The Committee met at 5:30 p.m. in the Assembly Chamber.

CHAIR (Forsey): Good evening, everyone.

This evening we will be reviewing the Estimates of Finance and Treasury Board, Public Service Commission, and OCIO. I think it is okay with everyone that we would do them individually - and we will be starting with turning off my phone; that should be a good start.

It has been agreed, I guess, amongst everyone - Kelvin, if it is okay with you - that we would do each one individually. We will start with Public Service, then we will go to OCIO and then we will do Finance and Treasury Board.

Before we do, we will ask for introductions from everybody. Also, when you are being asked a question or you are responding, it would be nice to introduce yourself. That is for Hansard, really, so they will know who is responding to the questions. That is important.

What we will do is have an introduction from our Committee, who is on our Committee, beginning with you, Kelvin, I guess.

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

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

MR. POLLARD: Kevin Pollard, MHA, Baie Verte-Springdale district.

MR. BUCKINGHAM: Ed Buckingham, MHA, St. John's East.

MR. DAVIS: Paul Davis, MHA, Topsail.

CHAIR: Clayton Forsey, Exploits.

Minister, you can introduce your staff. If you want fifteen minutes to do an introduction before we call the subhead, we will be doing them individually, but we will probably just deal with your introduction, whether it is ten or fifteen minutes, whatever it is, for the complete one so you will not have to do that every time that we come back to a committee. So, you can introduce your staff.

MR. MARSHALL: Thank you, Mr. Chair.

Tom Marshall, Minister of Finance and President of Treasury Board. To my left is Terry Paddon who is the Deputy Minister of Finance and Secretary of Treasury Board. To Terry's left is Laurie Skinner who is the Assistant Deputy Minister of Finance for Financial Planning and Benefits. To Laurie's left is Mr. Bob Constantine who is the Assistant Deputy Minister of Finance for Taxation and Fiscal Policy.

Behind me is Shelly Smith, who is Executive Director of the Office of the Chief Information Officer. In the middle, to Shelley's left, is Jean Tilley, who is the Chief Information Officer and the Chief Executive Officer of the Office of the Chief Information Officer. To Jean's left is Linda Vaughan, who is the Comptroller, Executive Council, Financial Administration of the Department of Finance.

To Linda's left is Luke Joyce who is Director of Communications with the department. To Luke's left is Larry Wells who is Executive Assistant in the Department of Finance. Behind Shelley is Mr. Ed Walsh, who is the Chair and the Chief Executive Officer of the Public Service Commission of Newfoundland and Labrador.

OFFICIAL: (Inaudible).

MR. MARSHALL: Oh, you switched seats? Well, it is all ruined. We will have to go home now.

CHAIR: We knew who Ed was.

[Laughter]

MR. MARSHALL: Ann Chafe, Commissioner of the Public Service Commission. To her left is Ed Walsh, Chair and CEO of the Public Service Commission. To Ed's left is Raelene Thomas, Director, Appeals and Investigation with the Public Service Commission. Now, did I miss anybody? No.

This is the eighth year that I have done this. Every year, Mr. Parsons has been on the other side and every year I have made a speech. Tonight, I am going to forego that.

[Laughter]

MR. MARSHALL: You are welcome.

CHAIR: So you are ready to go?

Apparently, Lorraine is not here. I do not know if she is coming. She is on this Committee. We usually give so much time back and forth, but we may have to just carry on with Kelvin.

With that, we will call the subhead for Public Service Commission.

CLERK (Mr. MacKenzie): Subhead 1.1.01.

CHAIR: Kelvin.

MR. KELVIN PARSONS: Thank you, Mr. Chairman.

Minister, each year, of course, we get an opportunity for Estimates here, it is very valuable actually because in Question Period we get an opportunity to ask questions but, quite often, you do not get the answers or any answer. This allows an opportunity to probe issues that might not normally get probed, as such.

What I usually do is go through the actual headings just in case there are any differences between what was budgeted last year, spent, and budgeted this year, just to get some clarification if necessary. Then if there is any more probing type questions where general discussion could take place, then I will get into that type of stuff.

First of all, on the Public Service Commission, under that subhead 1.1.01, I am just looking at 05, Professional Services. I am just wondering if Mr. Walsh could maybe give us some indication of the type of professional services that were utilized in the past year. Likewise, under Purchased Services, we had $1.2 million that was spent last year for Purchased Services, maybe just some explanation as to what type of services, professional and purchased, are actually acquired by the Public Service Commission under those headings.

MR. WALSH: Ed Walsh, Public Service Commission.

Sir, under the heading of Professional Services, those are primarily the costs associated with the contracts that we enter into for the provision of one-on-one counselling services through our Employee Assistance Program. You may note that there is an increase in the allocation this year and that is in keeping with the necessity to ensure that we provide what we are calling fair market value to the counsellors who are providing that service. We have not had a salary increase or a rate increase from those individuals for a number of years, so the extra money that you see is a reflection of the additional charges that we anticipate and that we will be able to pay this year.

MR. KELVIN PARSONS: When we talk about these professionals, can you give me some idea of the types of professionals who are utilized?

MR. WALSH: Surely. Once a year we advertise and we receive applications from individuals who are prepared to provide counselling supports and services. All of these individuals would be either master's degree in social work or a master's degree in psychology.

MR. KELVIN PARSONS: So is it done through a public tender process or do the same people get hired year after year?

MR. WALSH: Once a year we go out and determine whether or not there are any service providers, I will say in the community but it is actually province-wide, that are qualified and interested in providing that level of support to our clients. Those individuals are then vetted to ensure that they are duly registered, the references, background checks are done. Then individuals, on the basis of their specialization, are identified, and whether or not they have, for example, specialization dealing with children, with adults, addictions problems, whatever the nature of the specialized need of the client would be. Then, as best we can, we try to marry those individuals up with a fair distribution of the work amongst all of the providers that are available.

MR. KELVIN PARSONS: When it comes to addictions counselling, do we utilize an already existing agency of government? For example if Eastern Health has professionals available, would we utilize government agencies first or would we just automatically go to independent professionals?

MR. WALSH: Maybe Ann Chafe would be in a better position to respond to this. My suggestion would be that it would depend upon the nature of the treatment that the individual would require. There are obviously instances where, particularly, individuals may need to go through a process or a period of hospitalization and where that level of support and care would be more demanding than one-on-one counselling services, exclusively. In that regard, we would utilize and avail of all of the supports and services that are available within society. So the answer, assuredly, is yes.

MR. KELVIN PARSONS: Are there any services provided through your Commission outside the Province that is not available here in the Province?

MR. WALSH: To the best of my knowledge, no, there are not.

MR. KELVIN PARSONS: How about the purchased services?

MR. WALSH: Purchased services are primarily the lease arrangement that we have for the provision of our space and the advertising costs for the job advertisements that appear in, for example, The Telegram in the weekend edition. So those are the primary costs. Then, obviously, there is some staff-related training that would be provided for the continuous development of the skill sets of our own employees.

MR. KELVIN PARSONS: Where is the Commission currently housed?

MR. WALSH: We are now on 50 Mundy Pond Road, what used to be the old Murray Industrial.

MR. KELVIN PARSONS: What is the annual lease cost?

MR. WALSH: The annual lease cost is $621,000.

MR. KELVIN PARSONS: How much floor space do we have for that?

MR. WALSH: Twenty thousand and six hundred feet.

MR. KELVIN PARSONS: I take it, it is adequate?

MR. WALSH: Yes. It was an old warehouse and when we went out with our tender call for space, the successful bidder basically came in and said: Here is the space; you can design it and lay it out to satisfy your own needs. So, we have opportunities to develop the kinds of interview rooms and meeting rooms we require in order to be able to perform the services that the Commission offers.

MR. KELVIN PARSONS: Did we have to pay for the lessor's cost? I guess if we are designing it ourselves he –

MR. WALSH: No, we did not.

MR. KELVIN PARSONS: Oh, he paid for the cost?

MR. WALSH: He paid for that out of the contract.

MR. KELVIN PARSONS: What kind of lease do we have in terms of term?

MR. WALSH: It is a ten-year lease and it is fixed.

MR. KELVIN PARSONS: Does the Public Service Commission play any role in temporary contracts?

MR. WALSH: You are talking temporary employment contracts here?

MR. KELVIN PARSONS: Yes.

MR. WALSH: We have some limited responsibility.

MR. KELVIN PARSONS: How so?

MR. WALSH: The Public Service Commission Act excludes the hiring of temporary employees from the Commission jurisdiction. That said, we assert our authority in the areas of what I would consider to be long-term, temporary employment relationships.

MR. KELVIN PARSONS: Could you explain?

MR. WALSH: For the sake of description, the thirteen-week requirements of the collective agreements, if a vacancy exists for more than thirteen weeks, the position has to be advertised. Well then, clearly, that is one of those emergency response requirements that the employer from time to time is required to engage someone to be able to perform that level of function.

MR. KELVIN PARSONS: Anything less than thirteen weeks, you do not deal with?

MR. WALSH: We do not get involved that at all; however, if a permanent position within the Public Service is going to be filled on an ongoing basis, the expectation is: Satisfy your short-term emergency requirements but then advertise the position to ensure that merit prevails.

MR. KELVIN PARSONS: You do not play any role in the thirteen weeks and less?

MR. WALSH: That is correct.

MR. KELVIN PARSONS: So the merit principle does not apply to that, those hirings?

MR. WALSH: The Public Service Commission Act does not apply. I would like to think, however, that some basic evaluation of relative quality and competence of individuals would be a factor in the hiring process.

MR. KELVIN PARSONS: Thank you.

I have no further questions.

CHAIR: No more questions?

MR. KELVIN PARSONS: Not on the Public Service Commission.

CHAIR: That is good.

MR. KELVIN PARSONS: I have a few on Finance.

CHAIR: We did not think we were finished, no.

Okay, we can call for the subhead, the total.

CLERK: 1.1.01

CHAIR: Shall 1.1.01 carry?

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

On motion, subhead 1.1.01 carried.

CHAIR: Shall I report the Estimates for the Department of the Public Service Commission carried without amendment?

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

On motion, Estimates of the Public Service Commission carried without amendment.

CHAIR: Thank you very much.

Minister, the Public Service, if your staff want to leave, I guess they are free to go.

OFFICIAL: They are free to stay.

CHAIR: You are free to stay too.

We will call the subhead for OCIO.

CLERK: Under the Executive Council head, the first subhead is 4.1.01, for OCIO.

CHAIR: We will start at 4.1.01.

Kelvin.

MR. KELVIN PARSONS: Thank you.

Again, I believe it is Ms Tilley I am directing my questions to?

MS TILLEY: Yes.

MR. KELVIN PARSONS: I am just going through some of the variations from last year to this year, if you could give some explanation. Under that particular subheading just called 4.1.01, there seems to be about a $300,000 increase from last year to this year. Are those just the usual increases in salary that is involved or have there been extra hirings?

MS TILLEY: Yes, there are some salary increases there. We had thirty new positions created in 2010-2011 to replace long-term contracted positions of our Professional Services. We had new positions created so there was funding moved from Professional Services to Salaries. Thirty are not there; there was one under this branch, under this activity.

MR. KELVIN PARSONS: Maybe you can just clarify for me. I notice Professional Services, budgeted $830,000 last year, spent $436,000, and this year you are budgeting $1.1 million. I believe you just made a comment that you have taken long-term contracts that normally would have been Professional Services and now put them into Salaries?

MS TILLEY: Salaries; yes, there was one position under this activity.

MR. KELVIN PARSONS: Okay, so notwithstanding the increase under Salaries to accommodate that, it looks like your budget has still taken a fairly substantial increase this year under Professional Services.

MS TILLEY: Yes, under Professional Services there is an additional funding to do some work looking at a secondary data centre for government, so to do some engineering consultation type work there. That is under Professional Services; that is the increase there.

MR. KELVIN PARSONS: What kind of professional services were utilized last year for your $436,000?

MS TILLEY: For the $436,000 it would have been a business analyst type contractor to do scoping for some of our projects, some of the work that we are doing with government departments.

MR. KELVIN PARSONS: Under Property, Furnishings and Equipment, it looks like you are down quite a bit this year. I guess you got all the furniture you need, have you, pretty well?

MS TILLEY: Yes, we have been doing some renovations, some building maintenance, at 40 Higgins Line; so that work is completed. That was one-time funding that was dropped from our budget this year.

MR. KELVIN PARSONS: Forty Higgins Line, that is a rental property?

MS TILLEY: No.

MR. KELVIN PARSONS: Owned by government?

MS TILLEY: That is a government property.

MR. KELVIN PARSONS: Okay.

Under the Information Management, Salaries component, an increase there again of some $300,000 - new positions?

MS TILLEY: That is the new positions. They had two new IM analysts created and the salaries associated with those.

MR. KELVIN PARSONS: Under Professional Services, what kind of services was purchased there or what kind of professional services were there?

MS TILLEY: Under Professional Services?

MR. KELVIN PARSONS: You had last year $1.6 million.

MS TILLEY: The $1.6 million, that would have been professional services associated with IM advisory services, which are completed for government departments by our Information Management Branch, and some work on Information Management capacity assessments.

MR. KELVIN PARSONS: When you spend these monies under Professional Services, is it all done by public tender?

MS TILLEY: Ours is still Request for Proposals, normally.

MR. KELVIN PARSONS: Under Solutions Delivery, 4.1.03, again about half a million dollar increase from what was budgeted last year.

MS TILLEY: Under Salaries?

MR. KELVIN PARSONS: Under the Salaries component.

MS TILLEY: Yes, there are seven new positions there, which were previously contracted under Professional Services.

MR. KELVIN PARSONS: How many people right now are involved with OCIO?

MS TILLEY: How many employees?

MR. KELVIN PARSONS: Employees, yes.

MS TILLEY: We have about 268 permanent positions and we have a number of temporary, totalling about 340 positions.

MR. KELVIN PARSONS: I believe from a review of the staffing thing it looks like it is going up to about 370 this year, an increase of fifty-three positions.

MS TILLEY: From last year?

MR. KELVIN PARSONS: From last year.

MS TILLEY: We had thirty new positions; we had thirty new that were professional services. I guess it must be correct if that is what is here. We had a number created for HRMS that we are going to have to support and some new positions for some new computer support specialists as well.

MR. KELVIN PARSONS: Is there difficulty attracting IT people these days? I know years ago it was tough when you started in the IT business and government got into a lot of the Information Management systems, it was pretty difficult recruiting. Is there any problem these days, if you had positions to fill, having people who live here in the Province being able to fill them?

MS TILLEY: No, not normally. We have been very successful with the positions that we filled last year. We were really pleased with the results. We had very qualified, experienced people.

MR. KELVIN PARSONS: What would a typical - I do not know if there is any such thing as a typical employee, but someone who is an IT technician, for example. What kind of salary would they be paid working for government?

MS TILLEY: Well, it ranges. Our computer support specialists, I believe their salaries are probably about - they are a GS34 - $50,000 a year. It might be a little higher than that, up to a GS44, and they would be around the $70,000, $75,000 range, I think.

MR. KELVIN PARSONS: The salaries that these specialists get paid, are they comparable to private industry here in the Province?

MS TILLEY: In some roles they are. Computer support specialists are. Our land administrator position, it is my understanding that those are a little less than private industry, but it depends on your expertise and qualifications. It varies.

MR. KELVIN PARSONS: Under 4.1.04, Application Services, $8.6 million spent last year, $5.4 million budgeted for this year. What kind of professional services would be purchased there or acquired there?

MS TILLEY: That would be for support of our applications. We have about 600 applications we support. That would be the professional services associated with supporting those.

MR. KELVIN PARSONS: If you look at the Application Services and the Solutions Delivery –

MS TILLEY: Yes.

MR. KELVIN PARSONS: - and the Information Management, we are paying out what looks to be over $26 million a year, per year, under those three headings, for outside professional services.

MS TILLEY: Yes.

MR. KELVIN PARSONS: I am just wondering why we would pay that kind of money to outside agencies. Can it be done internally cheaper?

MS TILLEY: We do some in-house as well. We are looking at some of our long-term positions that are contracted out right now; we are looking at bringing more of those in-house. Mostly a lot of what is contracted out is specialized skills that we might not need on a long-term basis. In Solutions Delivery especially, that would be in implementing a new system. For example, we are implementing PeopleSoft system for HR. We would bring in the skilled contractors that have done it in the past and can reuse their skills for the Government of Newfoundland and Labrador.

MR. KELVIN PARSONS: What is the figure on maintaining the government's Web site annually, roughly, the cost?

MS TILLEY: I do not know what the support cost would be for the government Web site. We have a couple of people who support it, internal employees. I think there are two or three, but I do not know the exact cost of supporting the government Web site.

MR. KELVIN PARSONS: Thank you.

I have no other questions.

CHAIR: We will call for subheads for the Office of the Chief Information Officer.

CLERK: Subhead 4.1.01 to 4.1.07 inclusive.

CHAIR: Will 4.1.01 to 4.1.07 carry?

SOME HON. MEMBERS: Aye.

On motion, subheads 4.1.01 through 4.1.07 carried.

CHAIR: Shall I report the Estimates of the Department of the Office of the Chief Information Officer carried without amendment?

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Carried.

On motion, Estimates of the Office of the Chief Information Officer carried without amendment.

CHAIR: Thank you very much for your time. You might as well wait around now because we will probably be serving coffee or something.

Next we will start with the Department of Finance and call for the subhead.

CLERK: Subhead 1.1.01.

CHAIR: Subhead 1.1.01.

Kelvin.

MR. KELVIN PARSONS: Thank you.

I do not have any questions, Minister, concerning the actual annual variations there. Mr. Paddon runs a pretty tight shop; unless it is a mandated increase, it is not usually done.

I will start my questioning, if we could, 2.1.04, item 10, Grants and Subsidies. I notice last year we budgeted $5.5 million and actually spent $400,000. What types of grants and subsidies would that have been for? Who got the money?

MR. PADDON: Terry Paddon.

The $400,000 was paid to Newfoundland and Labrador Hydro to offset a rate increase in isolated diesel communities on the Coast of Labrador - and the Island, sorry.

MR. KELVIN PARSONS: Okay.

You put $6 million into it this year, what is the thinking if you –

MR. PADDON: If you look at the budget in 2010-2011 you will notice it was $5.5 million. Five million dollars of that was essentially money that was expected to be paid for money we got from the Community Development Trust from the federal government. We did not spend that money, although we did receive the money from the federal government.

That $5 million which was not spent in 2010-2011 is now budgeted in 2011-2012 to be spent. So $5 million of that $6 million is for Community Development Trust initiatives. The other $1 million is a block of funds for unanticipated initiatives that might come forward that do not fit in program areas for other departments that we may spend this year. The similar item on the isolated diesel communities has now been budgeted in the Department of Natural Resources, so that money would now be paid out of that department which is more closely aligned with their activities.

MR. KELVIN PARSONS: Under 2.1.05 Financial Assistance "…loan and equity financing to support business opportunities and promote industrial development…" Why would that be in the Department of Finance and not one of the funding agent departments such as Business or INTRD?

MR. PADDON: That is almost a corollary of the $1 million I just talked about that was in the previous subhead. Subhead 2.1.04 is a current item, so it would provide for grants if somebody came looking for a grant. In 2.1.05 it is a capital item, so it would be more in the nature of a loan or an investment where you would expect to get the money back. That is the distinction, but essentially they are both the same principle, the same philosophy; one is current, one is capital.

MR. KELVIN PARSONS: On the 2.2.06, Special Assistance for the fuel oil tank replacement, you had budgeted $200,000 last year, spent $129,900, and you budgeted $50,000 this year. How is that program going in terms of uptake?

MR. PADDON: I will let Bob answer that. He is probably more familiar with the details of the program.

MR. CONSTANTINE: What we are finding, of course, is the program was originally put in place for five years and it was extended I think probably three or four years now. As we move out, more and more people have replaced their fuel tanks so there is less and less take-up on the program because most tanks have a twenty-five year life. So we are seeing a lower and lower take-up and this is what is reflected here in this particular subhead.

MR. KELVIN PARSONS: Under 2.3.02, Professional Services, what kind of professional service would you be hiring there for the statistical information?

MR. PADDON: The Economics and Statistics Branch take on some special projects every now and then if some people are looking for some specialized information or specialized data. If that is the case, then depending on the nature of the program they would go out and seek the expertise external to the department.

It is difficult to say when you budget what you are going to need. It is effectively an estimate based on anticipated services required, but essentially it is consultants with specific expertise depending on the particular area that comes up.

MR. KELVIN PARSONS: Minister, just on a generic level in terms of surpluses, what has been the surplus situation in the last three or four years?

MR. MARSHALL: The surplus of the government? I think we have run accumulative surpluses of about $4.6 billion. This year we are forecasting $59 million. Last year, the surplus was $485 million. The year before, 2009-2010, we had forecast a deficit of $750 million. It came in at $33 million. I think the two years before that one was $2.3 billion and one was $1.4 billion.

MR. KELVIN PARSONS: What have we been doing with the surpluses?

MR. MARSHALL: With the surpluses, we have been paying down net debt because if you do not do anything with them, it automatically goes to pay down net debt.

MR. KELVIN PARSONS: Of that $4.6 billion, how much did we pay down on net debt?

MR. MARSHALL: Net debt went from just under $12 billion down to $8.2 billion, I believe, the start of this fiscal year. So, what is that?

MR. KELVIN PARSONS: That is pretty well all of it, you are saying?

MR. MARSHALL: What?

MR. KELVIN PARSONS: That is pretty well all of it, the whole thing went to debt?

MR. MARSHALL: No. I guess what you have to look at is you have to look at your surplus and then there are the expenses that are normally program expenses that are not cash outlays, they are accounting entries, they are amortization, depreciation, non-cash items. If you take your surplus, plus that, there is your cash and you use that cash to pay down debt and also to fund infrastructure, pay for your infrastructure, and make investments.

For example, this year the surplus and the cash that is not, in essence, being spent because it is a non-cash entry, the expense that is not involving a cash outlay, plus cash on hand, will go to pay for around $400 million in direct debt or public debt will be paid down; these are our borrowings, as they come due. Number two, there is $358 million investment in Nalcor this year and we are going to pay for about $752 million, which is the tangible, capital assets.

MR. KELVIN PARSONS: Believe it or not, some people do listen to this because this is broadcast publicly. Just to keep it in very simple language here: How much money do you have in the till? How much cash is in the till?

MR. MARSHALL: Right now?

MR. KELVIN PARSONS: Yes.

MR. MARSHALL: About $1.4 billion. Is that -

MR. PADDON: No, it would be expected to probably be closer to $2 billion on a consolidated basis at the end of March 31.

MR. KELVIN PARSONS: Okay.

Most people, if you are fortunate enough to have a bit of money in the till, you usually invest it somewhere and try to make some kind of return on it. What does government do?

MR. PADDON: We would do the same thing. The Financial Administration Act would limit the type of vehicles that we can use to invest in. Obviously, we are restricted to what you would consider to be fairly safe risk – nothing is risk-free but risk-adverse investments. We are investing the money in, essentially, low-return, low-risk investment vehicles.

MR. KELVIN PARSONS: Is it easily accessible?

MR. PADDON: Yes, it is very accessible.

MR. KELVIN PARSONS: Minister, is this a cash savings to be used, for example, for Muskrat? We are looking at a $6.2 billion total price tag on the project, $4.4 billion roughly from government. Is that the purpose of having the $2 billion in the sock as it were, we can use it for Muskrat?

MR. MARSHALL: As I said earlier, the cash that has been kicked off this year will go to pay down our public debt; that is the borrowings, as they come due. It will also go to put an investment in Nalcor for $358 million and pay for the infrastructure.

We have not had to borrow for infrastructure. When debt comes due, we just pay it out of cash. We have not had to go out and roll the debt over and borrow new money. We have not borrowed for operational purposes since 2004. This year, every province in Canada is going to borrow money for operational purposes except our Province.

Our net debt has gone up because our unfunded pension liabilities have gone up, and are continuing to go up. Of course, the cash we have - because the definition in the net debt is that you take your public debt or your borrowings, plus your unfunded pension liability, and you subtract from it your financial assets, which is essentially your cash. Since we are using some of that cash to pay for infrastructure, that will make the net debt go up.

MR. KELVIN PARSONS: Can you explain to us the connection, if any, between Nalcor and government? I realize Nalcor is wholly, solely owned by government. There is one shareholder of Nalcor and that is the Government of Newfoundland and Labrador. In terms of the financing, are there any reporting requirements from Nalcor to the Department of Finance or are they absolutely on their own?

MR. MARSHALL: I know that our investment in Nalcor is shown as an investment on the books. In terms of their obligation to report to us financially, I will defer that to the deputy minister.

MR. PADDON: The Minister of Natural Resources, I believe, is the shareholder of Nalcor, so the reporting relationship from Nalcor into government is through the Department of Natural Resources, but we would obviously have a working relationship with Nalcor and with the Department of Natural Resources as well.

MR. KELVIN PARSONS: The financial statements of Nalcor are not public record, are they?

MR. PADDON: Yes, you can find them on their Web site.

MR. KELVIN PARSONS: What cash is in Nalcor right now?

MR. PADDON: I would not be able to tell you how much. I would not be able to hazard a guess. It would not be a significant – well, it is all a question of degree or your perspective, but I would not suspect that they have a huge cash balance, but they would have some cash.

MR. KELVIN PARSONS: On the temporary contracts, Minister, the thirteen weeks or less, how many temporary contracts have been let or were let in your department in the past fiscal year?

MR. MARSHALL: How many? I will have to defer that.

MR. PADDON: I would not be able to say exactly. I could get the information. I mean we would use temporary assignments as needed, not as a rule. Really, it is more when people leave unexpectedly and you need to fill a position or you need to get the work done. Typically, we would fill it and run a competition to fill the job permanently. If we leave positions filled on a temporary basis for too long, as Mr. Walsh had indicated earlier, we will get a follow up from them to inquire as to when we are going to do a competition.

MR. KELVIN PARSONS: Can we get a list of all the temporary positions that were filled and where they were?

MR. PADDON: Yes, that should not be a problem.

MR. KELVIN PARSONS: In the last year.

MR. PADDON: Yes.

MR. KELVIN PARSONS: The names of the people who got those temporary positions, there is nothing private about that, is it, for being on a government payroll?

MR. PADDON: I would not think there is, no.

MR. KELVIN PARSONS: It looks like the number of positions in your department, in just rough calculations from looking at the employee stats there, went up about nineteen. Is that correct?

MR. PADDON: Nineteen? There are 370 permanent positions. I would suggest that it has probably gone up more than that because we had a bit of a restructuring throughout government where we now have a centralized processing unit for accounts payable payments, those sorts of things, which is now in the Department of Finance. So there would have been a shift of employees from other departments into Finance to do that work.

MR. KELVIN PARSONS: It might seem like a hairball question, but I have been asked this by several people, and that relates to the Newfoundland Liquor Corp: the fact that a monopoly business is involved in promotional activities, Air Miles and all that stuff, costs, giveaways, and reductions in price and so on, some people think it is absolutely unfair that we would have a government-regulated monopoly situation that is involved in that when there is no need to be. Personally, I am in favour of it, but I am just wondering: Was there any thought put into that, whether it was appropriate or not, or is that just left to the decision makers at NLC?

MR. MARSHALL: NLC is run by its Board of Directors, and the Deputy Minister of Finance is a member of the board. I will let him answer that one.

MR. PADDON: The mandate, I guess, of the Liquor Corporation is the regulation control of the sale of alcohol but, also, from a financial perspective, they have a mandate to return profits to the Treasury of the Province.

I guess the Board of Directors would not delve into the day-to-day operations of the Liquor Corporation. We would have been familiar with the fact that, for instance, Air Miles was a program that they wanted to get involved in; but, it was in, I guess, the nature of the marketing program to sort of stimulate sales to provide additional revenue to the Province and also to provide a greater variety to customers which is, regardless of the monopoly, still a business that they are operating and trying to respond to the needs of their customers. So customers, like Air Miles.

MR. KELVIN PARSONS: Has there been any consideration given – you talk about promotion, expanding sales and so on – to the sale of wine in corner stores, convenience stores? We have NLC sublets just about everywhere.

MR. PADDON: Yes. That would be more of a legislation issue as opposed to a policy issue or a business issue for the Liquor Corporation. The sale of wine and spirits in corner stores, for argument sake, is not permitted by legislation; whereas the sale of beer, to the extent that it is brewed in the Province, is permitted by legislation in corner stores.

MR. KELVIN PARSONS: Yes, I realize it is legislative to make it legal. I am just wondering: If NLC is into marketing, having access to wine, which is a pretty common commodity these days when people are dining, for example, has there been any thought given to it by the Board of Directors of NLC as asking to have that legislative change made?

MR. PADDON: It has not been discussed at the board level. That is not to say that at the staff level or at the operational level at the NLC that they would not have discussed it or thought about it, but they have not brought it forward to the Board of Directors. As far as I know, there has not been a request, certainly not through me - I cannot speak for the Minister - for government to take a look at that side of it and expand their scope of outlets.

MR. KELVIN PARSONS: On the issue of VLTs, what is the status now of the VLT removals?

MR. MARSHALL: We implemented a strategy to reduce the number of VLTs in the Province. It was a five-year strategy, which has come to an end now - I think March 31 it ended. The goal, I think, was originally 15 per cent and then it was increased to 20 per cent. I have not seen the report recently. Maybe Mr. Constantine can provide some information here, but the removals were well in excess of the 20 per cent. I think that number was hit.

We have also instituted measures to reduce the speed of play, slow down the play, to reduce the access to the machine, to reduce the number of hours. That is with respect to VLTs. A new strategy will now have to be developed to determine where we go over the next five years.

In terms of the gambling issue, we have rejected Keno, we have rejected the idea of a casino, we have rejected the idea of a mini-casino, and we have rejected the proposal for a racino. I think you can see where our heads are with respect to gambling in the Province.

MR. KELVIN PARSONS: And the on-line lotteries.

MR. MARSHALL: We rejected the on-line gambling as well.

MR. KELVIN PARSONS: On the recently announced –

MR. MARSHALL: Excuse me. Bob, do you want to –

MR. CONSTANTINE: In fact, over five years we removed just over 25 per cent of machines - as the last date I have that we checked - and that amounts to about 679 machines. Now, on any given day there could be some come out of service and pop back in again, a few here and there, but the number will stay around there.

MR. KELVIN PARSONS: So how many VLTs right now in the Province?

MR. CONSTANTINE: Well, 679 represents over 25 per cent, so I guess that puts it around 1,900 left.

MR. KELVIN PARSONS: Just before I leave that, the five-year plan is done on the VLTs. Has there been any thought given to if that is okay, we have accomplished that goal, we are going to leave it at that, or we should go further? Where are our heads on that?

MR. MARSHALL: The department is in the process of preparing the second five-year strategy, but that is in the early stages at this point.

MR. KELVIN PARSONS: On the HST elimination piece, I heard you on the Open Lines talking about, for example, the need to implement it now that we have the policy through the Budget there. Has there been progress and how do you see that being implemented vis-à-vis power companies, for example? Obviously, it seems to make more sense to help people if you are going to get the rebate or the elimination and that everybody does not have to apply every year or month to get it refunded. How do you see it working and where are we with that right now?

MR. MARSHALL: It is our hope that we can work with the oil companies and the hydro companies to eliminate it right from the invoice. Mr. Constantine is the ADM for Tax Policy. He has had those discussions.

Bob.

MR. CONSTANTINE: I have met a couple of times with the Canadian Oil Heat Association, once today as well, and I met as well with Newfoundland Hydro and Newfoundland Power. It is a kind of difficult system because the HST is collected by the federal government and remitted to the federal government. It is imposed under federal legislation. They will not administer this rebate, so we have to get the co-operation of the suppliers to provide a point-of-sale rebate. That is what we are working towards.

So at the end of the day, what we will see, hopefully, is on the invoice people will be charged 13 per cent HST and the suppliers will send that to the federal government. There will be a separate line item for the 8 per cent provincial rebate. That will be a separate line item and then we will reimburse the suppliers for the rebates they have paid.

That is basically the short story of how it works. There is a lot of complexity involved in implementing that system. We are working through those issues with the suppliers.

MR. KELVIN PARSONS: So the customer would actually see it on his or her bill?

MR. CONSTANTINE: For bulk suppliers, the customers will see it on their bill. Then there are some other situations that might be peculiar. For instance, if you buy wood pellets from Home Hardware, they will not have the capacity to provide a point-of-sale rebate. Consumers will pay the tax and apply to us for a rebate.

MR. KELVIN PARSONS: The average householder, for example, here in the city or anywhere in the Province, who pays their monthly light bill, it will be shown on the light bill?

MR. CONSTANTINE: That is the direction we are taking, yes.

MR. KELVIN PARSONS: In terms of implementation, I believe the Budget said it hoped to have it click in by October 1, do you think there will be any problems meeting those deadlines?

MR. CONSTANTINE: It is an ambitious deadline. When I talked to Newfoundland Power, Newfoundland Hydro today they indicated that it is a tough timeline for them to make; but, having said that, there is still more work to do, there is still more discussions to be had. So, I am sure they will meet the timeline, I expect they will.

MR. KELVIN PARSONS: Minister, I believe I asked you this question earlier - I did in earlier years - we talk about balanced budgets, where do you stand on that now? Originally, it was a case of, I believe, you supported balanced budgets. We never, ever got to have balanced budgets, wanted to legislate it. You seemed to be a disciple of Mr. Sullivan who was saying one day it should be and the next day it should not be. Where do you stand on having a balanced –

MR. MARSHALL: My own personal views?

MR. KELVIN PARSONS: Yes.

MR. MARSHALL: I think I have always said that over the business cycle you would have a balanced budget. I said in normal times you would balance it, you would spend whatever came in. There is no desire to keep the money; you would want the money to go back to the people.

In tough times, in times of recession and deflationary times, I could see running a deficit to stimulate the economy, which we did in 2009-2010 and a little bit in 2010-2011 because we were not sure in 2010-2011 whether the recession was really over. We were told there was a recovery, but there was a lot of uncertainty out there, increasing uncertainty. There did not seem to be much traction in the recovery, so we felt we should still spend, to have the government step in to provide jobs and opportunities for the people of the Province if the private sector was not doing it. When the good times come back and the economy is doing very well, then it is time to look at running a surplus, in my view, and pay down the debt you took on when times were tough.

MR. KELVIN PARSONS: How do you see this whole piece of the Auditor General, for example, and some other analysts, albeit are in good standing today financially, saying we need a plan for the future or hedge your bets, I guess, and where are we going to be ten, twenty, thirty, or forty years out. Because there is no doubt the oil will run out and the minerals will run out. Has there been much thought put around that by government as to the sustainability? Because we have ratcheted our budget I do believe from somewhere like $3 billion, $4 billion, up to $8 billion now; in eight years we have doubled our expenditures. We obviously cannot every ten years or every eight years double our expenditures, somewhere that has to come to an end. Where do you see that going?

MR. MARSHALL: I recognize that the wealth that we have today has come about because of the revenues from the oil industry and from the mineral industry, but we have always emphasized the fact that one of the things we do with the surpluses, in addition to getting our debt down to a more realistic level and to making our taxation system here competitive with the rest of the country, is to diversify the economy. It is easier to say it than to do it.

There has been success in aquaculture, for example, down the Coast of Bays, down the St. Alban's area. I was down there, I did pre-Budget consultation down there this summer and it was great to see. I have not been down to that area since I was in university. To go down and to see all the activity and to see that most of the major players in the country in that industry are now down there and to have people come up to me and say their biggest problem is they cannot get people to work. That is great, but it is a very small part of our GDP, that particular industry. Hopefully, it will continue to grow and be successful.

For us, the diversification, as you know, we feel it will come out of the Lower Churchill. We have an agenda, it is not a hidden agenda, it was set out in the Energy Plan that we would utilize the revenues coming from the non-renewables, the oil and the minerals, to try to leverage our investment into renewable energy sources that could not only provide heat and light for our own people at a stable cost, and hopefully a cheap cost, and would also be used to attract industry to the Province, to Labrador and the Island, but can also provide wealth to future generations by selling that power into the markets of North America. That is where we see it: Leveraging the revenues from oil and gas and minerals from non-renewable sources to the hydro renewable energy. We think that will be the future that will continue to provide wealth to the people of the Province.

MR. KELVIN PARSONS: Since 2002 the Auditor General in the Province has been recommending that government should be more proactive in identifying all the contaminated sites that we have in the Province, which we could be potentially liable ultimately. I think it is fair to say whether we eventually get the price tag brought home to us or not, AbitibiBowater in Grand Falls is going to be a potentially major environmental cost to somebody at the end of the day. Hopefully, it will not be us. Yet there is no recognition made for that contingent liability, shall we say, in our budgeting process. Why not? It is a reality we are going to have to face somewhere. Where is your department on recognizing that we have huge potentially environmental liabilities facing us and how do we account for that? How do we have a strategy to potentially deal with it if such and such happens?

MR. MARSHALL: The deputy and I have had discussions along those lines. I am going to refer to him on that to answer that question.

MR. PADDON: I guess, Mr. Parsons, there are two elements; one, you have to identify and determine what the cost of remediation is; and, the second element of that is you have to determine if there is a liability or if there is a contaminated site, is the Province prepared to remediate it or does it need to remediate it? To the extent that we have a commitment by the government to remediate a particular area, we will recognize the obligation in the financial statements. To the extent that we do not recognize that we are prepared to do something or we have not looked at the cost of remediation, at this point in time there is no recognition in the financial statements.

MR. KELVIN PARSONS: Isn't that somewhat like saying until we know the extent of the problem, we are not prepared to deal with the problem. The Auditor General has pointed out that our department of government - and you guys have a wide far-reaching responsibility for all the departments, you ultimately might have to pay the bills on it. The Department of Environment, for example, apparently we do not have an inventory in this Province, according to the AG, of contaminated sites.

He has pointed out the problem, we have not made any moves as a government to identify the contaminated sites, so that we can identify what the remediation costs might be, so that we can plan to look after them and record it in our statements accordingly. It is almost like saying do not tell me about it and I do not have to deal with it. Is that a fair approach to take to this?

MR. PADDON: It would be difficult, from a financial reporting perspective, to outline what your potential costs are in the absence of any evidence as to what the costs are.

MR. KELVIN PARSONS: Yes. Given that he is saying it is a reality we are going to have to face today or tomorrow and we are into planning - the minister just alluded to trying to plan for the future with renewable resources as opposed to non-renewable, it would seem to be equally important to have some planning in place to deal with the issue of environmental liabilities. Has there been any discussion by you people saying: look, we have to plan for this? An Environment AG has pointed out, you have not done it. There is no inventory.

Have there been any discussions between Finance? You guys are the administrators of the bucks as it were and an acknowledgement that we have a potential problem. We know we have a problem with unfunded liabilities and you have to manage it. It is no different. We know we have a problem with environmental liabilities but we do not know the extent of it. What are we doing to find out about it so that we have some idea? I like to know when I get my paycheque that I have to pay my light bill, my phone bill and whatever else. If I suspect I have to put new tires on the car I have to plan for it. How does government approach this environmental liability issue? It is going to be a major, major issue.

MR. PADDON: It is difficult for me to be definitive because it is really the responsibility of the Department of Environment to look at and evaluate where the environmental problems may be. I am not quite sure I would liken it to a pension obligation. With a pension obligation we have a legal obligation to pay that liability when it comes due. With an environmental liability there may be a contamination but the Province or government, in their wisdom, at some point in time will say: Well, we are going to leave that site as it is. Until you actually make a determination, look at each individual site and say, here is what the cost is and make a determination whether you are going to remediate it, it does not become a liability.

MR. KELVIN PARSONS: I think we are playing word games here. The bottom line is the Auditor General has said there are environmental liabilities out there, we just do not know what they are. Somebody needs to catalogue them, and government does not appear to be making any attempt to catalogue them. Whether you are going to pay for them or not, or be legally responsible or liable, we have to start somewhere by identifying where they are. Wouldn't you agree with that? Unless you know, unless somebody, whether it is the Department of Environment, Finance, whomever, do you not agree that somebody needs to identify where these environmental contaminated sites are?

MR. PADDON: I would agree that it is difficult for me, as the preparer of the financial statements, to identify the liability without that catalogue. There is no doubt about that.

MR. KELVIN PARSONS: Okay. I am not suggesting it has to start with your department. All I am saying is that there is something missing in our books. If there is a potential liability that we cannot quantify, and we cannot quantify it because another part of the government has not done what it should do to give you the information to quantify it, but yet it is still there. We cannot close our eyes to the fact that it is there.

MR. PADDON: I would agree. The contamination does not disappear just because you do not look for it.

MR. KELVIN PARSONS: That is right.

MR. PADDON: The Department of Environment obviously have their priorities and things that they need to do. I cannot suggest here that this should be their number one priority, is to catalogue environmental liabilities because I just do not know what else they have in their business plan. It is really an issue for them to comment on as to –

MR. KELVIN PARSONS: Has there been any discussion between your department and Environment to at least try to talk about it?

MR. PADDON: We would have discussions during the preparation of the public accounts to try to more determine what in fact they may have done in a particular area. That is not the same. I do not think that is really answering the question you are asking, which is: Is there a discussion about how you might plan to evaluate those liabilities over a period of time? I would say no, there has not been.

MR. KELVIN PARSONS: Yes, thank you.

I have no further questions, Mr. Chairman.

CHAIR: That is it?

MR. KELVIN PARSONS: Thank you, Minister, and folks.

MR. MARSHALL: Thank you.

CHAIR: Okay. I will call for the subheads of the Department of Finance.

CLERK: Subhead 1.1.01 to 2.4.02 inclusive.

CHAIR: Shall the total carry?

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

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

CHAIR: Shall I report the Estimates of the Department of Finance carried without amendment?

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Carried.

On motion, Estimates of the Department of Finance carried without amendment.

CHAIR: Thank you, Minister, and your staff, for your time, and our Committee as well.

Just for the information of our Committee, our next Estimates meeting will be tomorrow, Thursday morning, May 12, at 9:00 a.m.

OFFICIAL: (Inaudible).

CHAIR: Copies of the minutes, yes, I just passed them out.

OFFICIAL: (Inaudible).

CHAIR: Okay, I am sorry.

Yes, we just passed out the minutes of the last Estimates meeting, April 21.

Can I have a motion to adopt these minutes?

Moved by Terry Loder, Bay of Islands.

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

On motion, minutes adopted as circulated.

CHAIR: With that, I will ask for a motion for adjournment.

Moved by St. John's East, Ed Buckingham.

All those in favour, ‘aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Motion carried.

Estimates adjourned.

Thank you.

On motion, the Committee adjourned.