about 900 employees in all who had participated in that aspect of the program.

The program is operated by two professional staff and your key coordinators - one permanent, one temporary - with one support staff, who provide that service throughout the Province.

MR. OTTENHEIMER: It is an ongoing program, presumably?

MS DEVINE: Yes, it is. Right now the program is being looked at in terms of its role and mandate under public service reform, and one of the things we would hope is that the program may change from one of being reactive to being proactive in trying to help people prevent problems and stress rather than react to stress once it occurs. So again we have been asked to come forward with recommendations around the program in terms of that aspect.

A lot of the service is contracted on a regional basis. With only two staff, what we do is, the two staff do the initial assessment and then any referrals for counselling and so on, whether it is drug related or gambling addiction, or whatever the particular issue is for the employee, a lot of that is contracted out to individual, professional counsellors in each region.

It is a very small program with a very small budget but again, in our view, from the Commission, a very strong mandate.

MR. OTTENHEIMER: Understaffed, in your opinion?

MS DEVINE: Yes, but again we have endeavoured to contract as much as possible. Because again what we do find on a regional basis is that people often prefer to go to someone within their own region. Again, we have been fairly successful in using individual, professional people in communities to provide the service.

MR. OTTENHEIMER: Mr. Chairman, just one more question for the minister?

CHAIR: Okay.

MR. OTTENHEIMER: Thank you.

I understand the Department of Finance has offices in Corner Brook. Could you please indicate the number of personnel in the Corner Brook offices, and essentially what the role of the department's office in Corner Brook entails?

MR. DICKS: There are sixteen people at the office in Corner Brook. There are people who essentially, the majority of those people, are tied up within collecting RST. We also administer now, as you know, the tobacco tax, gasoline tax, and so on. Probably Bob can give you a little clearer idea of how many people are engaged in each of those areas.

MR. CLARKE: Most of the people in Corner Brook are temporary employees who are doing sales tax audits and collecting sales tax that is outstanding.

MR. OTTENHEIMER: Is this a reduction in the number of staff or, where the personnel are essentially temporary, does it fluctuate from year to year? What has been the pattern?

MR. CLARKE: Well, there was an office of permanent staff there of about eighteen. We are down to about maybe four permanent and the rest temporary.

CHAIR: Okay, Mr. Ottenheimer?

MR. OTTENHEIMER: Is there a comment being made?

MR. DICKS: I think the comment would be that when the RST is collected the office will be much smaller in size. The people who were there were absorbed by the federal government, went over to the feds. We had about eighteen of them, and virtually all of those... The ones who stayed were mostly people near retirement who wanted to finish up in Newfoundland. Because there were a lot more possibilities - something like 45,000 people work for Revenue Canada, so there were a lot more opportunities with the federal government - for the most part, people who were younger took advantage of it. People who were closer to retirement had to think about it because there was a pension issue there. The permanent staff would probably be in the range of about four people when we are finished.

CHAIR: Thank you, Minister. Mr. Lush?

MR. LUSH: I want to ask a general question about collective bargaining in the minister's capacity as President of Treasury Board. I think he announced some months ago the rate of salary increase that the government was prepared to give for this year and for somewhat into the future, the next couple of years. I wonder if the minister can indicate as to which groups of bargaining units have accepted the government's offers, or which ones are settled, and which ones are now ongoing, and what is the status of these?

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

We have settled with most of the NAPE unions; the hospital support staff have accepted. The only two that are outstanding right now that I can recall are - there are three groups - some of the school boards. About four out of the sixteen, I think, have settled, and we settled some of the others. So it looks like, I guess in the long run, that probably most of NAPE will accept. The ferry workers, I am told, are looking at it again, as are the workers at the Liquor Corporation, both of which groups had voted to strike. The collective bargaining is going reasonably well.

We still have not settled with a lot of the CUPE bargaining units, particularly some of the hospital support staff. The (inaudible) for example, is one of them. We have not settled with the nurses' union yet, but I think we have settled with Allied Health Professionals. The doctors are not a union per se but we are negotiating with them, and the teachers as well.

The largest representative of employees in the Province is NAPE, and we have pretty much come to an agreement with NAPE in most of the bargaining units. CUPE is still out there, nurses, teachers and doctors, in terms of salary agreements that we have. We are getting there.

MR. LUSH: So within the rates offered by government, are we pretty much staying within that range?

MR. DICKS: Yes. We will not agree to any additional amounts outside what we have set out; we just do not have the fiscal capacity. The 7 per cent that we negotiated over three years will be the agreement with all groups or else we will have strikes. We cannot (inaudible) salary packages. There are other issues, different collective agreements, and I do not want to say too much about bargaining at the table.

Like everybody else, most people would rather have more and so on, and people have different rationales for it. You can understand some of them, but the other issues are still things like job security, hours of work, temporary versus casual employees and so on, so there are a lot of different issues at the bargaining table. The reason people sometimes reject agreements is not always salary but it has to do with other issues, particularly job security in certain bargaining units, but we are working them through and in most cases we are resolving the critical issues to people.

MR. LUSH: What is happening with respect to the increase to pensioners? I know that you alluded to that in your Budget Speech, and I wonder if you want to give some further clarification on that again.

MR. DICKS: I remember answering a question from Mr. Ottenheimer. To me, it is a question of public policy. The pension funds do not have the money to pay any increase to existing pensioners. If the pension funds were in surplus, if you had an extra 10 per cent in there, you could very easily justify paying some amount out to your retirees or to reducing the premiums of current people who are contributing to the pension plan. We are not in that happy position. The Government of Newfoundland is the only employer in the Province that is able to have a pension fund that is underfunded, and we all know the reasons for that. It is historic. All of us around this table who represent governments of the past and current are somewhat to blame.

About 1980 a separate pension plan was set up for most of the public service employees, and in 1990 some substantial changes were made. Unfortunately, the position we now find ourselves in is that in order for us to give a pension increase to people who are retired - an indexed increase or 2 per cent or whatever the case might be - we have to take money out of general revenue to put in the pension plan. Because if we pay it out of the pension plan we are further jeopardising the integrity of those - I mean, the public service pension plan is only about 44 per cent funded, the NLTA pension plan is only 17 per cent funded, and if you start paying increases out of that, there is no money there to pay it.

The other issue is that we have said to the unions that we would be prepared to look at indexing if you want to negotiate it, but they are not interested in negotiating it, either for themselves or the future. So you have a situation where public service pensioners have not paid for indexing. Ninety-five per cent of the pension plans in the Province do not have indexing, so the issue, when you get through all those considerations, is this: Are we prepared to tax other people on fixed incomes, other pensioners, people who have retired from fish plants on fixed incomes, people who have been in the private sector and had to provide for their retirements through RRSPs, people who have retired from mills, people who have retired from vessels and so on, who are on fixed incomes - and that is, by far and away, the majority of people - in order to give public service pensioners an increase? I think it is bad public policy to do so.

A pension plan is a fixed benefit, it is something you contribute to, and I don't think people should expect that if they did not contribute for indexing that they should receive it. It is a gratuitous payment. In order for us to do it, we have to levy taxes on other taxpayers to provide it and I just don't think it is equitable. I don't support that concept.

MR. LUSH: I understand that, and I think that most people accept the fact, particularly in the private sector, that you don't get an increase to your pension. You get what you paid into it. If you paid into RRSPs you get precisely what you paid in, or if you paid into some other kind of pension plan, particularly with private enterprise. For some reason or other there is this perception with government that you are entitled to receive, or people have a level of expectation that there is to be an increase in the pension plan. How do we correct that?

I understand quite well what the minister is saying; one expects to get from a retirement plan what you paid into it, but for some reason or other there is a different level of expectation, certainly in this Province, with respect to public pensions.

MR. DICKS: I think the expectation is only there with the pensioners. If you go out and ask the general public, should we give public service pensioners a gratuitous increase when the pension plans are underfunded, when they have not contributed for it...

I will tell you two things. One is, my mother is a public service pensioner. It affects my family directly. My grandfather retired from the Newfoundland Railway in 1947. When he died in 1974, he was getting the same pension he did in 1947. So we all have to provide for our own retirements. To the extent that we don't or are unable to, we have other social programs that pick that up. We have old age pensions, we have guaranteed income supplements, we have social services. So the concept that because you worked for the Government of Newfoundland you are entitled to a gratuitous increase, I cannot see any justification for it, particularly when a lot of people who are drawing pensions are drawing pensions far beyond what they should be drawing, given what they contributed.

The teachers' pension plan, for example, people contributed 3 per cent for a pension plan that is probably worth 8 per cent, 9 per cent, or 10 per cent. You just simply cannot justify it, to my way of thinking. Other people may see a rationale, but I think one of the most inequitable things we could do is to tax people on fixed pension incomes to provide increases to another select group of people who happened to work for government. If we are going to take pension increases... I can see doing something for all old age pensioners - that I can understand - but to do it solely for government employees I think is unfair and inequitable government policy. I do not think we should do it.

CHAIR: Okay, thank you, Minister. Thank you, Mr. Lush.

Mr. Byrne?

MR. DICKS: Sheila just made the point that the federal one is indexed, but the federal government people contribute more to their pension plan. They have a higher pension increase. In fact, I think they are - where are they now? The federal pension plan is in surplus, for example. I think, in fact, some of them they have actually decreased because they are in surplus.

MR. LUSH: Talking about the indexing, you mentioned that it seems as though the unions - if I understood you - don't want indexing?

MR. DICKS: I think we made a proposal, and I may be wrong on the figures, but at one point when this issue came up - it came up several years ago - we looked at it. In order to provide indexing to us all when we retire, I think we would have to contribute about an extra per cent right now and that would cover indexing. The cost of indexing to the pension plan right now is about $2 million if we gave a 2 per cent increase. In order to fund that we would have to put $20 million in the pension fund out of general revenue.

The other side of this is that if we all contributed 1 per cent of payroll and the government matched it, you would be putting in about $34 million a year - our payroll is about $17 billion - so you would be able to pay out the money to the pensioners who are out there and the people who will eventually retire. One percent would probably give you an ability to index all the pension plans, but that is not one of the things at the negotiating table. That does not come up.

MR. LUSH: I just want to - because I cannot believe that the unions of this Province would not, on behalf of their workers - and I refer specifically to the NLTA - I cannot believe that they would not want to negotiate an indexed pension plan. I think the unions are shirking their responsibility not to negotiate an indexed pension plan. To not do so, to me, is manifestly stupid. That is not blaming the government. Obviously the government cannot do anything about it because if the unions do not negotiate it, quite obviously we are not going to give it. It seems to be a complete shirking of responsibility for unions in this day and age not to have done that for their members.

MR. DICKS: If I can just say this in response. Part of it may be - and I do not want to lay blame on anybody, you are trying to explain your own rationale - with the unions that it was not necessary in the past, because government did it gratuitously. When you get down to making very tough decisions about a limited amount of money and where you can do it and where you cannot do it, and you have to raise taxes in order to grant benefits, I think one would hope that once it becomes absolutely clear and it becomes government policy not to grant indexing or similar increases, then I think people should look seriously at it.

The other thing you have to remember is that pensioners are not union members. Once you retire you are not a member of the union. It only speaks for current members. One of the problems we have with the NLTA for example currently is that I am not sure if they can negotiate on behalf of their pensioners when it comes to trying to solve the difficulty we have there.

It is complex, but as you say, Tom, I think there is a good issue there. We would like to look at it but we can't do it without proper funding in place.

CHAIR: Mr. Byrne. Now, I have to leave for a couple of minutes. You will be okay, will you?

MR. J. BYRNE: I will survive. Thank you, Mr. Chairman. I want to get back to the information technology again. If you go through each department you will see, and sometimes in various subheads within the same department, money for information technology. I have asked this pretty well these past five years since I have been here on these committees. Does anybody have a handle on how much money is actually being spent on information technology?

MR. DICKS: Yes.

MR. J. BYRNE: The reason I asked that is this. You mentioned something earlier with respect to the idea that in eighteen months the computers and whatever are out of date, and so have you. There has to come a point in time when you have to say: What we have will suffice for x number of years, it's doing the job. Especially in light of the fact that when you walk through some of the hospitals in the Province you can see even the general cleanliness is not up to what it should be. I am just wondering about priorities here. What is the actual figure in information technology with respect to equipment, hardware and software that will be spent in the Province, say in this coming year?

MR. DICKS: It is in the range of about $18 million in government.

MR. J. BYRNE: Eighteen million dollars.

MR. DICKS: We have generally been spending roughly what our commitment to NISL or whatever it is called now is.

MR. J. BYRNE: Yes, I am getting into that next. About $18 million is being spent on computers each year in the Province. It seems high to me, I have to say, after looking at it for five years. If you are spending an average of $18 million, that is $90 million these past five years, and I would say it has been decreasing.

MR. DICKS: If I can just make a point. It is hard to fathom, but if you look at most large corporations, IT is to the point where you know you have a Chief Executive Officer, you have a Chief Financial Officer, and now they have a CIO or something, Chief Information Technology Officer. Fortis, for example, just went out and hired a guy from Ontario to be their chief - it is to the point where if you are running any major operation, all this thing with networks and keeping up to date can be very detailed.

MR. J. BYRNE: I understand.

MR. DICKS: We are not the exception. We may be proportionally for a business, and I use it loosely of course, but at this size we are probably spending less than what many other businesses this size would do.

MR. J. BYRNE: I am just thinking about $18 million -

MR. DICKS: It is a lot of money.

MR. J. BYRNE: - and priorities, that is all. This gentleman on the end mentioned $200,000 for laptop computers. Can somebody tell me how many laptop computers were bought for that and who gets to use these laptop computers? I know what they will be used for, but would they be permitted for personal use and what have you?

WITNESS: I am not sure how many laptop computers we have, but each one of our auditors will have one. They use those when they are doing audits.

MR. DICKS: In the field.

MR. J. BYRNE: Field audits.

MR. DICKS: Can I just answer? What happens is this. You can have someone go out and make detailed notes on each thing like this, or what they can do is when they are doing it with a laptop they input the information directly. The theory is, and it's one I accept, that if the person has the appropriate tools to do the job they can work more efficiently with it. What you face is this: do you get them to copy down all the information, come back, duplicate it, or do it on the spot? It made sense to us to equip them with laptop computers to do the work in the field.

MR. J. BYRNE: To continue on -

MR. BENNETT: I don't want to leave the impression, because I think I probably did, that these were solely for the purchase of laptops. I agree with you, that is a lot of laptops. What it is, is part of a deliberate plan to upgrade all the computer support systems in the full departments. Laptops were a major example of an upgrade. Two hundred thousand dollars was in there, but there were also other computers that went on secretaries' desks and other support people as part of the general upgrade of the IT system in the department.

MR. J. BYRNE: Thank you. With respect to the new company, when you privatized Newfoundland and Labrador Computer Services, I have some questions. Government certainly used to utilize NLCS over the years. The University is one example, and the Howley Building on Higgins Line with respect to calculations for geodetic surveys and what have you, and other departments, are other examples. Is there any study being done and an analysis of the cost that we are paying for that service now compared to what it was prior to it being privatized? Is it costing us more per hour now than it had been?

MR. DICKS: Yes. Part of the agreement with NISL requires an audit each year of what they are charging and the work doing done. That is done every year and the results are satisfactory. We check to make sure we are not being overcharged and we check to make sure that the rates are competitive. If you presume that the work that is being done is necessary - now maybe we should only spend $1 million a year on IT rather than $20 million. The consensus of opinion is that a lot of our systems are outdated and have to be upgraded even before the year 2000. The work that NISL is doing is necessary and the rates they are charging are fair rates.

MR. J. BYRNE: With respect to the privatization itself of NLCS, my understanding is that there have been yearly reports done of the agreement, the benefits package and what have you, but government has not verified the reports that have been submitted over the past three years. Has that been done since the Auditor General's report was submitted? What I am asking is: How do we know if the benefits that were agreed upon, and the industrial benefits package, were actually met?

MR. DICKS: Yes, in fact, that has been. There was an issue raised in the Auditor General's report. In fairness to the Auditor General she conducts, and her officials, an audit that was (inaudible) point in time. I answered the question for Judy Foote who was not in the House, she was away at the time, and I got the information. That part of it is monitored by ITT which had done the privatization.

The results of that, there were two or three different aspects to it. One was that NISL had to produce a certain number of jobs and they had to subcontract a certain amount of work. They have surpassed both those things. I supplied the information in the House and I can get that again for you. In fact, I had a letter from Frank Davis, who is the head of it. I will get that information again for you.

MR. J. BYRNE: I know that, yes.

MR. DICKS: Anyway, as regards to NISL, they were supposed to add something like thirty jobs. They have actually employed about eighty people or something like that, so they have really grown.

The part of it that was not done and that we are negotiating with and for is Andersen Consulting, which is the largest consulting group in the world. They recently went through a split. They were going to put a centre of excellence or something like this in the Province for about $2.5 million or $3 million. They did not do it because what happened is they basically got out of that end of the business. They have been back to us saying: Look, we are prepared to give you x millions of dollars worth of work. We are negotiating with them as to what a suitable replacement for that would be. Now there is no doubt that Andersen Consulting did not meet their part of the agreement, because this was supposed to be a joint venture, and I think Andersen Consulting had 10 per cent.

MR. J. BYRNE: Sigma too, wasn't it? Sigma was involved there?

MR. DICKS: Sigma or something like that, yes. That is the only part - just to finish the answer - that was not completed, and we are negotiating as to what a suitable replacement for that would be right now.

MR. J. BYRNE: With respect to the privatization of Newfoundland Hardwoods, and I have asked you questions in the House on this -

MR. DICKS: Yes. I have answered three times, I think.

MR. J. BYRNE: You may have answered but some of the answers we get sometimes are answers, but... Anyway, Newfoundland Hardwoods. You were supposed to receive $7 million and you are short $1.4 million. Have we actually received that money, yes or no? Because when you got up and answered that you talked about tanks and what have you. To me, you left me with the impression that we may be stuck somehow for that money.

MR. DICKS: No. My recollection is we were supposed to receive $7 million, which was the estimate, and we got $5 million, right? Whatever the amount was we did receive. There were some questions about the cost and consultants and that kind of thing.

MR. J. BYRNE: Yes, that is right.

MR. DICKS: I gave you a list of those. I think one of the questions you had was why the consultants were estimated to be $30,000 and they were $900,000, something like that. What happened was they got into it, and of course where they were using creosote and so on, and with current political thought and social thought where it is, we got into an environmental assessment that cost us many hundreds of thousands of dollars.

MR. J. BYRNE: Why should we be paying for that, though? Why should the Province be footing the bill? We received our $7 million, why should we have to pay? It does not make sense to me.

MR. DICKS: Anytime you privatize something it is a matter of negotiation. Maybe you can say it could have been better negotiated, I do not know, and that is a matter of conjecture. I was not part of it at the time. The difficulty you have is that legally the person who is selling has a responsibility to insure that it meets environmental standards, and to the extent that it does not you are required to meet that cost.

For example, that is why we are into an argument with the American government down in Argentia. We got $84 million for this because when they gave it to us there was all this pollution. We had an argument with them on Stephenville. They recently found all these tanks. It is a principle of law. In Newfoundland Hardwoods' case it works against us. On the other hand, if we have gotten substantial amounts of money it is because people that we have acquired property from did not leave it in proper environmental shape.

MR. J. BYRNE: With respect to Newfoundland Hardwoods also, and this is one I really cannot see how you can answer, but you did, with respect to the 10 per cent net profits that are supposed to come to the Province. In 1996 there wasn't a financial statement, and in 1997 they had not received it, so how can you tell if we got 10 per cent of the net profits if we do not have financial statements?

MR. DICKS: Well, we did. They were waiting on the 1997 statement. When the Auditor General did her report she said 1996 and 1997 were not in. When I checked with the department they had received the statement and we did in fact receive some monies for them. My recollection was $30,000 or $70,000, something in that range. I gave the information in the House one day. I can get that for you again. We did receive the 1996 statements and what the figures were. We did get something in that range.

MR. J. BYRNE: I am going into the Estimates themselves here now. On page 35 -

CHAIR: Your time is up, Mr. Byrne.

MR. J. BYRNE: Alright, I will wait.

MR. DICKS: With leave, Mr. Chairman.

CHAIR: I will give you five minutes. Then we will revert to Mr. Sparrow and then to (inaudible).

MR. J. BYRNE: Page 35, Debt Management 2.1.01.01, Salaries. Last year you budgeted $561,300 and you spent $557,000 last year in revised, and it is going up to $598,400. Is that going to be a new employee there or what?

MR. DICKS: Let me see, I can tell you my note. We have fourteen permanent positions in the department and there is an extra pay period this year, which increases it by $37,000.

MR. J. BYRNE: On page 36, Pensions Administration, 2.1.04.05, Professional Services.

MR. DICKS: Just a moment now. 2.1.04.05, Professional Services.

MR. J. BYRNE: You had $90,000 in, you spent $65,000, and you are up back to $90,000. If you only spent $65,000 why do you have a budget of $90,000 this year? What services is that for?

MR. DICKS: Are you reading from 2.1.04.05?

MR. J. BYRNE: Yes.

MR. DICKS: The projected revised I had was $80,000, was it? I am sorry, no, it was... That was for W.M. Mercer Limited relating to the administration of the pension program. They do an actuarial review each year to determine where our liability is. They determine the number of pensioners, existing lives, and what it is going to cost, and that is what we did on that. Last year the special report for the teachers was not necessary.

MR. J. BYRNE: Next section, .06, Purchased Services, $15,200 budgeted and you spent $40,000. Why?

MR. DICKS: I'm sorry, would you (inaudible)?

MR. J. BYRNE: Same subhead, subsection .06, Purchased Services.

MR. DICKS: Yes, okay, it went to $40,000.

MR. J. BYRNE: Yes.

MR. DICKS: I will tell you what that is. We had $15,200. Why was it revised to $40,000, John? (Inaudible). Good question. I have a list of the $15,200, I do not know where the other twenty -

MR. J. BYRNE: Twenty-four thousand eight hundred dollars.

MR. DICKS: John, do you know why (inaudible)? If I can just say that Purchased Services in Pensions Administration, to give you an example, those are things like outside printing, inside printing, furniture and equipment and rental and you have $5,000, $2,900, $4,600. Repair and maintenance is about $1,600 and rentals $1,000. That was the $15,200. Why it was higher than that I (inaudible).

MR. J. BYRNE: Twenty-four thousand eight hundred dollars higher.

MR. DICKS: Yes, I don't know why.

MR. J. BYRNE: You can find it out. Under the next section, 2.1.05, Financial Assistance to Crown Corporations, you have Grants and Subsidies there of $3 million. What is all that about?

MR. DICKS: The $3 million?

MR. J. BYRNE: Yes.

MR. DICKS: That was NMFC. Last year we put $3 million in NMFC to assist municipalities with debt, municipalities which were in over their heads. Where we cut back on MOGs we gave the minister some flexibility to negotiate with municipalities to try to bring them in line.

MR. J. BYRNE: I have a question on that because you don't have any budgeted this year. Is there any likelihood you will be going into it this year for that purpose? This is debt retirement for municipalities, right?

MR. DICKS: All that money has not been used up. It is there now and we did not have, frankly, any more money to put into it. NMFC is a very substantial debt obligation of government. If I had my druthers I would not mind reducing that over time, but this year, at the end of last year, we did not have any money to put into it.

MR. J. BYRNE: With respect to that debt retirement for the municipalities, it seems to me the municipalities that - I cannot say abused the system, but utilized the system to the hilt -

MR. DICKS: Extensively.

MR. J. BYRNE: - extensively over the years are the ones that benefiting now. The municipalities that were conscientious and tried to pay down their debts and everything are really not benefiting now. For example, the town of Torbay wrote trying to have their debt renegotiated. They were prepared to refinance and what have you, but because of the penalties that were being charged by the Newfoundland and Labrador Municipal Financial Corporation they could not do it. They were better off just taking it on the chin. I think we have contacted the minister on that, and the Minister of Municipal and Provincial Affairs, and there was nothing done. I find that to be pretty unfair and unreasonable, really.

MR. DICKS: You have to remember that one of the things with allowing municipalities to pay off the debt is a lot of the ones that are being paid out are ones that are in good shape and could afford to continue servicing the debt, because they can go to the banks and raise the money. The ones that cannot go to the banks and raise the money are the ones that are not paying the debt to the Crown. You can question the wisdom of governments over the years, and all of us bear responsibility for that, in continuing to extend credit and allowing municipalities to borrow, and keep going back every year and renegotiate a repayment schedule that anybody who is being honest with themselves and with the municipalities would know they could not meet.

I suppose, in answer to your first question, we are not doing people any favours. On the other hand, the way NMFC works, the municipalities go with the government guarantee and borrow the money from the bank. They then come to government which borrows it through NMFC. The problem we have is when municipalities want to pay us out early we still have debt obligations. Someone can go to the bank - let's say successful municipalities, ones in better financial shape -, they can now borrow the money at 7 per cent. We have maybe nine years of an obligation on a bond where we are paying 11 per cent. Now, is it fair to taxpayers for us to absorb the, say, 4 per cent in interest on the remaining debt?

What we say is: Look, if you want to pay us out because interest rates are low, you should pay us the liquidated amount to cover the additional cost to us, because we have to reinvest the money. We have to pay it off.

MR. J. BYRNE: On the other side of the coin, you are taking the money, that $3 million for example, and giving it to the municipalities anyway to pay down their debt, and here we have a municipality that was responsible but could not take advantage of it.

MR. DICKS: That can occur. What we said to Art Reid, the minister, is: Look, there is $3 million here. You work with the municipalities and you, in your discretion, make the decision as to how the money can be best utilized. Part of it, I expect, could be used to give some debt relief to municipalities which are in a position to refinance and find the interest penalties a little high.

The other issue you have (inaudible) we all face the same. If you take a mortgage out at 10 per cent and interest rates drop to 7 per cent, the first thing you do is recalculate. How likely are they to stay at 7 per cent? Should I renegotiate now and pay the penalty? Because over the lifetime I am going to have with the mortgage I will still save money. Towns have to make that same decision.

In answer to your question, if they come to us the $3 million is there, and if they are deserving then the minister has to make a judgement how to best utilize that $3 million. Because there is a lot of need out there as you know.

MR. J. BYRNE: Sometimes I wonder if the decision was made on where the municipality was situated. In the meantime -

CHAIR: One short one.

MR. J. BYRNE: One more short one.

CHAIR: One short answer.

MR. DICKS: I would expect not.

MR. J. BYRNE: You would expect not. Okay.

MR. DICKS: We now have an answer for you on the $15,000, after embarrassing my officials.

MR. WALL: That earlier question on the Purchased Services -

MR. J. BYRNE: Twenty-four thousand eight hundred dollars.

MR. WALL: Yes. At Budget time last year we anticipated that direct deposit of cheques to pensioners would be in place before the year just ended. There is a lot of reduced costs associated with direct deposit as opposed to doing up cheques and mailing them out to people. That did not take place. We anticipate that it will take place in the current fiscal year. That is why it went from $15,200 up to $40,000 last year and back down to $15,200, because we anticipate that mandatory direct deposit to pensioners of their cheques will happen this year.

MR. J. BYRNE: Thank you. Under Section 2.2.03.05, Professional Services, you budgeted $65,800 and it bumped up to $215,800, and it is back down to $65,800 this year.

WITNESS: Was that 2.2.03?

MR. J. BYRNE: 2.2.03.05, page 38.

CHAIR: Economics and Statistics.

MR. DICKS: I can tell you what that is composed of. This has to do with the Newfoundland and Labrador econometric model.

MR. J. BYRNE: Say what?

MR. DICKS: The Newfoundland and Labrador econometric model.

MR. J. BYRNE: It sounds good.

MR. DICKS: The main cost there was $150,000 for a provincial demographic study. There was one being done by - was it Stats Canada or a federal group? There was a Canadian one being done, so by us agreeing to participate in it, it cost $150,000. We could procure the same information. Bev Carter, I remember, came to Treasury Board (inaudible) permission to do it. If we had to do it ourselves the cost would be substantially more. I forget the exact figure, but it would be $700,000 or $1.5 million.

MR. J. BYRNE: Why was it necessary?

MR. DICKS: For the very reason we discussed earlier. We need to know what is happening in the Province. We are negotiating with Ottawa on equalization. Demographic models tell you, for example, the age of your population. There is a lot of important information.

MR. J. BYRNE: Yes, I know.

MR. DICKS: This is a very detailed study. What is happening in the Province is you have a shift. St. John's grew by 1 per cent over the last several years and the rest of the island shrank by 18 per cent, 12 per cent, 7 per cent. There was a population shift. Of nineteen to twenty-four-year-olds, about 80 per cent out-migrated. You need that information. The childbearing statistics, for example, it is 1.2 per cent and dropping. That has dropped substantially the last three or four years. It used to be 1.4 per cent about two years ago. We are below the replacement, which is about 2.2 per live births of females of childbearing years. In about five years time the number of deaths in the Province will surpass the number of births.

You need to know that information. Because, for example, if you are going to design a hospital system, how much acute care do you need? The problems of the aging are different from the problems of the young. How many gynaecologists will you need, how many obstetricians will you need, things like this. Demographic information, if you are going to properly plan in the Province, is probably the most critical thing we need.

MR. J. BYRNE: How often would you have that done?

MR. DICKS: We rely on Stats Canada, we do it ourselves. This kind of thing I don't recall, since I have been minister, that we have ever done it. It is not available from Stats Canada. The other thing is that - I should have Bev Carter talk to you for three hours some time - the type of modelling that the federal government uses in Stats Canada is different. They take five or six communities in a cluster and study them in detail, and they extrapolate from that to generalize about areas.

Frankly, our economic group is much more detailed. We have much more knowledge about the Newfoundland economy and population in many cases than the federal government does, which is why we often get these revisions from Ottawa. They take Newfoundland only being 2 per cent of the population of the country and assume in large part that what is happening elsewhere is happening here, and it's not. That is why, for instance, the GDP figures, we often disagree with the federal government, and then the major banks. Unfortunately in past years they have been overly optimistic, and we were fortunate enough to realize that the economy was not going to perform as well.

Demographic information is the same thing, and ties in very closely with your economic information when you see population shifts. You need to know what type of services you need in each area. The two are very closely related and that study is money well spent.

CHAIR: Thank you, Minister. Thank you, Mr. Byrne. Mr. Oldford.

MR. OLDFORD: (Inaudible) it is related to HST. I have often wondered. I know if you go in and buy a used car you pay HST, if you buy a used skiddoo you pay HST. A thought occurred to me one day. I was driving out in Conception Bay and I noticed at the marina out there that there are all sorts of millions of dollars worth of boats, and these boats are purchased in Nova Scotia, Ontario or wherever. There is a great trade going on, people trading boats and buying boats. Is HST collected on these boats?

MR. DICKS: Yes. We have had several issues with boat owners who did not pay it. We always collect the RST on it, and HST applies to sales of these as well.

MR. OLDFORD: Obviously these boats are registered. How would you verify whether or not a boat -

MR. DICKS: People like Doug Oldford come in and tell us: Did so-and-so paid tax on that great big vessel sitting out in Conception Bay? No, I don't know. Maybe I should ask Bob if we have a formal system of monitoring it. You have to remember, most taxation statutes are self-policing. It is up to you to remit your income tax if you are self-employed; we require employers to do it. To an extent they are self-assessing. What we try to do is narrow down the areas for abuse. In many cases we require automobile dealers to collect the tax, we require cigarette distributors to collect tax rather than rely on it at the retail level. In essence it is largely self-policing. Bob, can you reply on the vessels in particular?

MR. CLARKE: Used boats of course are taxable under our provincial legislation and we can generally get a copy of an invoice which would show the purchase price.

MR. OLDFORD: That was my question. When people go out to Ontario and buy a $50,000 boat I was wondering (inaudible). If you go to a dealer obviously the dealer remits the HST, but how do you know whether or not the HST is paid when it says private transaction?

MR. CLARKE: The HST of course is the responsibility of the federal government, but if it is a provincial tax we would probably get the information on being registered with the federal government.

MR. DICKS: Can I just say in response to your question, Doug - it is not going to answer it completely -, that private sales are more difficult to place. In automobiles, for example, it is easier, because people have to register their vehicles. One of the advantages of the HST, in case of sales outside the Province into the Province the federal government will collect the HST in the full 15 per cent. Previously they would only collect the GST at 7 per cent and it was left to us to find the 8 per cent ourselves. We would send auditors up to the various clothing companies, furniture companies, and we would do an audit up there.

When I was first minister I would get these letters from some person who had gone out and brought a chesterfield suite in Ontario and shipped it down here. My officials had gone up there, audited and sent him or her a tax bill, and they were upset because they had to pay the tax plus interest because they had not remitted it. In any system that is the reason we have auditors. We pick these things up.

In the case of vessels it is a little more difficult because there is no central registry in the Province for recreational vehicles. I should not say recreational vehicles, but recreational vessels. To the extent people are supposed to remit, and when we can we police it. Like you say, I suspect that is one of the areas where we may miss some tax.

MR. OLDFORD: Thank you.

MR. DICKS: No system is perfect, but taxpayers don't seem to mind.

CHAIR: Thank you, Mr. Oldford. Thank you, Minister. Mr. French.

MR. FRENCH: (Inaudible) on page 35, Crown Agencies - Recoveries, 2.1.02. It says, "Appropriations provide for the recovery of dividends from Crown Agencies." In .02 it says Revenue - Provincial. In 1997-1998 we budgeted $46.8 million and we collected $16.8 million. Why the difference? Then in 1998-1999 budget it is gone up to $60 million.

MR. DICKS: Actually I answered that question. I believe Mr. Oldford asked it earlier. That is the Hydro dividend. The difference is that in the budget this year we have a $12 million regular dividend that we get from Hydro. In addition to that we have about another $24 million that is our share that comes from the sale of the 130 megawatts (inaudible) by CF(L)Co. It sells for about $36 million and we get two-thirds, so around $24 million. That is the first $34 million. It is roughly $22 million there, so $22 million plus $12 million gives you the $34 million.

There is a Hydro special dividend of $15 million that we required them to pay several years ago, and a (inaudible) from CF(L)Co of $20 million, so that gives you a total of $69 million.

I should say that as well we expect this year the returns from hydro should be higher because they are doing a review down there and we expect the regular dividend to be increased as well. So all of that money comes from hydro, the full $69 million.

MR. FRENCH: Okay.

In 2.1.03, Industrial Assistance, in Grants and Subsidies we budgeted $171,500. Can the minister tell us what that was used for and who would have been given that money, or some of that money?

MR. DICKS: That money goes to Marble Mountain Development Corporation. What happened was several years ago the government was going to privatize it. It did not come off. That money - in fact substantially more than that - over the years had been in the Department of Tourism, Culture and Recreation. At the time the subsidy for Marble Mountain was in there at $171,000 and that was transferred over to the department because it now reports to the Department of Finance.

MR. FRENCH: Okay.

On page 38, 2.2.04, Project and Program Analysis. If we come down to Professional Services, we budgeted $20,000 and the actual expenditure was $105,000. We are over budget $85,000. Can the minister tell us why?

MR. DICKS: I think we can. I will get the answer for you. Those were consulting fees for Voisey's Bay. We hired two experts to come in and advise us on tax regimes around the world, and we focused on South Africa and Australia, so the additional amount there covered the cost of those consultants.

MR. FRENCH: How close are we to the tax regime?

MR. DICKS: I think we are very close. We have some models that we think would work very well. The only thing is that government has not made a final decision on it yet, but I think we have some very good work done as to what would be the best regime to impose on Voisey's Bay. I should say on Voisey's Bay (inaudible) also, because all taxes have to be of general application. So let's just say that in terms of a type of change to the fiscal regime that would take into account projects of a very valuable nature that yield high returns to the owners, I think we have a system in place that works very well, or we have some proposals that I think would make a lot of sense.

MR. FRENCH: You may have already answered this one. Again on page 38, to go back up the page, in 2.2.03, Professional Services were up by $150,000. We have dealt with that, I think.

MR. DICKS: I think I did. That was the econometric model, I think, the $150,000. Was that where -

WITNESS: Yes.

MR. FRENCH: Yes, okay.

MR. DICKS: Yes, that was mostly to do with -

WITNESS: Demographics.

MR. DICKS: Demographics, yes.

MR. FRENCH: On page 39, Support Services, Salaries, we have gone from $615,000 down to $478,700, roughly a reduction of $136,300 in this fiscal year. How many positions were eliminated to reach that savings?

MR. DICKS: This is part of the tax change, going to the HST. I said earlier, some of these are disbursed around, Bob, in different areas in Tax Administration. For instance, there is a change. If you notice, Compliance and Audit is down from $3,700,000 to $3 million. The reason for that is, we had a drop because our employees went over - you see, it went from $3 million down to $2,200,000. It will go back up to $3 million because we lost people and then we had to replace a smaller number and it spread throughout the department. Because you need fewer tax auditors, you are going to need fewer support staff for them.

WITNESS: Thirty to twenty-one.

MR. DICKS: This went from thirty to twenty-one in Support Services. It is part of the same phenomenon where we are dropping the overall number of people needed to collect taxes. That has already taken place, by the way, and we accommodated all the people who were affected. In fact, Revenue Canada hired more if my recollection is correct; that have been adding.

MR. FRENCH: On page 28, Treasury Board Secretariat, 3.1.04, if we come down to 02 Revenue - Provincial. We budgeted $58,000 and it was revised to $35,000.

MR. DICKS: I am sorry, you say 3.1.04.

MR. FRENCH: Under 3.1.04, and we come down to 02 under Revenue - Provincial. It was budgeted $58,000, revised to $35,000, and we have gone back up to $58,000. If we budgeted $58,000 and only got $35,000, why the difference? Why is that?

MR. DICKS: I am sorry, Bob. You say 3.1.04 and -

MR. FRENCH: Come right on down the page to 02.

MR. DICKS: Provincial Revenue.

MR. FRENCH: Yes.

MR. DICKS: I do not know. To be quite frank, these are estimates of Executive Council that we normally do in the House, not in committee. I do not have the answer here; I will get it for you when we do it in the House. I would not know what that was offhand. I could maybe make a guess at it. I do not know; it might be some (inaudible). Would you know about it offhand?

MS DEVINE: It may be revenues from training, but I am speculating.

WITNESS: Our front-line leadership courses were down this year.

MR. DICKS: Yes, our front-line leadership courses were down this year. The revenue from this, where is says Revenue - Provincial, that is monies paid by the departments, because the departments were sometimes charged with different areas of cost to the department. That comes back as accounted for in this fashion.

CHAIR: Thank you, Minister.

Mr. Sparrow?

MR. SPARROW: Just a quick question, Minister.

With all the IT equipment that becomes redundant after eighteen months, what do we do with the old equipment? Do we own it or do the IT companies repossess it and upgrade it or whatever?

MR. DICKS: It depends on whether we buy it or lease it. In a lot of cases we do, in fact, own it. It goes to government purchasing; it goes to works and services for disposition.

What has been happening, though, is that we have been in some cases putting them in schools. Because although it is not the highest level you need for certain types of major tasks in government which involve a fairly high level of, in our department, fiscal review, they still have other uses. I noticed the department, instead of just putting them out on public tender where they go for very little, is trying to find other uses within the system, particularly in education. Occasionally, if you have a deserving public group in your community, you may even be able to get one out to them in that way, which I think is not a bad way to go about it.

MR. SPARROW: Would you contact the departments, or would you go to government purchasing?

MR. DICKS: I would go to the Minister of Works, Services and Transportation. I had a public group contact me a little while ago about getting computers, so I wrote to them to see if they had one available that was redundant that we could give to this group. I think I got one last year for a poverty group in my district that was working with school children. I think that is probably the best use, because when you sell things on public tender you get little or nothing for them.

MR. SPARROW: Thank you.

CHAIR: Okay, Mr. Ottenheimer.

MR. OTTENHEIMER: Mr. Chairman, I have no questions. I will reserve my other questions for the House with respect to Executive Council.

CHAIR: Okay, Mr. Byrne.

MR. J. BYRNE: Page 39, under Compliance and Audit, 3.1.01, Salaries went from $3.7 million down to $2.2 million, and back up to $3.03 million. Why the drastic difference there? Why did it go down and back up again?

MR. DICKS: That was because of the HST amalgamation. We had seventy staff that left us and went over with the federal government. That started to occur last year after April, so by the fall most of the people - I think it was by September - had gone over with the federal government. Initially we were funding about seventy positions and it dropped down. We lost seventy, but in the meantime we had to add back people we hired on contract, so we actually dropped from 115 to fifty-eight, which is why it went from $3,700,000 to $2,200,000. Then we hired back the people on contract - Mr. Ottenheimer asked about the people in Corner Brook and so on - so we added back about thirty people.

WITNESS: Forty.

MR. DICKS: An extra forty, I am sorry. So the revised figure reflects the people that we lost, and the increase from the revised figure this year reflects the people that we have added, but we are still down by about $700,000 thousand or so.

MR. J. BYRNE: So those forty people who are back - you said forty, I think - are back on contract?

MR. DICKS: Yes, they are contractual employees and -

MR. J. BYRNE: Why is that?

MR. DICKS: Because we do not have a need for them beyond a certain time. Bob said earlier, in response to the question, he figures it probably takes about a year to collect, so we cannot create a full-time position if we know there is a limited workload to be met. We will monitor it, and maybe we will keep some portion of those to finish up. We may need all of them for a shorter period of time, or we may need to terminate the contracts and then keep the smaller number on for a longer period to finish up.

MR. J. BYRNE: Under section 3.1.02, Support Services -

MR. DICKS: 3.1.02.

MR. J. BYRNE: Under 04, Supplies, it went from $55,100 budgeted to $60,000 and down to $35,100. What would be those supplies?

MR. DICKS: First of all there are less because there are less people working, both as auditors and so on, and there is a reduction in the need for dye for gasoline as well. No, I am sorry, all of this money went for dye. That is how much it used to cost us to buy dye to mark gasoline. We now no longer mark gasoline.

MR. J. BYRNE: The question I have now, and you mentioned it in your Budget Speech and in the Budget, is with respect to the payroll tax.

Now, I have always had a problem with the payroll tax. I have been in business myself, and what have you, and I have considered it to be a tax on jobs, a regressive tax and what have you, but in the meantime it is there and there is a minimal decrease this year. I think it went from 130 down 120, is it?

MR. DICKS: It went from 100 to 120, threshold.

MR. J. BYRNE: When do you expect that to be completely eliminated?

MR. DICKS: Jack, I really cannot say. I would hope that the government would, over the next period of time as we expect revenues to increase somewhat, reduce the tax burden. The problem we have in government is - this is why I dislike the term `fiscal dividend'. If there is a fiscal dividend, it means that you are taxing people too much in relation to the services. You may do that in order to retire your debt, but I would think that if we get to the point where we have sufficient government services that are properly funded and properly staffed, then what you have to look at doing is what you do with any extra money that you might find as a result of tax revenues.

Now there are three things you can do with it, in my view. One is, you can reduce taxes. The second thing you can do is retire the debt. One, two, three - what is the third?

MR. J. BYRNE: Spend it.

MR. DICKS: You reduce taxes, retire the debt, and you spend some on new programs, I suppose; that is the other one.

I think we have enough programs in the Province right now; I do not think we need any more. My belief is that the majority of people would rather see us reduce taxes and at some point reduce the debt, because the two go hand in hand. If you pay off some of your debt it means you need less interest next year so you have less demand. I would favour, really, in the near term, just doing two things - reducing taxes. If you get to that point, then you say: Which taxes should we reduce?

The payroll tax is there and, I agree with you in point of principle, it is a tax on job creation. On the other hand, we have just given the business sector an enormous tax break. The HST put $170 million back into the business community. My preference would be to reduce personal income taxes and, in fact, this happened in the last Budget. Our personal income taxes provincially went down by $12 million as a consequence of what the federal government did, and it was appropriate, I think, to make some move on the payroll tax.

I will be frank. Next year or the year after I would hope our revenues would be such that we would be able to say to the people of the Province: Look, we are making some moves on reducing taxes, we are going to bring the personal tax rate down, and maybe we would set a horizon for eliminating the payroll tax, presuming you can say it with certainty. There is nothing worse than saying you are going to reduce something and have to raise something back up.

MR. J. BYRNE: The revenue from that, I think, was about $73 million? (Inaudible).

MR. DICKS: We net about fifty. The gross revenue is there but we pay it on ourselves as well, (inaudible).

MR. J. BYRNE: I know small companies with two, three or four employees, and what have you, that deliberately would not hire to go over that threshold. Has there been any kind of a study done to see, if that was actually wiped out, would there be more jobs created? You were talking about $73 million in revenues, but maybe you are only talking half that. If it was gone you might have revenues coming in from the other side with people creating jobs. Was there some kind of a study done on that, an analysis and what have you?

MR. DICKS: There is merit to your argument in the sense that we grossed $70 million but we really only netted about $50 million of it. I suppose, in a sense, we are doing an experiment now. The economy is expanding somewhat this year so we felt, look, we are going to have enough latitude, and there are 250-odd companies that as a consequence of this will pay no tax. The other thing is, everybody who is in business really gets about a $400 break because the rates for most people, say, if you take it at 2 per cent, and you have an additional $20,000...

You are right in terms of people being a deterrent. I don't think that going over $100,000 is much of a nuisance because if you go over, say, and your salaries are $110,000, you only pay 2 per cent of that, which is not a lot of money - $200 - but the nuisance is that you have to fill out forms and file them, and all the rest of it. I think there is a lot to be said for trying to make running a business - which is not a blessing, having done it myself - a lot less complicated and a lot less onerous.

I agree with you, it is a tax I would like to see eliminated, but at the same time, in terms of what is fair overall to people, before we would eliminate that I think you would have to make a substantial reduction on the personal income tax side to go along with it.

MR. J. BYRNE: That's it. Thanks.

CHAIR: Okay. Are there any more questions?

Mr. French's request with regard to the Newfoundland and Labrador Liquor Commission, if it was an answer submitted last year, I couldn't find it; but I thought there was an answer given by you. For clarification purposes, would you take it upon yourself to clarify the question?

MR. DICKS: We will supply an answer to you, Mr. Chairman. I think you are right. I believe you were Chairman last year when I did write you a letter concerning some matters which arose, and I circulated it to the members. I forget what the question was now, but there is no reason not to answer that. I think I have done it in large part anyway and I will just supply the information.

WITNESS: Can we have that shortly?

MR. DICKS: I will supply it before the end of the week.

CHAIR: Maybe the committee did not get a copy of the letter. I am just trying to recall.

MR. DICKS: We will certainly check on that.

CHAIR: We would appreciate if that could be done.

Since there are no further questions, the Clerk will call the main heads.

On motion, subheads 1.1.01 through 3.1.02, carried.

On motion, Department of Finance, total heads, carried.

On motion, Public Service Commission, total heads, carried.

CHAIR: I want to thank you, Minister, and your staff for appearing. I must say, your answers were precise and in totality the questions were good. Mr. Byrne, I see you shaking your head but you certainly did a good job. You covered it well.

Thank you very much.

On motion, the Committee adjourned to 7:00 p.m.