Pursuant to Standing Order 68, Mary Hodder, MHA Burin-Placentia West, replaces Eddie Joyce, MHA Bay of Islands; and Bob Mercer, MHA Humber East, replaces Yvonne Jones, MHA Cartwright-L'Anse au Clair.

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

CHAIR (Mr. Sweeney): Order, please!

Kevin, are you on-board this morning?

WITNESS: (Inaudible).

CHAIR: Yes, Kevin is on duty. He is down in the media center downstairs. We have a little code worked out there.

To the minister and her officials, you are all sitting in the right places. Please identify yourselves before you speak, and make sure your light is on by your mike. That way then you will know that Kevin is recording. We are being taped for sound but not for video this morning.

I would like to start off with the Committee introducing themselves. Mary Hodder will be here shortly. She is upstairs on her way down. Wally, do you want to start?

MR. ANDERSEN: Wally Andersen, MHA for Torngat Mountains.

MR. MERCER: Bob Mercer, MHA for Humber East.

MR. SULLIVAN: Loyola Sullivan, MHA for Ferryland.

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

MR. COLLINS: Randy Collins, MHA for Labrador West.

CHAIR: I am George Sweeney, Chair.

This morning we will do some housekeeping. We have the minutes of our last meeting on May 7. Could somebody move that they be adopted?

On motion, minutes adopted as circulated.

CHAIR: This morning we will start off, as we have with the same format that we have used, on a fairly casual, open basis and keep the line of questioning as close to the Estimates as we possibly can to the heads.

Elizabeth, if you will call the first head, and then we will ask the minister for her opening remarks and to introduce her officials.

CLERK: Subhead 1.1.01.

CHAIR: Subhead 1.1.01. So, Minister, we are ready.

MS J.M. AYLWARD: Good morning, my name is Joan Marie Aylward. With me this morning I have my Deputy Minister, Phil Wall; Assistant Deputy Minister, Terry Paddon. Sitting behind me I have John Bennett, my pensions' person, and Earl Saunders, who is taxation. Also this morning, although we will be doing it a little bit later, from the Public Service Commission, Fonse Faour and Sheila Devine.

I am not going to do any opening comments as we speak to Finance. I think I have made a number of opening comments.

WITNESS: (Inaudible).

MS J.M. AYLWARD: No, I do believe the purpose of this process is to ask questions, and I think I have done that. My opening comments were my Budget, and I have done a number since. I am more than happy to answer any questions, so I will just turn it over for questions. I know we have a three hour time block, so I will let you go.

CHAIR: Ed, do you want to go first?

MR. E. BYRNE: Thank you, Mr. Chair.

I am just looking for - I guess not specifically related to the subhead in a sense - a general overview of the pension plans that government administer, the shape they are in, what the priorities are in terms of managing these plans over time. Just to get some sense, and we can get into some questions from there.

MS J.M. AYLWARD: As you know, our Public Service Pension Plan is probably the best of the ones that we have right now. That is up, about 50 per cent funded. Our Teachers' Pension Plan is about 30 per cent funded. As you know, that is one of the reasons - when we did the indexation piece to the collective agreements we agreed to include the indexation piece right into the Public Service Pension Plan as part of a pool. Whereas, when we did that arrangement with the teachers we did it in a separate fund, because traditionally we know that the Teachers' Pension Plan is much richer and the benefits are much richer rather than the cost.

With respect to the other pension plans, we have the Uniformed Services Pension Plan and the MHA Pension Plan. The MHA Pension Plan - I think we all know - is a plan that is generally funded from the general revenue, as is the Uniformed Services Pension Plan. What we have done on both of those is that we are looking at doing the same thing as we did with the Public Service Pension Plan and the Teachers' Pension Plan, and that is to make special payments to lower the cost of other monthly payments through interest payments. We are going out to borrow like we did for the pension plan and try to put them in a better fiscal position. We have done that with the teachers, we have done it with the Public Service Pension Plan. I believe that is one of the reasons why we have had a credit upgrade - not this one, but the one prior - because of the improved position of our Public Service Pension Plan. As you know, that certainly adds to the overall debt of the Province.

I do not know if that gives you an idea of where we are with them. In terms of anything else with respect to indexation, the only two we have indexed right now are the teachers and the Public Service Pension Plan. There has not been any real move afoot to do anything with the other pension plans with respect to indexation.

MR. E. BYRNE: Okay.

Could we go to the Public Service Pension for a few moments?

MS J.M. AYLWARD: Sure. Are we doing back and forth or did you want -

MR. E. BYRNE: Yes, that's fine with me if that is okay with you.

CHAIR: Yes, no problem here.

MS J.M. AYLWARD: All right, back and forth it is.

MR. E. BYRNE: Page 67 of the Estimates, dealing with the Public Service Commission. It says, "Appropriations provide for maintenance of the merit principle in recruitment and staffing in the Public Service...". How many -

MS J.M. AYLWARD: Okay, just let me find my place now where we are.

MR. E. BYRNE: How many people work directly for the Public Service Commission out of your department now?

MS J.M. AYLWARD: How many people work over there?

MR. E. BYRNE: Yes. There is an appropriation there of $1,958,000 for Salaries. How many people work directly out of the Public Service Commission?

MS J.M. AYLWARD: There are nineteen permanent positions. It includes temporary assistance and the overtime. Out of this, as well, funding is also provided to cover the cost of the thirty graduate recruits through provincial government departments.

MR. E. BYRNE: Okay. It says here, "...for maintenance of the merit principle in recruitment...". That is for full-time positions only. That does not include temporary staff that may be hired or contractual staff. Is that correct?

MS J.M. AYLWARD: No, we have actually changed that most recently now. The merit principle is for the long-placed temporary employees. Over three months, I think it is, or six months, Fonse?

MR. FAOUR: Six.

MS J.M. AYLWARD: Six months, yes.

MR. E. BYRNE: So, anybody who has been there over six months -

MS J.M. AYLWARD: If we know a position is for six months, if it is temporary -

MR. E. BYRNE: It goes through the Public Service Commission?

MS J.M. AYLWARD: Right. Remember when we had that discussion here last year about temporaries? We told you, at the time, we were in the process of reviewing the whole temporary piece and how we could include the merit principle in temporaries because temporaries tend to carry on and become more permanent. Now, if a position is six months or over, it has to go through the merit principle.

MR. E. BYRNE: How many temporaries are in government right now, any idea?

MS J.M. AYLWARD: I am sure Fonse has that number. I do not have the number here. Do you have it?

MR. E. BYRNE: Even just a ballpark figure. It does not have to be the exact number.

MR. FAOUR: I have no idea. What we do know is a significant number of positions are being filled on a temporary basis, some by permanent people, some by temporary people. It is not something we have been tracking. We have determined - since the change in policy we are starting to track those now.

MR. E. BYRNE: Okay.

CHAIR: That was Fonse Faour, and the Chair recognizes Mr. Jack Byrne who has just arrived.

MR. E. BYRNE: In terms of the temporary, would they be the same as contractual positions hired within government department by department, or is there a difference?

MS J.M. AYLWARD: There is a difference in the contractual than the temporary, yes.

MR. E. BYRNE: I am just looking for the departmental definition of what separates a contractual arrangement from a temporary arrangement and what is the difference.

MS J.M. AYLWARD: There was a list of contractual arrangements that were tabled by the Minister of Industry, Trade and Rural Development. I think all that information was there, as one example, from one department.

MR. E. BYRNE: Yes, well that is consultants and that sort of stuff.

MS J.M. AYLWARD: Well, they are contractual, yes.

MR. E. BYRNE: Okay. So they would be covered directly under - I wasn't getting into consultants. I was just thinking contractual employees. Contractual employees would be for Professional Services that any department may require on a ‘as needed' basis? Would that be the best definition?

MS J.M. AYLWARD: Yes, that would be the best definition.

MR. E. BYRNE: Pardon?

MS J.M. AYLWARD: Yes, that is a good definition. There is probably a more formalized definition. I do not have all the definitions of the jobs here with me.

MR. E. BYRNE: I am not looking for that level of detail and I am not trying to be coy.

MS J.M. AYLWARD: I am sure you are getting to something.

MR. E. BYRNE: No, I am not leading anywhere. I am just trying to get a sense of full-time employees, temporary employees, and is there a difference in temporary employees who are being hired and contractual employees? I am not leading to -

MS J.M. AYLWARD: There hasn't been any change though, Ed. What I will say is that there hasn't been any change in anything we have done over the last year when we were here talking about the public service. The only thing we have done is actually taken a position that if a temporary is going to be there for six months or longer it is has to go through the merit principle. Before that, any temporary did not have to go through it -

MR. E. BYRNE: Did not have to, and that (inaudible).

MS J.M. AYLWARD: - and we have sort of clamped it up because if you look at the maternity leaves and things like that, for example, they are gone to a year now, but even less than that, at six months we are moving towards that.

MR. E. BYRNE: Is there an established criteria?

MS J.M. AYLWARD: For the merit principle?

MR. E. BYRNE: Yes.

MS J.M. AYLWARD: As government, as politicians, that is all done through the Public Service.

MR. E. BYRNE: No, I understand that.

MS J.M. AYLWARD: Fonse would be best to speak to the merit principle.

MR. FAOUR: Thank you, minister.

The Public Service Commission Act gives the Commission, itself, the authority to set the ground rules for the merit principle. I guess, in a general sense, we look for a process that is fair, transparent. It could be an open competition. It could be a developmental opportunity that is open to members of the public service, but, essentially, merit is defined as a value that we would try to make sure exists in every recruitment or promotion. Fairness, transparency, and openness are the kinds of things we are looking for. Usually, in the past, that has been predominantly done by an open competition, and that is essentially where we are looking.

MR. E. BYRNE: Okay. I am going to stop for a moment. Someone else may have some questions.

CHAIR: Loyola.

MR. SULLIVAN: While we are on the Public Service Commission - I think I will just deal with that first - with reference to hiring, I get a lot of people contacting me complaining, from e-mails and from phone calls and various things, saying: Look, we are putting people into temporary positions and they are getting hired permanently then when they are in the position. It gets a foot in the door and gives them a leg up on other people.

My first question: I am wondering what percentage of people who move into temporary positions, fill those positions when they become permanent? When they are hired on temporary and then it becomes permanent, what percentage of the people move into those positions?

MS J.M. AYLWARD: Unless Fonse has the details, I think you would probably need a department just to track that kind of thing Loyola, and I am not aware of it. I know we have had the discussion. We tried to make some improvements on the temporary inasmuch as if you know it is going to be for six months or beyond. But, I mean, whether you are a nurse or whether you are a physiotherapist or whether you are working over in Government Services and Lands, obviously if you are in any position in a temporary basis, you get to learn some things that would give anybody in any position, I suppose, an advantage inasmuch as the job. Also, there is a seniority principle which may have a factor. You may be more senior in another government department that would allow you to also have benefits and have an advantage.

Unless Fonse has been doing this tracking - which I would assume would be quite a task if you look at the number of employees in government. It would be a nice thing to do but I do not know if they are funded or able to do that kind of tracking; to go back and find out if that temporary actually got the job for that reason or if it was because they had x years in government or what the actual reason was. Fonse, you can add to that if you like.

MR. FAOUR: Thank you, minister.

Mr. Sullivan, I guess, precisely the fact that we did not have a lot of information on temporaries in the system. That was one of the reasons we adjusted the policy in the past year, because of the need to get a handle on what was happening in the system.

Now, the specific question you asked I think would take a fairly major effort in terms of resources to track, but I have to say as well that we are beginning, this year, to track the whole temporary experience within government, precisely because of the kinds of questions that have been raised, similar to the one you are raising now. We see it as a problem, in terms of perception, of how the process works, and from our perspective we wish to get a better handle on it. We are hoping that next year we will be able to provide the minister with better information on temporaries within the system as a result of our new policy.

MR. SULLIVAN: People are telling me, and I have seen resumes of people who have tried to get into the positions, who have had excellent resumes and training to go with it, and other people without any training in the area have gotten the jobs temporarily and then they get to fill them permanently.

If we are going to maintain the integrity, impartiality and fairness in it, I am just wondering - it does not send a good message. I know people who have been in one position and applied for another position, who have had up to fifteen and twenty years' experience, and someone without any experience in that area gets put into the position and then they become permanent. I am wondering, who makes the decision on the temporary one? What is the involvement of the Public Service Commission? What is the involvement of the department? There are ministers' lists. I know that people get in and get jobs on that list, and if you are not on the list - basically, that is a common term that has been used. They get their foot in the door and then they are hired after. I am wondering, because I have been told by people that they go from a list. The department has a representative, I understand, on committees, who sits there on any hiring. Would that be correct?

MS J.M. AYLWARD: I can assure you, I have no list. I have no minister's list in Treasury Board, and I have no minister's list in Finance. I do not know what you are talking about, a minister's list. I would assume, if a person is being hired -

MR. SULLIVAN: Works, Services and Transportation, I will use as an example.

MS J.M. AYLWARD: I am sure you asked that question to the minister when he was here, or one of your colleagues would have. I can speak for my no lists. I do not have a list in either of my departments. I can tell you that, to me, it would make sense, if you are looking to hire someone to work in a department, that a departmental rep would be on that committee just to be able to help the selection committee in terms of what kinds of things would be necessary. I can say, it is not a political process. It is removed from the political process. I do not know who is coming over to work for me until I am told who is coming to work for me. I think that is the whole idea of the merit principle.

If you are trying to say that there is political interference, you should state your case and I will be happy to look into it for you. I can tell you, for my own department, I do not have a list and I do not interfere with the selection of people who get hired through the Public Service Commission or otherwise.

MR. SULLIVAN: I would like to know what procedure is followed, if someone could explain that. What is the procedure when a position is vacant - temporary? For example, what does the Public Service Commission do? What role do they play in that hiring process? What are the roles of other departments? If I could have an explanation of that.

MS J.M. AYLWARD: What I would do is, I would have to refer that to Fonse, because I have absolutely no role in the hiring of people through the Public Service Commission. I would have to asks Fonse to answer that.

MR. SULLIVAN: I mean within government service now. I am talking about the whole public service, through the Public Service Commission.

MS J.M. AYLWARD: But, the Public Service Commission works on behalf of government to make sure the merit principle is followed and that an appropriate process is followed to allow people to enter the public service. My point is, it is not a political process; so, in order to answer the question, I would have to ask the deputy minister to answer the question from the Public Service Commission.

MR. FAOUR: Thank you, Minister.

I guess, to start, the process begins with an agreement we have, the Commission has, with each of the deputy ministers on behalf of their departments. We call it the delegation agreement, and under our act we delegate the authority to do the process, do the hiring, to departments, subject to their following our policy. We do an audit of their hiring after the fact. In our last audit we examined 585 hires in that period, and I have to say that by and large the experience we have had is that departments under those agreements are following the process that we have set out. Are they perfect? No, but the kinds of problems we found in those positions, those hires that we have audited, the problems have been things to do with record keeping, file keeping, and so on. They have not gone to the heart of the process. The difficulty we have is that up to this past year we have not had the ability to look at precisely the problem you are talking about. Temporary hires are done completely outside, or have been done completely outside, our processes. We understand that in many cases, most cases, human resource directors are following a similar process because frankly it is the best way to get the best person for the job. We cannot verify that because we have not been tracking it.

The new policy would require temporary hires to go through some sort of process. If you are trying to promote someone or make an assignment of a public servant to a temporary assignment, a temporary position within the public service, the human resource community now has to follow our processes under those delegation agreements. In the next round of audits we will have a look at that experience and see what has happened.

The act specifically excludes contractuals, seasonal people and so on, so we will not be tracking those. What we have done in the last year is expand the scope of our coverage, we think, by a significant amount. We will have a sense of that once we have seen the first year or two of experience under the new policy.

I do not know if that answers the question.

MR. SULLIVAN: I think basically what you have said is that temporary hirings are done by departments, and hopefully they will follow our policies and guidelines. That is what I gather from that. So, temporary is done by department

I think it was stated in the Estimates last year, too, that departments do a lot of the hiring, and even permanent positions now are delegated to departments. That has been going on for a number of years, to my knowledge. I do not know what years specifically, but the shift from hiring now has gone from the public service having control over the entire process to a delegation of departments where the departments basically pick who they want in a position, and hopefully they will not get rapped on the knuckles as moving outside the guidelines and the policies of the Public Service Commission.

That is my understanding, that there is a greater shift. I think it would be safe to say, wouldn't it, that hirings now are primarily done through the departments rather than through the Public Service Commission directly? Would that be a fair statement to make?

MS J.M. AYLWARD: Since we did program review, which would have been in 1997, this would be the fifth or sixth year we have been doing what you are talking about right now. What we are saying is, yes, since we did program review, when the Public Service Commission was downsized and a lot of the responsibility went to the departments, as Fonse pointed out, with an audit system in place after the fact. So, when you kind of make the assumption that they hire who they want, that is not necessarily true in my view. In fact, I think, in the view that Fonse just said, there are guidelines in place. They have to follow the guidelines, and then they are audited after the fact.

MR. SULLIVAN: By and large, they adhere to it.

MS J.M. AYLWARD: Whenever you do an audit - my understanding is, for example, when the Auditor General does an audit, she doesn't go in and audit every transaction of every department. When you do an audit, you do a cross-section and you get a general understanding from that whether or not the principles have been violated or not. I think Fonse Faour just said that, by and large, those principles have been adhered to and that we, in fact, added to our ability now to go back and look at that through including a temporary posting for anything six months and beyond, that will now be subject to the audit of the Public Service Commission.

MR. SULLIVAN: Why should there have been a shift from the Public Service Commission to a departmental delegation?

MS J.M. AYLWARD: It was a very clear direction in that right now you can see there are nineteen permanent positions. It was one of the methods we took in program review to look at reallocating a lot of the responsibilities to the departments to try to actually save money because of the size of the Public Service Commission. What we did was, we re-delegated. In fact, some departments do the hiring for two and three departments. We know that, for example, I think Municipal Affairs, ITRD, and Government Services and Lands, all three of them, come under one human resources director. So, it is all about maximizing human resources and minimizing the cost. That is a big part of it. The audit system was the way we thought would help address the merit principle being adhered to. Admittedly, last year when we were here, and as pointed out by the Auditor General, if I am not mistaken, we needed to do something to address the issue around temporary. I think, as Fonse pointed out, we are starting that process now and we will actually be able to audit that this year.

MR. SULLIVAN: I don't see it that way. I see more merit by somebody more at arm's length, not within the departments, doing the hiring, because you can get a better public service, probably a more skilled one, away from any influences, and get a more productive one by having it there. There has been a distinct shift and I think it impacts basically overall on individuals.

That is the perception that is out there. Whether it is a fact, I get more complaints on that issue than probably any other thing, basically. I have dozens and dozens of cases, with resumes and comparisons, people who have gotten jobs in that instance. It doesn't do much in the public view to give the public the impression that: Look, you have a fair chance to get a job out there if you don't happen to know somebody, basically, or have a certain politician influence.

That is the perception that I deal with out there, and I have documented cases that I have, resumes from people who have gotten positions and what they served in. I am not a judge of who is the best, but I really think it should be left in the hands of - it was set up to put merit in the hiring of the public service and I think we have eroded that immensely there. I do not think it bodes well for the average person out there to think they have a fair chance to get a job.

MS J.M. AYLWARD: I think we do have a better and more productive public service. I don't feel the same way, I guess, as you do about that. I think they are productive and better, and I think they have done very well. I think that people should not believe they are not able to get a job because they are not on someone's list. I can speak for myself, I am the minister responsible for the Public Service Commission. I have not gotten the complaints you have gotten.

MR. SULLIVAN: Because the departments are doing the hiring.

MS J.M. AYLWARD: But still, I have not gotten the complaints. What I have been told is that most people who go through it - I mean there are lots of people who get hired and I think to myself: Wow, they got a job; but they worked through the process. I really think that people should not feel that you have to be on a list to get a job because that is not the case. I think it is wrong to try to put forward the view that you have to be on someone's list to get a job in government. That is not accurate.

MR. SULLIVAN: I think it hurts the morale in the public service, too. I think that is one of the biggest contributors of the morale in the public service, people moving into positions that they do not feel are the best qualified to get those positions. I think that is part of the morale problem here.

MS J.M. AYLWARD: It may be, but your peers do not judge who is the best person to fill the job. There is a merit principle that - I mean this is a philosophical discussion. Just because you might not like the person who got the job does not mean they are not the best qualified. Whether you like them or not, as the person who is working next to them, got nothing to do with - it might have something to do with their morale, but whether you like someone or not does not mean they are the best person for the job. If the system goes through the process - I mean you have to go through the Human Resources process and you are audited afterwards. I do think we have a better and more productive public service. I do not have that feeling of paranoia or whatever, and moral problems. I think that our public service is quite effective.

MR. SULLIVAN: The reason I asked that is because I really feel that we have shifted. I do not think it has been good and I really feel it has affected morale. I think it is something that should be corrected. In any hiring I think it should be solely on merit and at arm's-length from government whatsoever. I do not think it bodes well, and not just because - regardless of what political stripe. I think the merit principle, as opposed to knowing somebody, should be the reason for hiring.

MS J.M. AYLWARD: I think it is totally wrong to say: Because you know someone you will get a job. I really think that it is an inaccurate and unfair statement to make. You get a job in the public service because of the merit principle. We have even now moved it to the temporary position, and to leave the impression that because they might know you or know me, then they are going to get a job. That is not accurate. I think by saying that because it is not with the Public Service Commission, you are somehow saying that every human resource director out there have their own list. If they do I would like to know that, because that creates a huge problem for us.

MR. SULLIVAN: I said a position in Works, Services. I mentioned one department in the past. I have dealt with people on it. I have dealt with ministers in the past. I have dealt with individuals and so on, and that is where I had - most of the experiences came in that area. I have individual cases that I have spoken to people in the department on and people, when it was advertised, said they were going to get the jobs and they got the job. I have documented cases on it, but I don't need to - no, that is not the point of going into that.

MS J.M. AYLWARD: Well, I am sure you have taken that to the limit, if you have had those kinds of cases.

MR. SULLIVAN: I really feel though that we should be shifting it back from where we -

MS J.M. AYLWARD: We are shifting back.

MR. SULLIVAN: And I am wondering why? Is that the intent, to shift it back into the public service?

CHAIR: I think we agreed to disagree on this particular topic, so maybe there might be another forum, if we are all in agreement, to pursue this in.

I would like, if we could, to move to another line.

MR. SULLIVAN: No, that is fine. That is all I had on the public service, unless somebody -

CHAIR: Mr. Collins?

MR. COLLINS: I am just following the argument with interest. I have not had any problems brought to me, in my capacity, from my area. I would like to say, just in following the discussion that was taking place, that a lot of these openings - you have a collective agreement in place, particularly for the internal ones, that you have to follow the provisions in the collective agreement?

MS J.M. AYLWARD: These are generally outside of the collective agreement, a lot of these jobs are.

MR. COLLINS: Okay.

MS J.M. AYLWARD: A lot of these are managers and senior positions. They are not the same. If you are talking about the health boards and the school boards, the rules are different. These are generally around the management positions and senior positions that we are talking about here.

I still have to say that I think the people who are doing the hiring are following the merit principle. I think they are competent, and I think we have an effective, productive, public service.

CHAIR: Next question?

MR. SULLIVAN: If you wanted to deal with the public service, I do not have any other questions. We do not have any other questions on that. Then you wanted to stick to (inaudible) finance.

CHAIR: Is there anyone else for the public service? Then we will agree to move on.

Mr. Mercer.

MR. MERCER: Just to make a comment on some of the things that my colleague to my right has said.

I did spend some twenty-odd years in the public service, and they were all prior to 1989. I guess one of my biggest frustrations - and this is not going to be complimentary to the PSC, by the way - one of my biggest difficulties was working at the time with the hiring procedure. In an attempt to be "impartial" and adhere to the merit principles, and everything like that, I could probably name off ten or a dozen situations where we ended up hiring exactly the wrong person.

We have people in the public service, particularly in the forestry sector, which I was most familiar with, hired by individuals through the PSC, whose job it was - personnel who sort of looked upon the line department person as: Well, what is he doing here? type of approach to the interview process, and sometimes ending up with perhaps a person that the PSC thought was the most qualified, but when you took that person back to go to work and do the actual job that you wanted him or her to do, you were somewhat missing some of the necessary skills and whatever.

Where that fault lay, whether it was in the department not giving the right instruction to the PSC, or the qualifications, I am not going to get into that, but if you follow the objective point system of hiring people and all of this stuff you can do exactly the very worst thing for all the right reasons. You have to get the departments involved, you have to get the people who have to work with these people involved, if you are going to get the correct people for the job.

Just to say that because a department's people are involved you sometimes end up with hiring people because you know them or you do not know them, I think that is a gross mis-characterization of the process. I just want to make that point. Just because you take everything and move it arm's length to an independent agency to do your hiring for you does not necessarily mean that you get a better public service. That has been my experience in the twenty-odd years I have worked in forestry. The examples of temporary employees, we need not get into secretaries who showed up to fill in, temporary jobs. The first job we had to do was to show them how to type. There are all kinds of stories like that, so I would prefer not to go down that road.

I think the way we are right now, with the departments being more involved with the hiring practice, with the departments themselves having more to say, I think we are getting a better person or a group of people into the public service. That has been my experience, and I can only base what I say upon my own experience. I went from the days in which we first brought in the PSC to where we are now, and there has been a lot of evolution and devolution from then to now. I think where we are now, we are getting more of a balance between professional interviewers, professional staff people, and the more technical people within the department. I think we are getting a better balance. Personally, I think we are getting a better group of individuals into the public service as opposed to what I am hearing from my right, to say that we are perhaps getting not quite so good.

That is just a comment. I do not expect an answer.

CHAIR: Thank you, Mr. Mercer.

MS J.M. AYLWARD: Mr. Chair, if I could just make a comment.

I think it is important, too, that there is a lot more to the Public Service Commission than hiring. They have some excellent programs, particularly the Respectful Workplace Committee and program, which has done a lot for morale and working through the various issues in each of the departments, and also their wellness initiative and their training. I think they have done a fabulous diversification of their role in addition to the hiring. I do not want to minimize what they are doing. Even though it is a very important role, and hiring through the Commission is very important, there are other very important programs that I think have helped improve the public service, both the morale and the overall effectiveness of the Public Service Commission. I would like to thank both Fonse and Sheila for their direct involvement in that.

CHAIR: Thank you.

There being no further - I'm sorry.

Mr. Byrne.

MR. J. BYRNE: Thank you, Mr. Chair.

With respect to the Public Service Commission, this is an issue that I brought up last year. I believe we mentioned it was brought up last year, and I have had problems with it for some time now.

I worked with the civil service, as did Mr. Mercer, and I came into the system through the Public Service Commission. I knew no one in the system. I applied, was qualified for the job, and got it. Right now I can give you an example, one in particular, in a certain division, where a manager was hired, brought into the system, where there were individuals who had been there for twenty years who were quite qualified to do the job, and a manager was brought in from the outside with absolutely no experience in the field at all, none, and became manager of a division with probably twenty-five people, with no experience in that field at all.

That is happening, and it is happening because people are hired through the line departments. It is not an independent - it was who this person knew within that department. That was the only reason they were hired. That is happening. There is no ifs, ands or buts about it. That is just one example that I can tell you about.

I think we would be much better off if government went back and basically emphasized the Public Service Commission as the group to do all hiring within the system. That is not happening, and I think it is a problem.

Thank you.

CHAIR: Thank you, Mr. Byrne.

There being no further questions -

MS J.M. AYLWARD: I just need to make a comment about that.

I can appreciate the comments you make, but I am not prepared to speak about an individual case of someone being hired.

MR. J. BYRNE: There is more than one.

MS J.M. AYLWARD: There may be more than one, but just because you did not think they were the best person, with twenty years' experience, does not mean that person should or should not have gotten the job. I can use lots of examples. For example, the president of our own university is not from Newfoundland. There were other people who applied for the job, who had twenty and thirty years' experience, and they never got the job. I was not part of the process, and I think that unless you are part of the process and you know the pros and cons of the interview process, all of the experience, all of the limitations, and all of the pieces associated with it, nobody can make a generic statement like that.

I am not saying it is a perfect public service, but I am saying that unless you are directly involved - at which point you would not be able to comment because of the conflict - that you cannot make those kinds of generalizations. Are we improving on it? Yes, we are. Was the old system the best way to go? I do not know, maybe it was, but what we have done now is, we have a hybrid form of a more diversified Public Service Commission and an auditing system that puts the confidence and support into our human resource directors to lead, with the Public Service Commission, these hirings.

MR. J. BYRNE: I think it is the principle we have to talk about here. When you talk about, this person had no experience - basically, if you put it into a field, say you had a nurse supervisor on one of the hospital wards over there, and you advertised for a nurse supervisor on a ward, and you hired an engineer to go in and be in charge of that ward, that is basically what happened. That is what I am talking about. That is what is happening. You talk about morale.

MS J.M. AYLWARD: Maybe the job has changed, Jack. I am not arguing with it, but they have hired social workers to be in charge of nursing departments, and nursing departments to be in charge -

MR. J. BYRNE: Yes, I know. Does that make it right?

MS J.M. AYLWARD: It is a new policy; it is a new principle. I am saying that, unless you are a part of that, your arguing about an individual case is, in my mind, an inane way of bringing across the point because you do not know the details.

MR. J. BYRNE: Oh, I do. That is the point; I do know the details.

MS J.M. AYLWARD: You do not know the details, if you were not in on the process. It is too foolish to talk about.

CHAIR: We are going right back to where we were a few moments ago.

Seeing that there are no further questions for the Public Service Commission, I will ask Elizabeth to call the heads for the Public Service Commission.

CLERK: Subhead 1.1.01.

On motion, subhead 1.1.01. carried.

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

CHAIR: The fine folks from the Public Service Commission, I am sure, have other pressing matters to do this morning.

Thank you very much.

Now, let's go to Finance.

Loyola.

MR. SULLIVAN: Thank you, Mr. Chair.

I hope to just run through each of the areas first. Specifically, I want (inaudible) expenditures and that, and then general. I have a series of general questions I would like to ask. We might move fairly quickly, hopefully, through each of these areas starting on page 29.

MS J.M. AYLWARD: Page 29? Okay.

MR. SULLIVAN: Page 29 in the Estimates.

CHAIR: Subhead 1.1.01.

MR. SULLIVAN: Subhead 1.1.01.

The first one there, it is proposed that there would be a reduction in salaries in the Minister's Office. What would be attributed to it being down, for instance, $12,000 from last year?

MS J.M. AYLWARD: The cost of last year, the increase, is associated with two summer students and overtime incurred during the strike. The reason that the budget of $125,000 is now down to $123,200 is because of the 5 per cent and 8 per cent savings being applied to that department.

MR. SULLIVAN: In the Departmental Salary Details, it shows that the EA and the two secretaries would be $127,225 for 2002-2003, on page 23 in the Salary Details. Why would it be $123,200?

MS J.M. AYLWARD: Because we are doing the 5 per cent and 8 per cent reduction in the Minister's Office, of the salaries of the secretariat, the secretary, and...

MR. SULLIVAN: Yes, but they are not rolled back.

MS J.M. AYLWARD: No, but we are achieving our savings because through overtime a lot of this was achieved. The increase was because of overtime and summer students.

MR. SULLIVAN: But their basic salaries from the Estimates shows an EA at $55,668 and two secretaries at $71,557, which totals $127,225. Why would it be $123,200? If we were including summer students and other areas, it would be more than $127,225. It would probably be up in the $130,000 some.

MS J.M. AYLWARD: My vote says $125,000 revised up to the $135,200.

MR. SULLIVAN: I am just looking at the three positions in the Departmental Salary Details. It shows that there are three positions in the Minister's Office: an EA at $55,668, and two secretaries to the minister at $71,557.

MS J.M. AYLWARD: Right.

MR. SULLIVAN: Obviously, their income is going to be a bit higher this year than last year, I would assume, unless there is a change in personnel and someone starts lower on the scale.

MS J.M. AYLWARD: A part of that would be overtime as well in theirs because you are entitled to a certain percentage of overtime, and that overtime now would be taken in time as opposed to money.

MR. SULLIVAN: Okay. Overtime for the secretaries?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: And the EA?

MS J.M. AYLWARD: There is a policy for the EA as well, the same policy. You have to work up to 10 per cent and then you get a portion. You are only allowed to take so much in overtime and so much as straight time.

MR. SULLIVAN: Okay. For example, the EA was listed in the Salary Details as $55,668. What per cent of that would have been overtime?

MS J.M. AYLWARD: I do not have his exact amount of overtime, but it would be the same policy that applies to everybody else: you can get only so much and then you have to take time off. It is the same way with the secretaries. For example, when we were doing budgets or during the strike, if there was overtime incurred, that would all be added into that.

MR. SULLIVAN: Basically, a secretary to a minister - I know from my past experience, when they stayed extra and worked extra, there was no overtime involved. Would that apply differently?

MS J.M. AYLWARD: Everybody accrues overtime, Loyola - everyone - whether it is taken as time or whether it is taken in money. You cannot expect people to work day and night and not get overtime, whether it is in hours or time, but there is a policy for how much you can take in time versus in money. We do not treat our secretaries any different than we treat anybody else.

MR. SULLIVAN: But you cannot tell me what percentage of that is in overtime or what is in salary?

MS J.M. AYLWARD: No, I cannot today, but I can say it is for the three of those people all combined and most of it is for salary. Very little of it would be for overtime. It would be whatever the policy states.

MR. SULLIVAN: You do not have the breakdowns?

MS J.M. AYLWARD: Do I have the breakdowns with me this morning on each of - ?

MR. SULLIVAN: You would not have the breakdowns, for instance, for last year, $135,200? You cannot tell me what the salary was and what was overtime?

MS J.M. AYLWARD: I could, but I do not have it here with me. If you are asking me if I have it here, I do not have it here. I could tell you, but I do not have it here.

MR. SULLIVAN: Because I am certainly interesting in knowing what -

MS J.M. AYLWARD: It is not that I do not have it. I do not have it here with me right now this morning.

MR. SULLIVAN: I certainly would be interested in knowing what percentage of salary is going in overtime. I think that would be important to know.

MS J.M. AYLWARD: Well, only as much as the policy allows, is what I can tell you. The policy that is in place for all overtime with respect to time versus money is the same that is applied to everybody else. I can get you the -

MR. SULLIVAN: Would that be the same right through this whole department now in each area? You do not have that information here to be able to tell us...?

MS J.M. AYLWARD: No, I do not have the individuals and how much money they made and the breakdown for what they made in overtime versus time accrued.

MR. SULLIVAN: I would not require it individually. For example, within the Department of Finance, the Minister's Office Salaries, Executive Support Salaries, Administrative Support, Government Personnel Costs, or any of these areas - Pensions Administration - when you look at all of these salary components totally, are you able to give me some reasonable amount as to what percentage of that is going to direct salary and what percentage -

MS J.M. AYLWARD: I will have to ask one of my staff to go over and either find it or do the calculations because I never did the percentage breakdown of each of the people.

MR. SULLIVAN: But wouldn't the department know and have looked at - I am sure the department must have looked at what percentage of their costs of salaries are going to overtime, to look at corrective measures or ways - whether that could be implemented by.... In other words, the reason I ask it is, the same way with other systems like in a hospital system, for example, where we are paying far more out in overtime in certain situations in units than we would by having more permanent staff in the position. So, to be cost-effective we need to know exactly how much is going in overtime, basically, and is it -

MS J.M. AYLWARD: I have it per division but I do not have it per individual. Is that what you are asking me?

MR. SULLIVAN: Oh, no, I do not need it by individual. I do not think I really need to get into that.

MR. BENNETT: Can I make a comment?

CHAIR: Yes, Mr. Bennett.

MR. BENNETT: What basically happens is, when we finish the Budget process, we, as a department, will sit down. If you look at that summary statement you have, you have $4,000 as a negative adjustment in the Minister's Office, to come with the assigned value of $123,200 which is the figure that the Minister's Office, Salaries, has. What we are doing now, and it is part of a formalized process, is going through the salary components and actually seeing where we will have savings in other areas to meet that particular requirement. Obviously, if somebody resigns, then it may be part of our design to allow that position to remain temporary for a period of time and use the savings created there to fill that particular bucket. Unfortunately, I have been here longer than most and we have been doing that ever since Adam had his first child. That is just the way that we operate.

What we will do, if you go down there and remove the Government Personnel Costs which, of course, is $84 million, you take that, then each one of these other adjustments, every divisional director and every assistant deputy minister is aware that these are salary targets that we have to meet and we will do that through the normal vacancies and turnover of staff and the rehiring, which takes some period, and we track that. I am in the middle, responsible for administration of the Department of Finance, putting together, for Phil and Terry and the others, a salary plan that is actually going to hit the target mark, so we have to pick up the difference of $3,000 on the minister's salary.

MR. SULLIVAN: For example, when you budget and you look at - I will just use this as an example, I am not getting into specifics. When you look at Salaries in the Minister's Office, for example, you say: well, we have an EA and we have two secretaries to the minister, for example, and here is their basic salaries. With increases kicking in at certain times you do your calculation as to what you would need there for that year with costs. Do you look at some figure then and say: Well, overtime costs have traditionally been 10 per cent of that so we need to budget at 10 per cent because that is what the traditional overtime costs have been? That must be plugged in in the Budget, it has to be. What figure do you plug in for overtime, over and above? Because I am sure when you are budgeting you do the total salary base, I would assume, and project what each person would get at a particular point in time.

MS J.M. AYLWARD: Okay, let me answer the questions.

First of all, obviously when I look at my Budget - we have all agreed to save the 8 per cent and 5 per cent. Now, whether I am going to save 8 per cent and 5 per cent specifically in my department, in my Minister's Office, or whether it will be out in Executive Support; but in Treasury Board and Finance, I am going to save my 5 per cent and 8 per cent. There was overtime last year. I am not planning on having any overtime this year, to answer your question.

We are looking to save approximately $4,000 from that salary load. If we do, that's great. If not, I have to find it somewhere else within the Department of Finance. So that is the answer to your question. One way or the other we will save our 5 per cent and 8 per cent. We are planning to save it by reducing it by $4,000. If we do not we are going to have to find it somewhere else, but overall, in the Department of Finance, I will save at least my 5 per cent and 8 per cent.

MR. SULLIVAN: What has happened traditionally - we will just take the last three or four years - in reference to overtime? Have the costs increased or have they held steady, or have they gone down?

MS J.M. AYLWARD: They have been steady, except for last year during the strike vote when they went up in the Department of Finance and Treasury Board. Most of the departments paid more in overtime because of the strike, but traditionally the year before there was not a lot of overtime.

MR. SULLIVAN: Would you be able to get the figure for me at some future time? What percentage of salary allocations are -

MS J.M. AYLWARD: Are you just interested in my office or are you interested in all the parts of my department?

MR. SULLIVAN: No, I am interested in the Department of Finance. What percentage of the total salary budget goes to regular salaries and what percent goes to overtime?

MS J.M. AYLWARD: Okay, I can give you that now. Of the $6.9 million that we spend in salaries, $77,000 of that is in overtime.

MR. SULLIVAN: Seventy-seven thousand out of six point -

MS J.M. AYLWARD: Almost $7 million, okay?

MR. SULLIVAN: Yes.

MS J.M. AYLWARD: Seventy-seven thousand two hundred is in overtime.

MR. SULLIVAN: Seventy-seven thousand out of $6.9 million?

MS J.M. AYLWARD: $6,921,417.

MR. SULLIVAN: So we are looking at about 10 per cent, basically.

MS J.M. AYLWARD: That works out to be $6.9 million, yes.

MR. SULLIVAN: Could you just repeat the figure one more time?

MS J.M. AYLWARD: Yes. Of the $6,921,417, which is the total permanent staff employees' cost, $77,200 goes to overtime.

MR. SULLIVAN: Okay. That was the question I was asking.

We will just move to, if we could, Mr. Chair -

CHAIR: Yes, go right for it.

MR. SULLIVAN: Executive Support, I guess that pretty well applies to the same basic thing there so we will move on, if we could, to 1.2.02.

Transportation and Communications, under Administrative Support, $193,500 was budgeted last year and $150,000 actually incurred. Was there any major thing anticipated that did not get done last year? What would account for the difference there from the budgeted amount?

MS J.M. AYLWARD: It is postage less than originally anticipated; and, no, I think we probably did more but we probably used different ways of doing it rather than using postage. (Inaudible) just spent more.

MR. SULLIVAN: General postage.

The Transportation and Communications breakdown, what would be the major expenditures under that heading there?

MS J.M. AYLWARD: It is all the postage.

MR. SULLIVAN: It is strictly all postage?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: What would be included? Postage in what specific areas, for example? A mailer on the budget, a householder, for example? Would that come out of that? For example, the little thing that went to each household in the Province on the Budget?

MS J.M. AYLWARD: Mostly things like tax statements and HST stuff, and some of the pension things, that kind of thing.

MR. SULLIVAN: What about the little brochure thing on the Budget?

MS J.M. AYLWARD: That is under a different subsection.

MR. SULLIVAN: That is under a different section?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: Purchased Services, budgeted $41,000 and $120,000 was actually spent. What would have accounted for that huge increase there?

MS J.M. AYLWARD: Photocopier charges, printing costs -

MR. SULLIVAN: How much would they have been, roughly?

MS J.M. AYLWARD: You want the breakdown of the $120,000?

MR. SULLIVAN: No, well just the big items. I do not need to get into the nitty-gritty. What would be the major expenditure under Purchased Services? What might have been the biggest three or four items?

MS J.M. AYLWARD: Pre-Budget consultations.

MR. SULLIVAN: What did they cost?

MS J.M. AYLWARD: Thirteen thousand.

Budget Highlights, the book, approximately $30,000.

MR. SULLIVAN: Okay. That included mailing?

MS J.M. AYLWARD: No, that is just -

MR. SULLIVAN: Okay, sorry. You are talking about the little Budget Highlights book that accompanied the -

MS J.M. AYLWARD: Right, the little one that goes with the Budget.

Then Purchased Services, the rest of it, goes to photocopiers, ergonomic assessments, professional training. All of that stuff comes out of Purchased Services for the department because it is for the Administrative Support group.

MR. SULLIVAN: Why would it be $37,900 next year? If you needed to spend $120,000, what extraordinary expenses occurred that are not going to occur this year?

MS J.M. AYLWARD: I guess we are hoping that we will not have the same photocopier charges.

MR. SULLIVAN: Why wouldn't that be? Are you talking about just the photocopier, the cost of operating it?

MS J.M. AYLWARD: Every so often they come and do the maintenance and they do all the - it is fairly significant.

MR. SULLIVAN: Why would maintenance go down on a copier from year to year?

MS J.M. AYLWARD: Because it is based on the number of copies you put out. It accumulates over a period of time.

MR. SULLIVAN: Why would the number of copies go down from year to year, if it is a standard part of your operation?

MS J.M. AYLWARD: It is not necessarily every year. It could be every couple of years. It could be every eighteen months, so a portion of it would be spread over two years. Do you know what I am saying? You do your servicing on your photocopiers after so many months.

MR. SULLIVAN: Are you talking about servicing contracts on this?

MS J.M. AYLWARD: Pardon me?

MR. SULLIVAN: Are you talking about servicing contracts?

MS J.M. AYLWARD: No.

MR. SULLIVAN: They are not included?

MS J.M. AYLWARD: Servicing contracts in this? Yes, servicing contracts are included in this section.

MR. SULLIVAN: On what type of basis would you renew those? What period of time would they normally be for, a servicing contract?

MS J.M. AYLWARD: I do not have the servicing contracts here with me, Loyola.

MR. SULLIVAN: But they would be more than one year. In some years there are a lot of them that come -

MS J.M. AYLWARD: It depends on when you would buy them. You know how many photocopiers there are in government. I do not know how many there are over there, but I know this is specifically related to two photocopiers.

MR. SULLIVAN: I am wondering why it would be three times as much one year and then back to one-third. There must be some -

MS J.M. AYLWARD: I would imagine it is sort of when the service contracts are up.

MR. SULLIVAN: Is that traditionally - well, the year before then, 2000-2001, they must have made them much higher at one time.

MS J.M. AYLWARD: I do not know. Maybe we bought a new one back then. I do not have a running tab on when we buy new photocopiers and such, but if you want me to find out -

MR. SULLIVAN: Yes, I would like to know because there is a dramatic shift from one year to the next. If it was $10,000, I can see it, but from an expenditure of $40,000 up to 120,000 and back to -

MS J.M. AYLWARD: We just bought two new photocopiers out of this here. I do not know when we bought the last new ones, but I can find out when we bought the last new -

MR. SULLIVAN: So it was purchasing, servicing contracts, and supplying of supplies to keep that operating - toner and so on.

MS J.M. AYLWARD: Printing costs, purchasing, ergonomic assessments.

Oh, yes, the other piece that is here too is that they had to upgrade the washroom in the tax administration component. They had a problem with it. I do not know what the problem was, but I can find out what it was.

MR. SULLIVAN: What did these upgrades cost?

MS J.M. AYLWARD: Fifteen thousand dollars.

MR. SULLIVAN: So I can see that as being a one time. That certainly would account for -

MS J.M. AYLWARD: I am not sure what they actually did over there, but it was $15,000.

WITNESS: (Inaudible).

MS J.M. AYLWARD: We can find that out. I do not know exactly what that was, to be quite honest.

MR. SULLIVAN: Increased usage, was it? We won't go into any more detail on that one.

MS J.M. AYLWARD: You are welcome to it. I do not know if there were one or two toilets that were blocked, but we will find out for you.

MR. SULLIVAN: There has to be a reason other than just a copier -

MS J.M. AYLWARD: We bought two copiers and there is a service agreement.

MR. SULLIVAN: What is the cost of buying a copier?

MS J.M. AYLWARD: We will have to get you the cost of the copiers. I do not know if they are big copiers or small copiers.

MR. SULLIVAN: Do we buy copiers every year? Do we lease -

MS J.M. AYLWARD: No, you do not get them every year.

MR. SULLIVAN: Oh, I see.

MS J.M. AYLWARD: They are usually twenty-four months or thirty-six months, to my recollection, when I used to sign the agreements and buy new ones. You lease them, just like you lease out a car or something. Then you either buy them or you get rid of them, but if you do not get rid of them -

MR. SULLIVAN: I would be content if you would just provide, like last year and this year, just a comparison there. That is fine, if you can provide that later.

Provincial Revenue there, what would be the source of that?

MS J.M. AYLWARD: That is the pension mostly, postage costs associated with the pension fund, you know, when you mail out your pension statements. That comes out of the accrual pension fund.

MR. SULLIVAN: Basically, that is recovered from the pension fund itself because it is a cost incurred by that area, right?

MS J.M. AYLWARD: That is correct.

MR. SULLIVAN: Subhead 1.3.01., under that area there, Provision for Salary Increases, could you give me the premise on which that amount was obtained? Was it strictly - I understand for each 1 per cent we are talking about $17 million. Would that be roughly $18 million?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: Was that strictly taken and said, well, most of that is going to be incurred within the year, or some that kick in later, it is not a full year or whatever? Is that the basis for that?

MS J.M. AYLWARD: It includes the salary increases, obviously, for certain groups. For example, we had NAPE and CUPE settle last year, and this year we have the nurses, the teachers and the police outstanding. We are not even really started with the physicians yet, but they are due this year. Also, it includes pay equity adjustments..

MR. SULLIVAN: Yes, the pay equity is a separate line there, right?

MS J.M. AYLWARD: Yes, pay equity is there.

MR. SULLIVAN: Okay. That is basically strictly the amounts that were in the agreements. They all looked at roughly 5 per cent. Some are kicking in - I guess during this year there will be 2.5 per cent at first, so that factors. It is just an accumulation total of all of those contracts that are kicking in at various times.

MS J.M. AYLWARD: Right.

MR. SULLIVAN: What about the other pay equity costs? This is pay equity as it applies to the Department of Finance only, is it?

MS J.M. AYLWARD: No, this is all government that (inaudible) here.

MR. SULLIVAN: What other pay equity -

MS J.M. AYLWARD: The nurses, I think, finish it up now.

MR. SULLIVAN: That would be it?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: Are there further pay equity payments to come besides this year?

MS J.M. AYLWARD: Not that I am aware of. If they are, they are cleanup types of pay equity, but that is about it. Most of it is covered off into the nurses, which is $4.1 million. I think that was the last piece of it.

MR. SULLIVAN: Employee Benefits, I guess that went up because of the increased salary, I would assume. Would that be the only reason? With increased salaries there are increased benefits, percentages and so on.

MS J.M. AYLWARD: Yes, that is most of it.

MR. SULLIVAN: Would that be the sole reason, or were there others?

MS J.M. AYLWARD: You can see it is up and down; parts of it are up and down. Like, the EI benefits, the plan was over funded so the premiums were reduced; but then, when you pay a higher salary, as you said, it is an ad valorem type of increase based on that.

MR. SULLIVAN: Higher CPP and EI contributions, that is basically what it is, is it?

MS J.M. AYLWARD: It is a .2 per cent increase.

MR. SULLIVAN: It is a payroll burden, basically, is it?

MS J.M. AYLWARD: Pardon me?

MR. SULLIVAN: Basically, it is what is involved with the payroll burden.

MS J.M. AYLWARD: They are all listed out there, you can see. I guess they are listed out for you, are they?

MR. SULLIVAN: No.

MS J.M. AYLWARD: Oh, they are not.

MR. SULLIVAN: No, I just have the totals.

MS J.M. AYLWARD: It includes EI -

MR. SULLIVAN: We are not privy to such details.

MS J.M. AYLWARD: It includes EI, CPP, Group Medical, Group Life and HAPSET, which is the payroll. So, that is what it is.

MR. SULLIVAN: Particularly those, what you would expect under salaries.

MS J.M. AYLWARD: Yes, it is the cost of paying people.

MR. SULLIVAN: Okay.

Provincial revenue, again, what is the source of the provincial revenue?

MS J.M. AYLWARD: This is the cost of administering the pension plan. Again, that is -

MR. SULLIVAN: Recovery from the pension fund, basically?

MS J.M. AYLWARD: It is, yes.

MR. SULLIVAN: That is the only one in that, is it? That is the only source of that?

MS J.M. AYLWARD: That is it. That is the only thing in there.

MR. SULLIVAN: Pensions Administration there is pretty consistent.

Under Crown Agencies, subhead 2.1.03., could you give me the breakdown there? I guess that is coming from Hydro. Hydro, I assume, has to be in there. Are you including Newfoundland Liquor -

MS J.M. AYLWARD: No, just Hydro.

MR. SULLIVAN: Just the Hydro only, right?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: That is dividends but not guarantee fee?

MS J.M. AYLWARD: That is right.

MR. SULLIVAN: Guarantee fee is included under our Consolidated Fund, right?

MS J.M. AYLWARD: Right, the Consolidated Fund.

MR. SULLIVAN: Okay, those are the figures for that one.

Under Financial Assistance, Grants and Subsidies, where were grants and subsidies made? Could you just give me a breakdown of that? For instance, last year there was $200,000. How might that have been dispersed?

MS J.M. AYLWARD: That was to the Newfoundland Farm Products.

MR. SULLIVAN: Pardon?

MS J.M. AYLWARD: One-time money to the Newfoundland Farm Products.

MR. SULLIVAN: The $200,000?

MS J.M. AYLWARD: Yes, that is the West Coast -

MR. SULLIVAN: Okay, and what about the $400,000 for this year?

MS J.M. AYLWARD: The $400,000 is a reinstatement of the Pippy Park Commission Operating Grant.

MR. SULLIVAN: Reinstatement?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: They did not get any last year?

MS J.M. AYLWARD: That is right.

MR. SULLIVAN: What about the year before?

MS J.M. AYLWARD: No.

MR. SULLIVAN: Why did they need a reinstatement?

MS J.M. AYLWARD: It is just for everything. If you were ever up there, you could see they need a fair bit of work done on the trailer park. It is a publicly-owned park, right in the middle of St. John's - they call it the gem of the city - and it is just in need of a lot of work.

MR. SULLIVAN: So, general enhancements.

MS J.M. AYLWARD: And they do not charge the public a lot of money to do that. They need the enhancements for the flowers and the trailer park hookups and requests for different things, just services mostly.

MR. SULLIVAN: Did they put in a proposal of how they intend to spend it and for what specific areas?

MS J.M. AYLWARD: Yes. They put forward a proposal to do those kinds of things that I have talked to you about; generally about maintenance. They have not done anything in the last three years. It is mostly upgrading and the trailer park piece of it and keeping the land clear. They have the little minigolf course up there and they have -

MR. SULLIVAN: But nothing on their regular golf course?

MS J.M. AYLWARD: No.

MR. SULLIVAN: None of it for that purpose?

MS J.M. AYLWARD: No.

MR. SULLIVAN: Strictly with the park area itself, I guess.

MS J.M. AYLWARD: That is right, Pippy Park Commission.

MR. SULLIVAN: Provincial Revenue, 2.1.04.02. What is the source of that?

MS J.M. AYLWARD: This is the balance of the NIDC, which is the Newfoundland Industrial Development Corporation. I guess there is a fund amount of $1.6 million of a $3 million fund and that is being returned to the Province for general revenue.

MR. SULLIVAN: Why is it returned?

MS J.M. AYLWARD: At this point there are no additional funding requirements for that fund so rather than let it park there we are putting it back into general revenue.

MR. SULLIVAN: So there is no future need?

MS J.M. AYLWARD: At this point, that is correct.

MR. SULLIVAN: At all, or for this year?

MS J.M. AYLWARD: Well, you predict the budgets for the year. There are no requirements for this year, as best as we can tell.

MR. SULLIVAN: Okay. The next one is pretty explanatory, 2.1.05.

Tax Policy, 2.2.01., under Salaries there is about a 13 per cent to 14 per cent increase in the salary budget from last year. What would account for that?

MS J.M. AYLWARD: You mean decrease?

MR. SULLIVAN: That is 2.2.01.01., under Tax Policy.

MS J.M. AYLWARD: It is based on seven permanent positions. The reason for the change is because we did not hire any temporary assistants during the year, and overtime was less than anticipated. They are just getting more and more efficient over there in Tax Policy.

MR. SULLIVAN: That was last year, you mean. That is why it was $393,000 as opposed to $449,000?

MS J.M. AYLWARD: Right.

MR. SULLIVAN: No overtime and no temporary hiring.

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: Why would it go up 14 per cent this year; $446,000? Are you planning to have overtime or temporaries hired this year?

MS J.M. AYLWARD: Actually it is just down, as you can tell from the Budget, $449,000 to $446,000. There is a reduction there that we are putting right across the board on all of them but we are anticipating, I guess, that it may happen this year.

MR. SULLIVAN: I know, but it is back up to where it was. It was up higher because you had temporaries and you had overtime. That is why it went down. If it is going back up to where it was, is there an intent to have temporaries or overtime this year? If there is that much of an allocation - 13.4 per cent is the difference between the two. If there are the same number of permanent positions there, that is a fair increase.

MS J.M. AYLWARD: I think one of the reasons was, when we de-linked, we did not know exactly how much extra staff and that sort of thing we would hire. This year, again, I guess we will be looking at bringing in the third year of our tax reduction and that kind of thing.

MR. SULLIVAN: You mean federally?

MS J.M. AYLWARD: Yes.

MR. SULLIVAN: But that was in effect last year and we had a low amount.

MS J.M. AYLWARD: That is right. That is what I am saying, and it worked out very well, but this year, I guess, if we go ahead with the third year of our tax deferral, and if there are any other rationale - I will ask Terry to speak to it specifically, or Earl.

MR. PADDON: I will speak to it.

I guess the budget again for this year still includes a provision for temporary positions and overtime. Whether we need the positions or the overtime remains to be seen. It is really just a block fund that is in there just in case particular issues come up that you need to have individuals come on, for a project-by-project basis. Whether we need them or not remains to be seen. There is nothing right now that we see that we would specifically need them for, but it is still early in the year. Things do come up.

MR. SULLIVAN: We went through two years now where we de-linked, or (inaudible) tax from the federal since January 1, 2000. We did not encounter any last year. Are there some things that might have happened last year that you felt could have necessitated costs that you got through, that might be there this year? Is there any specific area of concern where that might be a requirement?

MR. PADDON: In this particular division there is nothing related to the de-linking or the move to tax on income that I would see we would need specific individuals for, on a temporary basis. There may be things arise during the year, particular initiatives that might come up, that you would require people for on a project-by-project basis, but at this point in time, no. It is really just a block fund that is in there just in case.

MR. SULLIVAN: It is still possible that $50-some thousand we might not need. That is basically a 13.4 per cent cushion in case we need it, if we go on the same as last year. There would normally be an increase from last year anyway, I guess, with the extra salary increase, so it would not really be 13.4. There is probably 7 per cent in there, in that ballpark.

MR. PADDON: You have the normal salary increase built in; plus, then, you have your requirement for reduction, the 5 per cent and the 8 per cent that is built into salaries and the operating. Those two items are built into the salary estimate that is there right now.

MR. SULLIVAN: When you factor, we are still up about 13 per cent. That is an area that there could be a savings incurred.

MR. PADDON: Up from the revised.

MS J.M. AYLWARD: (Inaudible) savings increased for that as well? (Inaudible).

MR. SULLIVAN: I looked at, basically, the savings cut should be offset by the salary increase, right? There is a 13.4 per cent difference from last year and what we are looking for this year. If we looked at the savings, we are looking there and there is a salary increase. They should offset each other, approximately, so there is still about a 13.-some per cent increase.

MS J.M. AYLWARD: There was a 5 per cent last year and about a 3.75 per cent year this year. That is what it works out to, right? A portion of it does not come into effect; it is only for six months of the year.

MR. SULLIVAN: No, the question I asked: Was there something anticipated that did not occur last year? I think I got an answer to that.

MS J.M. AYLWARD: No. Generally, like last year, we had extra work being done, for example, on the fuel tank initiative, coming up with the cost and how many people we may need to help, that sort of thing. The year before it was the seniors' allowance and we had to come up with that, so there are many things that may come up during the year.

MR. SULLIVAN: Yes, I know, but this is the Tax Policy area we are now talking about, right?

MS J.M. AYLWARD: But we are not anticipating anything.

MR. SULLIVAN: The costs, I guess, for that, incurred with the fuel tank thing, wouldn't that come out of the $2 million under fuel? Would there be an appropriation out of that amount for that?

MR. PADDON: The $2 million itself is just the cost being paid to individuals. The cost of administration would be built into the Department of Finance budget.

MR. SULLIVAN: Okay, it would be built into the general department.

MS J.M. AYLWARD: Right.

MR. PADDON: Yes.

MR. SULLIVAN: Okay.

I still have questions, but I do not want to prevent somebody else from getting a turn. If you want me to keep going, then they can pick up after?

CHAIR: Continue on. We are going to take a short recess at 10:30 a.m. for coffee.

MR. SULLIVAN: We might get this part of it, hopefully, done by then, before I get to my general questions. I did have one but I will just leave that, general things, until after, I think.

When you talked there, I think Terry mentioned the third year of taxing. I have some questions I want to ask of a general nature, Minister, after, but if we could just move and deal with these specifics first -

MS J.M. AYLWARD: Yes, go ahead.

MR. SULLIVAN: - at least we will put that to rest.

Under Fiscal Policy, we are looking under Salaries, that is over 20 per cent, I think, if you look at it there. That is a little over 20 per cent, about a 21 per cent increase in Salaries there in the Fiscal Policy area. What would account for those particular costs?

MS J.M. AYLWARD: Are you talking the fact that it was revised down during the year, or that it is back up to -

MR. SULLIVAN: The point, I guess, is that same thing happened under Tax Policy, in the previous one, that we budgeted $310,000, spent $250,000, and we are now back up again.

MS J.M. AYLWARD: Exactly. It is exactly the same, Loyola.

MR. SULLIVAN: So, if it is not basically required, unless from year to year we run into some unexpected things, it is better to have at least some cushion there to look for it, if it has been not unusual to have some costs that may pop up, not every year but from year to year. I can see that, but if it is consistently below, have we consistently come in well under on this area? In other words, if we had done that, we are probably over budgeting for that area. If sometimes we utilize that, maybe we are just preparing for certain eventualities. I am just wondering, which is it?

MS J.M. AYLWARD: Well, I would have to ask Terry the year-over-year budget, and how we are, but I know this year particularly we did not have any temporary assistance, and overtime was less than we anticipated, and it covers the cost of five permanent positions over there. I do not know what the year-over-year is.

MR. PADDON: For the last couple of years, the actual salaries have probably been fairly consistent with the $253,000 that you see for last year. What we have built in again is the same as Tax Policy; there is provision for temporary assistance and for overtime. Overtime is on an as-needed basis, obviously.

On the temporary assistance side, what you will find in the Fiscal Policy is that as you get closer to the five-year renewal on equalization, which comes up in 2004, we would end up hiring more staff on a temporary basis to do some of the analytical work related to some of, I guess, the issues that arise with any renewal there. So probably, say within the next year or two, we would end up taking staff on just for some specific issues there.

MR. SULLIVAN: I did not get an opportunity to go back to each of the previous years to see what the actual expenditures were. If it is consistently down at that level, I would not see a need to increase it. If there is something that would be anticipated, obviously, I certainly would be an advocate to make sure it is there if we are going to need it. Don't come back looking for it, basically.

MS J.M. AYLWARD: I think the last one is probably the most legitimate one. You wouldn't wait until a couple of months before the equalization deal is up. We are having talks now. I would imagine, as it gets closer, it will ratchet up even more.

MR. SULLIVAN: Well, if it is anticipated there, that financial (inaudible).

MS J.M. AYLWARD: Well, it is part of a five-year process.

MR. SULLIVAN: If it is anticipated that it could be required this year, well, it should be budgeted, but if it wasn't....

MS J.M. AYLWARD: It is budgeted.

MR. SULLIVAN: Last year we budgeted but didn't use it?

MS J.M. AYLWARD: That's right.

MR. SULLIVAN: Anyway, I got an answer.

The next one, Project Analysis; Salaries again, we are seeing it even higher here. We see - from what we actually spent last year into what is budgeted for 2002-2003 - a 26.8 per cent increase, from $387,000 up to $491,000. Under Tax Policy it went from 13.4 per cent to 21 per cent. Under Fiscal Policy it is 26.8 per cent over and above. What would account for this? That would be considered an extraordinary cost, the 26.8 per cent increase. Could I have an explanation for that?

MS J.M. AYLWARD: Are you talking about the Project Analysis Salaries?

MR. SULLIVAN: Yes, I am talking about 2.2.03.01., Salaries. The figure of $491,100, that is a 26.8 per cent increase over $387,200. Why would that be?

MS J.M. AYLWARD: We have nine permanent positions over there, that is the funding for that. The reason why it is down is because two of our people have been seconded to other departments.

MR. SULLIVAN: It is anticipated they will be back this year?

MS J.M. AYLWARD: It is anticipated - well, you never know. One is working on Voisey's Bay and you never know. They might be back this year.

MR. SULLIVAN: Oh, they won't be back.

MS J.M. AYLWARD: You never know. They might be back tomorrow afternoon for all I know.

MR. SULLIVAN: They will be back tomorrow, yes.

WITNESS: According to John.

MR. WALL: One of the people is scheduled to come back in September, unless they get extended. You really have to budget for it.

MR. SULLIVAN: That is a satisfactory explanation there for that. If there are two people whose salaries are not included there that would normally - or portions thereof that could be included. We want to have that eventuality prepared for.

CHAIR: Folks, it is 10:30 a.m., or pretty close to it. Loyola, if you -

MR. SULLIVAN: If you want to break now, because there is still page 34 I have to get to and I have some other questions.

CHAIR: We will take a short recess.

MR. J. BYRNE: How long?

CHAIR: We will reconvene at 10:40 a.m.; twelve minutes.

CHAIR: Order, please!

Loyola.

MR. SULLIVAN: Thank you.

Page 34, Tax Administration, under 03., Transportation and Communications. There was $155,000 expended there, the budget was $208,000, and it is back up to $191,200. That is a 23.4 per cent increase, and this year it is budgeted over what was actually spent. What might have been anticipated, or did they move it back nearer to traditional levels? What might be the reason for that?

MS J.M. AYLWARD: One of the reasons was that travel was not as much as we had expected. Also, the mail charges were not as high as we had anticipated. Again, in light of - I guess you can see the reduction there from the Budget. It is still reduced to $191,000. We do not know what will happen this year. That is the way it is with respect to the travel and the mail, but we are anticipating that it will still be lower than last year's budget.

MR. SULLIVAN: Is mail and travel anticipated to be up again? If the reason for going down was mail and travel, would that be the reason to have it back up again?

MS J.M. AYLWARD: That's right.

MR. SULLIVAN: Are there any anticipated things planned outside of the ordinary things? Why might there be more travel this year than last year?

MS J.M. AYLWARD: It is less than what was budgeted, not less than what was spent, but we are anticipating, I guess, again -

MR. SULLIVAN: No, spent is the actual measuring stick, basically.

MS J.M. AYLWARD: Yes, but the Budget was $208,000 last year and we spent $155,000, and this year it is up to $191,000. Again, I cannot identify any specifics. I will ask if Phil or Terry wants to talk to that one.

MR. WALL: Just to remind everyone that in the last part of last year we had what was essentially a travel freeze. That is the main reason why the $208,000 went down to $155,000, because of the travel freeze in the last part of the year. This year there is a 5 per cent reduction on travel but not a travel freeze. So we are back up from the Revised last year but certainly not back to the originally estimated amount of last year.

MR. SULLIVAN: Basically, we are 5 per cent down from what we budgeted last year.

MR. WALL: Right, because a lot of the travel in the taxation area is discretionary. Obviously, many times it is revenue generating but with the travel freeze on we cut that significantly in terms of travel, particularly outside the Province for tax auditors, et cetera, last year. We anticipate that this year there will be more normal travel arrangements and time frame for our tax auditors; which is principally what this is, tax auditors and compliance auditors.

MR. SULLIVAN: With reference to 04., Supplies. Why would we have spent over double from what we budgeted? It is down even less this year. What were the extraordinary expenditures there?

MS J.M. AYLWARD: Are you talking about Supplies?

MR. SULLIVAN: Supplies.

MS J.M. AYLWARD: That is the cost of the fuel dye that we put in to test - you dye the fuel to make sure that you are selling the taxable form.

MR. SULLIVAN: Marked fuel.

MS J.M. AYLWARD: Yes. So, we will buy a stock of it maybe every year-and-a-half or every two years. We had to buy a stock at a cost of $50,000 for that.

MR. SULLIVAN: What was the cost of that item?

MS J.M. AYLWARD: Fifty thousand dollars.

MR. SULLIVAN: We will not have to buy any in this fiscal year, is that what you are saying?

MS J.M. AYLWARD: That is our plan, that we will not have to, yes.

MR. SULLIVAN: Have you received any complaints from people, for instance, truckers? I asked this question that some people are using it and getting an unfair advantage over people that are not. Have you had complaints and has there been non-compliance?

MS J.M. AYLWARD: Yes, we have had a few complaints. That is one of the reasons we are bringing in the legislation, for that very reason, because the way it works now we have to give a warning, a notice period that we are going to come and check you. That way there is a chance to clear the fuel. Now we will be in compliance with the other nine provinces and not in violation of the Charter by just people knowing that they have to use the appropriate - it is just like drinking and driving, you know you should not drink and drive. You do not need a warrant to tell someone that you are going to check them out to see if they have been drinking and driving. It is the same sort of thing. They should be using the appropriate fuel, but if they are not, then they are subject to being checked at any time and subject to a fine. So we have had complaints.

MR. SULLIVAN: I hear from larger truckers sometimes: I have to compete against a single guy who has his own independent truck and can do it a lot cheaper than I can because I am adhering to the law on my fuel and somebody else is not. Nobody likes to kick up and complain, or put in a complaint, but if there is -

MS J.M. AYLWARD: Even when you complain, you have to give them notice. So, by the time you go to check them, they have the fuel disposed of or they have the proper one in the tank. We know; we have received many complaints. I don't know if there were many, but we have gotten complaints. Neighbours usually call on neighbours and say that this fellow is using it or not using it.

MR. SULLIVAN: Okay, that pretty well speaks for that area.

Under Professional Services, there was very little last year incurred. What is included in that amount? What specifically is the main expenditure there? For instance, the year before you budgeted $25,400 and $5,400. I didn't go back the last few years, but I would assume it has historically been budgeted around that level.

MS J.M. AYLWARD: We are anticipating that it will go up because the fuel dye samples would be one reason. We have to do the chemical analysis through MUN on fuel dye samples, and legal costs incurred by the sheriff and the deputy sheriff on issues of levies on property and appraisals and that kind of thing. As you know, we are trying to clamp down on that a little bit more if we can.

MR. SULLIVAN: What about Purchased Services? What is included there?

MS J.M. AYLWARD: Purchased Services includes office equipment leases, printing costs, photocopier charges, international fuel tax agreement fees, vehicle maintenance, all those kinds of things.

MR. SULLIVAN: Standard things, okay.

Under Economics and Statistics, Salaries is about $63,000 less there. Why would that be? It is back to roughly the previous year. Was it that some people might have been off for some reason, unfilled positions, or what?

MS J.M. AYLWARD: It was revised higher than lower. Is that what you are talking about?

MR. SULLIVAN: Yes, it is lower this year.

MS J.M. AYLWARD: It is lower this year.

MR. SULLIVAN: Is it anticipated that it would change? Why would it have gone up last year, fifty-some thousand?

MS J.M. AYLWARD: It went up last year because there was a severance pay for one employee. That is why it went up. Now it is back to what it normally would be, plus the reductions we have built in.

MR. SULLIVAN: That is another area, severance. There is no budget for severance, I understand.

MS J.M. AYLWARD: That is right.

MR. SULLIVAN: That is not budgeted at all?

MS J.M. AYLWARD: No, that is usually found within the departments.

MR. SULLIVAN: Yes, it is usually found within the departments. From year to year there is always certain severance there. Go back the last ten years and look at severance being paid out. Why isn't there some - it is a fair amount of budgeting. If we paid out traditionally $2 million in severance a year, for example - I will just throw that figure out - on average for ten years, why don't we budget $2 million for severance? Why do we have to come back looking for it somewhere else? Why isn't it budgeted?

MS J.M. AYLWARD: Oftentimes departments will find it within their own votes. They will find it. Whether it is because they do not hire a couple of temporaries or because they have less overtime, most of them have managed to find it within their salary votes. So if they are able to find it, and consistently able to do it - even with this amount here, we know some will go over; but, by and large, they have to find it whenever possible.

MR. SULLIVAN: There is no guarantee someone is going to leave.

MS J.M. AYLWARD: If you are going to do that kind of thing, you would have to - I mean, there is a lot of talk sometimes about doing a severance package or redundancy type of buyout, but there is no plan to do that now. It has always traditionally been found within government departments.

MR. SULLIVAN: What would the reason be? You don't know in advance if someone is going to leave. They may stay. There may be no severance, technically, so why budget it? It is not a given that there is going to be a severance that has to be paid, but it is a practice that you never go through a year without having to pay severance, I would assume. I cannot see that. Is there a reason? Just because it has happened all along and it has been found within the department probably means maybe we have a little cushion in the department that we should be allocating under severance or whatever. It probably boils down to the same thing. What is the rationale behind doing it that way?

MS J.M. AYLWARD: I think I have sort of explained the rationale. It is just that first of all we do not have extra money to put in a severance block. We are not necessarily encouraging people to leave. I know they leave eventually, but there is no set time for retirement. People can retire when they want, basically. We have never allocated a block for that particular reason. I think, by and large, deputy ministers have done very well finding the money within their votes unless, of course, you have an exorbitant number of people leaving. Overall, generally, the departments come in within their budget. If you gave them the extra money, there probably would be a way to spend the extra money, I do not know, but we are not looking, necessarily, for people to retire, with an aging workforce.

I do not know if you want to add to that, Phil?

MR. WALL: In most cases, as the minister has pointed out, departments are required to find within their government vote amounts to cover costs of severance, redundancy, or whatever the case may be, as you go through the year. That is an understood policy. If you have a large allocation required - because you could easily have a couple of people during the year who could retire early or whatever the case may be - there is an opportunity to go to Treasury Board and seek some additional funding from Treasury Board if the need is there, is identified, you make it clear and explain to Treasury Board that there is no opportunity to find those savings within your department. Treasury Board, on occasion, will consider. As I said, in most cases, I would say 90 per cent of the time, you are required to find it within your department, and it is difficult sometimes to do that. If you cannot find it then you have an opportunity to discuss it with Treasury Board and they may give you a further allocation or find some other method to fund the severance or redundancy costs.

MR. SULLIVAN: What might have been the total amount paid out? I know this only deals with the Finance Department as it applies to them on severance. What might be the total severance paid in the last fiscal year?

MS J.M. AYLWARD: For all of government?

MR. SULLIVAN: Yes, for all departments overall. I know it is more general, I guess, that question.

MS J.M. AYLWARD: I would not have that information here compiled. I do not know if Treasury Board would have that compiled in any one front because it is done through the departments and their salary votes.

MR. SULLIVAN: It would be easy to find it because as someone leaves there is a severance package. I am sure it is something that could be found pretty easily, I think.

MS J.M. AYLWARD: That would be under the Treasury Board vote. It would not be here under Finance. This is just for the Department of Finance.

MR. SULLIVAN: Yes, I know. I prefaced, I think, by saying that it is not under this particular department but, as president of that, I just thought you might have some ballpark as to what the total severance on an annual basis is. That is that much money we have to find within various departments.

MR. WALL: The problem is, I guess, that departments sometimes - I would say in most cases - find the money within their salary vote or within transportation or purchased services within their departments. I do not know if Treasury Board tracks it. I do not even know if departments are advised or have to advise Treasury Board that they just found $50,000 or $100,000 for severance purposes. I do not have it and I do not know if it is even compiled. Departments are required, in most cases, to do this within their existing votes.

MR. SULLIVAN: We could find it on a payout basis anyway. (Inaudible).

MR. WALL: I think you could poll the departments to get an indication from them.

MR. SULLIVAN: Okay.

Revenue-Provincial there in 02., what would that $5,000....? You budgeted $55,000 last year. What is the source of that revenue?

MS J.M. AYLWARD: This is the cost recovery from Newfoundland Hydro. They sort of do some work for them in terms of economic forecasting. That is a cost that they pay for, from Newfoundland Hydro, so we recover that.

MR. SULLIVAN: The $55,000 that you budgeted last year -

MS J.M. AYLWARD: We didn't do that much work. That is sort of the contracting out part of it. We did get the $5,000 back from Hydro, but oftentimes they ask us to do a whole lot more work for them, or other groups would.

MR. SULLIVAN: Some discussions and things, as opposed to Churchill, were charged back to Hydro, weren't they?

MS J.M. AYLWARD: I am sorry; I didn't hear what you said.

MR. SULLIVAN: Some of the cost associated with Hydro discussions, whether it be on the Upper Churchill or Lower Churchill, I guess, some of the preliminary work done there was done and charged to Hydro, basically. Would that be in those figures there?

MS J.M. AYLWARD: This would be the $5,000 worth of work that my Division of Economics and Statistics did on behalf of Hydro with respect to the economics, and the forecasting associated with it. That is what it is, $5,000 worth of work.

MR. SULLIVAN: There have other costs recovered from Hydro in other areas too, besides dividends and guarantee fees. Where would they be reflected?

MS J.M. AYLWARD: In terms of the work we are doing under the economics piece of it -

MR. SULLIVAN: Yes, under that one it is here. I think there was one cost of $50,000 recovered, wasn't it? Where was that?

MS J.M. AYLWARD: What was that for?

MR. SULLIVAN: I just read it in this past year. Maybe it is under another area. I wonder, is it under -

MS J.M. AYLWARD: It might be under Mines and Energy or something, I do not know. But, in terms of what we have here you can see through the special dividends, the dividends, and this is what we recover.

MR. SULLIVAN: Okay, that is understood to be one. That is fine.

Mr. Chair, I have numerous questions too, that touch on some of these. Could we - unless someone else has - I could continue then before you do the vote, because once you do the vote on them, basically, they are complete.

CHAIR: You are okay, Jack?

MR. J. BYRNE: Okay.

CHAIR: Go ahead, Loyola.

MR. SULLIVAN: I guess the first one is with reference to taxes, the compilation of taxes and the filing of taxes. I know it has been pretty cumbersome on people who have done their income taxes this year, as people in CCRA will tell you, and people working there and tabulating with the two different levels of taxes.

Could you give me the figure, for instance, that the provinces realizes from each of the tax brackets, overlapped with federally, what we call bracket creep? For instance, from our $29,590 - which is our lowest tax bracket - up to the lowest federal tax bracket, I think, which is $31,677 this year, I believe. There is roughly a couple of thousand at that bracket. At the higher brackets too there is a difference of what we would be paying in provincial tax at the lowest bracket; the second bracket on one level for that overlap. What are we taking in, on an annual basis, because of that factor alone? I am not talking about other areas, just this bracket creep factor alone, the inflationary aspect.

MR. WALL: Just on bracket creep, just with brackets, and plus there are some differences in the credit amounts as well with personal credit.

MR. SULLIVAN: No, I am not talking about credit amounts. I see where you are coming from. You are talking about the different amounts you allow for spousal, for disability, for your personal exemption and educational allowances. No, I am not talking about any of these.

MR. WALL: But the federal government has increased those to reflect inflation as well. So that would form a component part of the bracket creep, I think. Just in total, with everything, there is about a $20 million saving to the Province by not increasing.

MR. SULLIVAN: And that is including the differences in - for example, on average - the disability amounts, personal exemption, and spousal amounts, including the whole package?

MR. WALL: It is about $20 million.

MR. SULLIVAN: It was my understanding a year ago that it was about $11 million, and with another year of inflationary aspect it is in the twenties. Would that be correct?

MR. WALL: Yes, it is roughly $20 million.

MS J.M. AYLWARD: That is what it would cost us to implement the indexation.

MR. SULLIVAN: Okay, that is what I anticipated it being in that ballpark, because initially it was, on a first-year basis, about $11 million I understand. I do not know if I asked that question before.

With reference to the voluntary purchase - I know the minister has indicated before - in non-work service that we had there in the federal government, which you are quite familiar with, on the court case and the federal (inaudible) order. I know there is no legal responsibility, I gather, from the Province to do something about it unless there was some legal action taken. If that was initiated then that would be something for the courts to decide; then it would be incumbent.

I know I have asked the minister this question before, and I know people have contacted me and the minister's office, and the response they received, basically, is that a decision on the matter can be made in the near future. Is that being looked at now or is that on a back burner? Where are with a decision on that to bring closure to it?

MS J.M. AYLWARD: Yes, it is the same. It is before government and it is something that, you know, has to go through the process. The same as when I answered a question very -

MR. SULLIVAN: Because I think last fall it was basically at the Cabinet level. Is it still there?

MS J.M. AYLWARD: I do not think it was at the Cabinet level last fall. I do not think that was ever said, that it was at Cabinet level.

MR. SULLIVAN: Well, it is an issue that has to be -

MS J.M. AYLWARD: I said it was before government and it is something that we are certainly aware of. It is a cost factor, as I said to you. It is about a $2 million cost factor and it is something -

MR. SULLIVAN: Some are advocating it is only a $1.2 million cost. Have you worked out the cost?

MS J.M. AYLWARD: Our tax people are telling us that it is closer to $2 million; $2.1million.

MR. SULLIVAN: Okay.

The next question. I know the minister indicated before that you were getting a legal opinion basically on non-lottery products and so on. The minister indicated it has been referred for legal opinion. Has a legal opinion from your Justice Department been obtained on that one?

MS J.M. AYLWARD: Yes, it has been. Phil, do you want to speak on that. That is on our -

WITNESS: Win A Grand.

MS J.M. AYLWARD: Win A Grand recipe man, is it? Recipe person?

MR. SULLIVAN: What?

MS J.M. AYLWARD: The guy who got the recipe on (inaudible).

MR. SULLIVAN: It is called Win A Grand. That is a specific one. Because it had been referred for your own legal opinion, I am just wondering what the legal opinion was on that and where exactly government is with that.

MR. WALL: The Department of Justice and the Constabulary did look at the complaint from the private company called Win A Grand and advised, in their opinion, that it was not an illegal approach. That being said, the issue under dispute right now is whether or not the Atlantic Lottery Corporation has the ability to advise its retailers that they are not authorized to sell lottery products if they are selling the Win A Grand product. That issue was referred to the Competition Bureau by Win A Grand, and the Competition Bureau indicated to Win A Grand, and provided us with a copy of their correspondence which basically said that there is no issue for the Competition Bureau or no breaching of the Competition Act in this case.

From the Atlantic Lottery's perspective, we have had, for a number of years, an agreement with our retailers that sales of lottery products were only going to be allowed by retailers who only sold Atlantic Lottery products. The legal issue is not an issue for Atlantic Lottery; it is an issue of whether or not we able, as the sole distributor of lottery products in the Province, to prohibit our retailers from selling other - what we determine are - lottery products. That is the issue right now before the company that proposes to sell these bonus cards. The legal issue is not the issue here.

MR. SULLIVAN: No. That is my understanding too, that it is not illegal, but maybe the ALC - it is not, maybe, anti-competitive deemed to say to the stores that if you sell this product we are not going to allow you to sell a competing product, the same as someone who strikes a deal with Pepsi to sell their products and they are not going to sell Coke. Maybe you could look at it in that sense and it is the same thing.

Two people approached me on this. One, last week, a businessman here on the Avalon, the most recent one, said: I find it offensive. I do not sell any of these products. I do not sell any ALC products at all and I got a letter - I think it was a letter he said he received - that if he sells those products he is not going to be able to sell ALC products.

MS J.M. AYLWARD: That is right.

MR. SULLIVAN: But he does not even sell them, he said. I find that kind of -

MS J.M. AYLWARD: Why would it be offensive to him?.

MR. SULLIVAN: - oppressive, he said, that I would be told that, what I am able to sell in my business. I do not even sell ALC. If I selling them, I am reaping a profit. There could be a grounds on it, but somebody who is not even doing that would find it kind of oppressive. I do not know if the department -

MS J.M. AYLWARD: I guess it is just to give them a choice, that if they want to sell ALC then they cannot sell the others. If they want to sell this other one - I think the principle for us is very clear: the money we get, the money made from ALC, goes into us to help pay for health and education. I guess the bigger question is: Do you, or do I, support a private entrepreneur putting the money in his pocket that may be made on a lottery? I guess that is the philosophical question. Our view is that the money that we get should be spent for public health, education and other social programs. While it might be offensive to someone, I think the bigger decision is: if you are not selling either one, I do not know how you can be offended; but, if you are, you have the choice. The choice is, if you want to sell ALC then you do not sell the others. If he wants to go sell Win a Grand, that is totally up to him. Then the choice is, you will not sell ALC.

MR. SULLIVAN: Once again, it is a fundamental thing that you could debate on the merits of it. I do not think it is really the place to get into it here, but I will just make one point and then I will move on. If the minister has a comment, fine.

Basically, we are not dealing with a private company pushing a private product that gets an exclusion. We are dealing with publicly-controlled, government-controlled, corporations, and whether it is going into health care or education or whatever - and I am not saying I have drawn a final judgment myself on that one, but I have asked the question: Should government-controlled corporations, basically, be dictating that you do not sell this product; you sell this product. You are not going to be able to sell our product if you cannot sell another product that maybe would be competing. Even though it is not competitive to do it, is it right to do that or is it not? I know the good overall will and the good of those revenues are badly needed and they are going into, well, the general Treasury, to use for all basic programs. I certainly see that point of it, but some people do find it a little offensive, number one, when they are not even selling lotto products; and, secondly, when they are selling them and are told that if they sell something else.... Because anybody in a business is going to try to sell what they can. It sort of increases their margins there, but they are not going to allow it if it is going to cut into their Atlantic Lotto products. I mean, they are going to make a business decision, but they are being pressured into making a decision there and it takes another option away. Now, whether that is right for the overall good, I guess, that can be debated. I know this is not the point, but that is just a thing I throw out at least for your thoughts (inaudible).

MS J.M. AYLWARD: I think the answer, though, is that anybody who has the potential to sell is informed what the choices are, because if that individual who is so incensed, who you referred to, was not made aware of what Atlantic Lotto was doing, then they might have decided to sell both. So what we are doing, as a government, is trying to inform all the broader public, whether you sell them or not, that in the event you choose to seek a licence to sell them, then you cannot sell the other ones. I guess, like I say, as you said too, the bigger discussion is whether the money should go into the public purse for the provision of health and education or should it go into a person's pocket for their own individual use? I guess we have made the decision that it should go into the public purse. I am sure the people who are making a profit from the private one are incensed because it is their profit they are losing; but I am willing to stand up for that one.

MR. SULLIVAN: Okay, I just wanted to toss that out.

With reference to - I know Terry made reference to, I guess, back there when we looked at Income Tax. He indicated that the minister said: In the final year we did not implement this. It is my understanding, and you can correct me if I am wrong, that in November, 1999, there was a decision made to implement a three-year tax program on cuts; beginning January 1, 2000, and January 1, 2001 and 2002. At the time it was to move our provincial percentage of federal tax from 69 per cent to 62 per cent, to 55 per cent, to 49 per cent. I think the general figures were stated by Mr. Tobin and Mr. Dicks, at the time, in that release. Of course the federal government changed their tax rate then, effective that January, from 17 per cent to 16 per cent. The intent then was that our Province would reduce it a percentage of what the federal was at that time. I concede that point. So, our cuts are based on a percentage of the federal at that time, which was 17 per cent. First, I want to make sure we are right on that before I get to the second part. Would that be correct?

WITNESS: (Inaudible).

MR. SULLIVAN: That would be correct.

If you took the first cut, 62 per cent of 17 per cent is 10.54 per cent. If you went to the second stage last year, 55 per cent of 17 per cent is 9.35 per cent. If you took the third stage, 49 per cent of that, which did not occur, we are down to 8.73 per cent.

The question I am asking, only one cut, 62 per cent of 17 per cent gives you 10.54 per cent. We are now paying 10.57 per cent. If we said we got two cuts out of three, if we went to the 55 per cent level that should be 9.35 per cent. Why are we now paying 10.57 per cent?

MS J.M. AYLWARD: Are you adding in the surtaxes too or are you just (inaudible)?

MR. SULLIVAN: No.

MS J.M. AYLWARD: Well, there you go.

MR. SULLIVAN: Well, that is coming in your answer, I know that. It is coming in your answer; but we also have the surtaxes. I am familiar with them too, the basis provincial surtaxes. I gather your answer is going to be that we looked at incorporating changes in the surtax to give another balanced rate. I would assume something to that effect. I will let you answer this question: Why are we now paying a little over 62 per cent of the federal rate if we should have had two tax cuts?

MS J.M. AYLWARD: I am going to let Terry answer the specifics of it, but I can say that everything we have committed to we have done, and we have done that.

MR. SULLIVAN: In a (inaudible).

MS J.M. AYLWARD: No. In whatever way you want to say it, we have done it. In two of the three years of the tax reduction we have committed, we have done what we have committed to do. I will let Terry speak to the specifics of it.

MR. PADDON: In terms of the specific details, when we announced the tax reduction program back in 1999, two things were put in place. One was a general rate reduction from the 69 per cent down to the 62 per cent, to 55 per cent, to 49 per cent. In conjunction with the general rate reduction there was also an additional surtax that was implemented to coincide with that, and that surtax rose over the three years. It started at 6 per cent and went to 13 per cent, and was scheduled to go to 20 per cent in the third year. So, in order to do the calculations to get to the tax-on-income rate, you would have to take the 55 per cent, which was the rate it was scheduled to go down to in 2000, multiply it by the surtax that was intended to be in place at that point in time, which was 13 per cent, so that would get you the 62.15 per cent. You multiply that then by the 17 per cent rate and that gets you the 10.57 per cent that we ended up with on the tax on income. Basically, we rolled the surtax into the basic rate.

MR. SULLIVAN: Yes, that is my understanding. You rolled the surtax in, but everybody did not get a surtax. There is a 9 per cent surtax right now and all income is over $7,000.

MR. PADDON: There were two surtaxes.

MR. SULLIVAN: Yes, but now there is one.

MR. PADDON: Now there is one.

MR. SULLIVAN: Yes. Right now you would pay a surtax if you had more than $7,033 of provincial tax. You would then pay a surtax of 9 per cent. Before you had two surtaxes based on two levels of income.

MR. PADDON: Right.

MR. SULLIVAN: You do not pay any surtax now. For example, if you fall into a taxable income in the $50,000-some range, basically you will not pay any surtax. You have to have $7,000 of provincial taxable income. So, what we have done is, we have levelled out. In other words, we have balanced out the surtax to reflect it as a part of the basic rate.

MR. PADDON: That is correct.

MR. SULLIVAN: That is basically what is done.

MR. PADDON: That is right.

MR. SULLIVAN: The point I make on it is, everybody did not pay it before. The people who would be in the lowest incomes before were paying 17 per cent federal and 69 per cent provincial. If you take low income people who paid 17 per cent of the federal tax and 69 per cent provincially, when it dropped to 55 per cent tax, the second tax - we will just leave surtax out of it for a minute - 55 per cent of 17 per cent comes to 9.35 per cent. So, the people who were paying no surtax would be paying 9.35 per cent and they are now paying 10.57 per cent.

MR. PADDON: But the surtax that was implemented, the 13 per cent that was intended to go in, in 2000, was applied at a taxable income rate of roughly $10,000, a fairly low level.

MR. SULLIVAN: Yes, but anybody down low - right now people down lower, in the lower end of the bracket now, are paying more tax, but people might have gotten the lower surtax balance further up. The lowest income people now, who got in under the surtax level, before the lower surtax, are paying more, a higher per cent now of what was the original (inaudible).

MS J.M. AYLWARD: Loyola, the bottom line is, they are all paying less taxes than they did the year before and the year before.

MR. PADDON: If I could just add one thing, Mr. Sullivan, the other thing that happened when we went to tax on income is, we effectively increased our basic personal amount from about $7,200 to $7,400, which is intended to address the issue that you are alluding to, which is the people who sort of fell just below the $10,000 level, so that was intended to keep those people (inaudible). In fact, it gave them a slight benefit, a few dollars.

MR. SULLIVAN: I understand exactly what you are saying. I am reasonably familiar with the tax system. I have been involved for a number of years so I understand what you are saying. I guess on the other side of the coin, too, now we are allowing - the benefits that you got by increasing your basic exemption there, now we are seeing that being eroded. So, when people pay tax on income now, we are seeing an erosion of that income because of inflation, and the federal government is stopping that slide from the bracket, but we have them. The people now in the bracket are seeing an erosion of that, and technically their per cents, when they are filing their taxes now, for instance, they are seeing their taxes are 72.5 per cent and 74 per cent. People are taking the same money they made last year and this year and doing it on two separate forms. I have spoken to accountants and they are finding that they are paying a higher per cent now and applying it to the same forms.

MS J.M. AYLWARD: That is a different issue though, Loyola, because we have never ever said we were going to address the bracket creeps or indexation because it would cost us $20 million. That has never been a promise or a commitment we have made.

MR. SULLIVAN: No, I understand.

MS J.M. AYLWARD: People know that.

MR. SULLIVAN: That is not the point that I am making.

MS J.M. AYLWARD: You just said they are paying more because of the indexation component of -

MR. SULLIVAN: They are.

MS J.M. AYLWARD: We never committed to address the indexation because it is $20 million to us. We did commit that everyone would pay lower tax.

MR. SULLIVAN: I am saying that everybody does not pay lower tax.

MS J.M. AYLWARD: We are saying everybody does, unless they make more money.

MR. SULLIVAN: The exemption went up, basically, but what is happening now is that people who never paid a surtax before, who did not have to pay a surtax before, are now paying. If you look at 10.57 per cent of what was then 17 per cent, the federal tax, if you come to 10.5 per cent, that comes out to just a shade over 62 per cent; so there are some people at the lower end who are paying a higher rate of tax than committed, while most people are not. The big bulk of them are not.

MS J.M. AYLWARD: Send them into us.

MR. PADDON: Except for the fact that we did increase the basic personal amount by approximately $200 to address that very issue, whether it would be people who may be negatively impacted.

MR. SULLIVAN: That is gone now.

I understand. Your answer is as I anticipated, and I exactly understand the answer there. I do not think we can go any further on this. I got the answer, basically.

MR. WALL: I have to say something. Any individual who believes they are paying more tax this year than they were paying the year before, with the same income, should approach the Department of Finance and we will look at their returns; but every single individual who has come forward in that regard has sat down and they understood that they are paying less taxes. Some people are paying more taxes because they made more money, and that is the way the system works, but there is nobody, that we are aware of, who has the same income one year to the next, who are not paying less tax. They are all paying less tax. I just wanted to say that.

MS J.M. AYLWARD: If you have them out there, send them in, Loyola.

MR. SULLIVAN: I spoke to some individuals who have called me and done it, and I have talked to some CAs who are very involved in tax, who have indicated there are people who, when they applied the same basic income, found that they paid up to small amounts more, not (inaudible).

MR. WALL: They are not paying a cent more, I am telling you; because what they are doing is, they are doing those calculations, the 62s and the 69, but we are on tax on income. We went on tax on income because we are not doing the 72s and the 62s and the 55s.

MR. SULLIVAN: No, I know that

MR. WALL: There is nobody paying more tax. There should be no one paying more tax.

MS J.M. AYLWARD: Send them in, Loyola, seriously. Send them in to us. We have had a lot of people call into the office and every single person who has come in has understood and is actually paying less tax than they did last year as long as they were making the same amount of money, not more money. As simple as that. So, if you have them over there, send them over to us.

MR. SULLIVAN: I know one in central who called me, who made slightly less and pays a little more tax than last year, he told me, only something like an $11 difference.

MS J.M. AYLWARD: Send him in.

MR. SULLIVAN: Okay.

The next question is on - let's take the issue on, when you are budgeting, you are budgeting for expense that is certainly anticipated. Let us use, as one example, Harbour Deep. I have mentioned that. When did you anticipate there would be an expense incurred on Harbour Deep?

MS J.M. AYLWARD: We have been talking with the people from Harbour Deep on their initial request for over three years.

MR. SULLIVAN: It has been -

MS J.M. AYLWARD: For over three years they have been approaching - and it has probably gone back further than that, quite frankly, but I am aware of it. Since I was over in the Department of Municipal and Provincial Affairs, for three years they have been approaching us to want to move outside their community. We did not know and, as far as I am concerned, had no formal or final - and you know there are still people up there who are having second thoughts about it. As far as I know, and I can say this as the person who delivers the Budget, we did not know that this would happen any more this year than last year, or the year before or the year before.

MR. SULLIVAN: Over a month ago, a month and a bit, when I was coming from the mainland, I picked up The Globe and Mail and read a story - I believe it was The Globe and Mail or The National Post - of an individual who did not want to move but he was going to move. Basically, this is something that has been almost to a conclusionary stage for some time -

MS J.M. AYLWARD: No, that is not accurate.

MR. SULLIVAN: - and it has been in the media. If we budget $50,000 or $60,000 for possible overtime where extra costs might be incurred in equalization in 2004, this is becoming a why wouldn't it figure. Why wouldn't you budget for that eventuality when it looked fairly imminent? Would you leave it out and come back after with a special warrant to get the money? Why wouldn't it be built into the budget?

MS J.M. AYLWARD: I see where you are coming from, but I can say to you, Loyola, that since I have been in Municipal Affairs, three years ago, those discussion were being held and led by the people of Harbour Deep with government. I heard about it then. There are probably other people, I do not know, but I know for a fact that Harbour Deep has approached government two, three, four or five years ago. The answer is that is was not finalized, it was not concluded. It has been ongoing. They have had a lot of discussion about it. I am, quite frankly, surprised it has not been more public than it has over the last couple of years.

That is the answer. It was not finalized. If it was, why wouldn't you add it in?

MR. SULLIVAN: There are numerous areas in the budget factored in based on negotiations, discussions, and extra costs to it. Just a couple of weeks or so after the Budget announcement was made - things like that just do not happen overnight. The only point I am making is not on the merits of it happening or not happening but to be a budget that would be reasonable in accommodating a high chance that this would have been a cost. There was a great chance it would have been a cost because even locally, and from speaking to people - I have not talked to people personally, but I know people in the caucus have, through relatives and through what has been in the media - it was fairly imminent that it was going to happen. I was surprised something like this was not budgeted.

MS J.M. AYLWARD: If it was imminent, why wouldn't we add it in the budget? What would be the difference between adding in $93 million and $98 million, if that was the deficit? The thing with it was, it was not finalized. If you are choosing not to believe that, then that is your right, but it was not finalized before we brought down the Budget. It was as simple as that.

MR. SULLIVAN: For example, right now hospital boards have not converted a certain amount into any long-term debt.. They have their own capital with approval to borrow. The Health Care Corporation, I think, is about $208 million or so. There is $120 million now accumulated, this last fiscal year just ended, with hospital boards. How is that being handled? Is that going to be sort of a permanent charge on their operating costs now? What is going to happen with that $120 million? What does government plan to do, to address that?

MS J.M. AYLWARD: I think you have heard the answer from the Minister of Health. They are working with each of the boards to try to help them identify and work through these issues. That is where we are right now.

MR. SULLIVAN: In other words, it is something that they are going to have to find -

MS J.M. AYLWARD: No, that is not what I said. I said they are working with them now to identify where it is and how they are going to address it. Whether they will come to us and ask to turn it into a longer-term debt, whether they have a plan to recover it, or whether they are going to say - just like out in Western or in St. John's they found that it was not a $14 million deficit; it was a $7 million deficit or whatever. It is in the process of being worked through.

MR. SULLIVAN: In other words, government has not made any allocation or appropriation at all to address any of those costs in this fiscal year?

MS J.M. AYLWARD: Government is in the process of working with each of the boards.

MR. SULLIVAN: Yes, but out of money that will not be subject to both, there is no plan to address any of that in this fiscal year, that money. If they are working with boards, I guess the number one preference would be, wouldn't it, to say: Find it within your operating costs, number one; therefore, there will not be any other costs back here. Would that be the preferred choice?

MS J.M. AYLWARD: That is the process they are going through right now, if I understand correctly, when the minister went and did a provincial-wide forum and met with the public and then met with the boards. They are trying to work with each of the boards to find ways they can achieve it. Some boards have wiped out their deficit totally. Others are still working through the process, and that is what the minister has said and that is what they are doing.

MR. SULLIVAN: Why did you eliminate it when there are unforseen costs that could be occurring? Whether it is Harbour Deep, or whether the $120 million with boards, there may be something worked out that the Province might have to come up with some more of that outside their operating grants they are given. Why was there no contingence reserve account this year to allow for those impending eventualities that would occur?

MS J.M. AYLWARD: Well, I am not sure that all of them are impending, as you said.

MR. SULLIVAN: Well, one is active so basically that is pretty pending.

MS J.M. AYLWARD: The Harbour Deep issue is something that was being discussed the last four or five years and the view is, we have been very clear that we did whatever we could to try to address our deficit. We believe, through the Legislature and through special warrants, if something is an emergency and has to be done there is an ability there through the existing legislation to either table a special warrant if the House is open or table it after the House opens if it meets the qualifications and definition of what special warrants are used for.

MR. SULLIVAN: I guess a $30 million contingence makes it look like $93 million instead of $123 million. Why would you eliminate it when you have done this, I think, for the past four years?

MS J.M. AYLWARD: Well, if you remember last year, we went from a -

MR. SULLIVAN: What is the reason for taking it out?

MS J.M. AYLWARD: I am going to answer that now.

If you remember, last year we went from a $30 million to $10 million contingence fund and we believe that we would be better able to address the needs of government by putting this directly either into our departments, into the Department of Health, into the obvious needs we have, and if we need to spend the money we have to go and use the appropriate process that is in place.

Not all governments across the county have a contingence fund. Some of them do. We decided this time not to do that, and that we would use other mechanisms available to us in the event we needed money on an emergency or urgent basis.

MR. SULLIVAN: Especially when you were looking at going from what was projected, a little over $30 million, and ended up at some $60-some million, so there was over $30 million more than you anticipated, and then eliminated a contingence reserve in the process. In other words, we have not keep on the target. We have always dipped into the contingence reserve, and that has been historically what has happened. Why would you want to eliminate it then? Wouldn't that be the time that you would want to maintain it? History would have shown that it is vital that we have that contingence reserve, that we do not have to be going out looking for some other forms of legislation or special warrants to get money that we could have had in the vote here.

MS J.M. AYLWARD: It was a decision that was made by government.

MR. SULLIVAN: What is the rationale behind the decision?

MS J.M. AYLWARD: The rationale - I think I explained the rationale - was that we have access, through the legislation and through the use of special warrants, through all the pieces laid out in the Financial Administration Act, that as a government, under this Administration, we decided that we would move away from the $10 million continency fund and use those avenues open to us. We tabled them in the House just recently; $30 million for special warrants, for education, for health, for fuel for Works, Services and Transportation. A continency fund is not a pot of money that is sitting over there in the corner. You still have to go out and borrow the money. So, for us, we believe the avenue was there for us to do it, and it is still there for us to do it.

MR. SULLIVAN: At least you have approval to borrow it if you need it, if it is factored in. That is the difference.

MS J.M. AYLWARD: I would think that you would be more supportive of doing it this way because everything would either come through special warrants - and for an accountability prospective, it makes perfect sense that you would either use the Financial Administration Act through special warrants or through extending a vote and tabling it there after. All of the tools are there for you.

MR. SULLIVAN: With reference to - what other costs? We know now, since the Budget was delivered, that there is going to be a cost of $5 million on Harbour Deep, in that ballpark. We do know that there may be - it is under discussion with the health boards. We do know that no decision has been reached yet. They are working with the boards to either convert it to long-term debt, to absorb it out of their operation to find the savings, or to either get some money from government, further money over and above their amounts, to be able to address this. These are all options that are still not determined. We know that could very likely be an option that could require more money other than what is provided here. Since Budget Day, are there other potential costs, at this point that we have not seen, that are now coming to light that might sort of encumber the amounts in here even more?

MS J.M. AYLWARD: No.

MR. SULLIVAN: There are none at this point?

MS J.M. AYLWARD: That is correct.

MR. SULLIVAN: Have you done a basic estimate, or ballpark figure, of where we might be in this Budget on an accrual basis, where the figure would be? I am sure it has been looked at. Do you have a ballpark figure that could give - this $93 million, on a cash basis, might be on an accrual basis when you take the whole picture into consideration. Where might that be?

MS J.M. AYLWARD: No, I do not.

MR. SULLIVAN: Has the department done any figures or estimates on that?

MS J.M. AYLWARD: No, because before you can do any figures or estimates you have to be able to do a full evaluation of all of your assets, and we are in the process of doing that evaluation of all of the assets of government. Before you can properly estimate what an accrual number would be you have to know what your depreciation factor would be, and before you know what your depreciation factor is you have to know what the value of your assets are.

MR. SULLIVAN: Well, most of the assets are ongoing and they have certain values. I mean, that goes from year to year. It is not like stepping into a whole new operation where you have to evaluate the assets of a business from day one. We do have an evolving process here that can be estimated; the same as you do a budget estimate. The same as you look from previous years. What are historical levels? There are certain things we can do on an accrual basis from year to year and we can give our best guesstimates, at least, of that. You are saying that there has been no figure arrived at as to what that is? Is that what the minister is saying?

MS J.M. AYLWARD: No. I mean, maybe you have all of government's assets evaluated but we are in the process of just doing it. We have quite a number of assets right across Newfoundland and Labrador. We are in the process. We have never done this before. Through the Department of Works, Services and Transportation, and other sources if we need it, we are in the process of valuing all of our assets before we can put the appropriate depreciation numbers on it. So, that is where we are.

MR. SULLIVAN: Did the minister make a statement before saying: We are looking at doing some preliminary work to move towards an accrual system of accounting?

MS J.M. AYLWARD: Right.

MR. SULLIVAN: You have said that already?

MS J.M. AYLWARD: That is right.

MR. SULLIVAN: Wouldn't this be in progress and in process now? Wouldn't that put us further ahead?

MS J.M. AYLWARD: Yes, that's exactly right. That is why we do not have it.

MR. SULLIVAN: Wouldn't that put us further ahead than we were last year, for instance, in arriving at that figure?

MS J.M. AYLWARD: Well, we are just starting it. I announced in our Budget that we are moving towards an accrual process and part of that is doing the evaluation of all of our assets. That is a part of it.

MR. SULLIVAN: Okay.

Mr. Chairman, I will conclude my questions.

CHAIR: Thank you very much, Mr. Sullivan. Mr. Byrne? Any of the other committee members?

There being no further questions, then I will ask the Clerk to call the heads.

CLERK: 1.1.01 to 2.3.01, inclusive.

On motion, subheads 1.1.01 through 2.3.01 carried.

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

CHAIR: Thank you very much.

A motion to adjourn is in order.

MS J.M. AYLWARD: Thank you very much.

CHAIR: I would like to thank the minister and her officials for coming by this morning to help us conclude our duties and, of course, the Committee members.

MS J.M. AYLWARD: Thank you very much.

CHAIR: And Loyola, thank you.

On motion, the Committee adjourned.