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

CHAIR: I will bring the meeting to order, our public hearing. I want to just mention again, if the media need to do any photographing or footage, if the cameras are here, to do so during a break, or prior, or at the conclusion, rather than during the hearing.

I would like to start by introducing the Committee members. I am Loyola Sullivan, MHA for the District of Ferryland, and Chair of the Committee.

Vice-Chair.

MR. JOYCE: Eddie Joyce, Bay of Islands.

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

MR. FITZGERALD: Roger Fitzgerald, Bonavista South.

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

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

CHAIR: Auditor General.

MR. NOSEWORTHY: John Noseworthy, Auditor General.

MR. JAMES: Claude James, Audit Manager.

CHAIR: Mr. Press, yourself and your members.

DR. PRESS: Harold Press, Deputy Minister.

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

CHAIR: I should mention, Mr. Press, for everybody's benefit, to make sure you press on the top button when speaking and press again when you are finished, and just identify yourself, first of all, for Hansard purposes, to make sure we attribute the appropriate statements to the proper individuals.

DR. PRESS: Thank you.

I apologize. I am Harold Press, Deputy Minister. Perhaps I will let the others introduce themselves, if that is okay.

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

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

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

DR. PRESS: If I may, I will introduce Carmel Turpin, our Director of Communications, who is occupying the entire front row behind us.

CHAIR: Elizabeth Murphy is Clerk of the Committee; Mark Noseworthy is Executive Officer with our Committee; and Kevin Collins is recording here with our office of the House of Assembly. I would ask Elizabeth if she would have the witnesses sworn in, and if Ms Turpin would be giving any responses we will have her sworn in. If not, we will just have the four of you.

Dr. Press

Mr. Young

Mr. Thompson

Mr. Hatcher

CHAIR: With members here from the department being fairly familiar with the purpose, I will not go into any lengthy aspect of the role of our Committee. Today, of course, we are looking at section 3.13, the Monitoring of School Boards, in the Auditor General's report.

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

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

DR. PRESS: Thank you, Mr. Chair, and thank you for the opportunity to discuss the Auditor General's report.

The department is generally quite pleased and concurs with the Auditor General's observations. I would like to make just two observations of my own, if I may. The Auditor General's report included information on school board revenues and expenditures between 1996, prior to reorganization, and 2001. I draw your attention to page 119 or, I think, page 2 in the pages that you have.

On the second paragraph, under Operating Results, it quotes, "Using 1995-96 as the base year which was the last full year that the former 27 school boards operated, school board provincial revenues have declined by $18.4 million...." That is factually correct but it infers that over that six-year period there was a 3.6 per cent decline in provincial grants to school boards.

The next paragraph goes on to say, "Using 1995-96 again as the base year which was the last full year that the former 27 school boards operated, school board expenditures declined by $17.8 million...." Again, that is a fact, it is indisputable, but it infers that there was a 3.4 per cent decline.

In Figure 2, I just wanted to offer some facts as well but they might present a somewhat different conclusion from you. Under Total Provincial Grants, you will notice that between 1996 and the following year, 1997, that is when the reorganization took place and twenty-seven school boards were consolidated into ten anglophone and one francophone. In fact, there was a $28.8 million reduction, but in the period since then there was a $10 million increase in provincial grants.

Much the same thing is happened under the total expenditures. In that first year there was a significant decrease in the expenditures, but in the year since then there was a $10 million increase in expenditures. So it just presents a different perspective, but again these are facts and they are indisputable.

The second point I would like to address speaks to the inclusion of the $97 million for accrued severance in accumulated operating deficits. In response to recommendations from the Office of the Comptroller General, school boards were advised not to set up a corresponding receivable from government to offset this transaction. This is based on a matter of accounting principles. The result is that school board statements report a $100 million accumulated operating deficit. It is our position that the accumulated operating deficit as of June, 2001, was $3.3 million, not $100 million. We would further state that this deficit affected seven boards.

The department has worked closely with the school boards and is pleased to inform you that as of June, 2002, five of the seven boards have either eliminated their deficits or have implemented reduction plans which will see the deficit eliminated over time. Only two boards remain in a deficit position. Since June one of the two boards has implemented a debt reduction plan and we anticipate the remaining board will have a deficit reduction plan in place in the very near future.

We have been working with school boards and, excluding the note related to the severance issue, as of June, 2002, the school board deficits were at $1.9 million, which is less than one per cent of the total school board operating grants. It is not perfect, but we are pleased, certainly, with the direction and we will continue to monitor the school board finances to ensure these positive results continue.

CHAIR: Thank you.

We will begin now with any committee member who may wish to start with any particular question. We will just throw it open in no particular order.

Mr. Osborne.

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

I will ask the first question. The department indicated that after the three year commitment to the boards for school closures that the department was to retain savings and operating costs, have all of those savings gone into the area of school utilities? If not, where were those savings utilized?

DR. PRESS: Bob can speak to the where it went, but after those three years they were allowed to keep their funding. Before those three years they were allowed to keep their funds for one time expenditures and after those three years the funds were put into a pool that went back to, on a proportional basis, all the school boards. Bob can answer the specifics but it was (inaudible) into the general operating grants to school boards.

MR. YOUNG: The answer is yes, the vast majority of those expenditures have gone back into the payment of 100 per cent of the utility costs at the school board level.

MR. T. OSBORNE: Second question, for the school board years ending 1998 and 1999, there were surpluses of over $6 million for the two years combined. Can the board comment on what the size of those surpluses and what has happened to that surplus money?

CHAIR: The department comment, I guess you mean.

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

MR. YOUNG: I am sorry, Mr. Osborne, could you show me where you are referring to the $6 million?

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

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

MR. T. OSBORNE: The Avalon East School Board, page 47, item 10. There is $2.974 million surplus for 1998 and $3.315 million surplus for 1999.

MR. YOUNG: Those surpluses are retained by the school board for whatever purposes the trustees and the board itself would choose to use those surpluses for. When you want to put on special scholarship programs or special initiatives in the school, it is the responsibility of the boards to administer those funds. Some of those funds are in the area of trust accounts and so on, as I understand, that have been given over the years to the boards. We don't monitor that closely. We do in the audited statements of the board. There is a comment by the auditors on those numbers, but we at the department do not monitor or do not have any say, really, in how those funds are expended. It is a board decision with the trustees.

MR. T. OSBORNE: Okay, so there would be no accounting back to the department on the expenditures of those surpluses?

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

CHAIR: Mr. Osborne, before you move to another one, I just have a question on that specific topic there. Did you have another one right on that topic?

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

CHAIR: If there is a surplus carried, I would assume, when the board submits its budget for the next year and their needs are, let's throw an arbitrary figure of $37 million, and you had a $3 million surplus, well, you may end up receiving $34 million then. Like they are carried over, an ongoing thing. Would that be an accurate statement, or is this a surplus that is specially earmarked or just a part of the normal allocation?

MR. YOUNG: We do not treat the surpluses as a reduction from the grant that the Department of Education will provide to that board. That board is treated in the fiscal year as any other board would be treated in our grant allocation. If they have a surplus in their accounts, that is, as I said earlier, a matter for the trustees principally and the school board as to how they want to disperse or dispense with that surplus.

CHAIR: Okay, their grants would be uniform based on square footage, for example, based on the number of students per assignment of support staff, and obviously, of course, teachers based on numbers would be the same.

MR. YOUNG: That is correct.

CHAIR: Mr. Osborne.

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

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

CHAIR: Yes.

WITNESS: I wasn't aware of that.

CHAIR: Mr. Fitzgerald.

MR. FITZGERALD: Thank you, Mr. Chairman.

I would like to ask the department if all school boards are required and if they do submit annual reports.

DR. PRESS: They are required to submit an annual financial statement. They are not required at this moment, I do not think, to submit an annual report, although all school boards do submit annual reports.

MR. FITZGERALD: Without exception.

DR. PRESS: Without exception.

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

DR. PRESS: Absolutely.

MR. FITZGERALD: The sale of real property when we reduced the number of school boards and a number of schools became surplus to the department's needs, what happened to the cash that was realized from the sale of excess property? Did that go to the individual school board from which the sale happened?

DR. PRESS: It really depends upon who was the original owner of that facility. If that was church-owned property, it is turned over to the church, the episcopal corporation, whoever the owner is. If that facility belonged to the board, as a number were in the integrated system and so on, they are the property of the school board and any revenues accrued to that from the sale of that property will go directly to that board.

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

DR. PRESS: For the most part.

MR. FITZGERALD: - I know there have been a number of sales realized there, and all the money that they realized from the sale of that property stayed within that board (inaudible) able to spend within their budget, and they would direct that money.

DR. PRESS: Yes, for those that did belong to them, but there were several schools, there were certainly several communities, King's Point and so on, that are not integrated and so on, so those properties would not belong to that board if they closed.

MR. FITZGERALD: It is my understanding that school boards are responsible to take from their own budgets, payments for computer technicians, the people, the support staff, to look after their technical needs. It also my understanding, in talking to one of the school board members, that they were little bit dismayed that the money they had saved by those people when they were on strike, when we witnessed the strike last year, that the department is now coming and looking to receive that money back from their budget rather than allowing them to maintain it in their budget, even though it was a budgetary item that was not surplus or extra money supplied by the department. Why would the department be looking for something that would come directly from their budget, and if it was a saving within their budget and it was not an extra cost to your department?

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

In terms of the IT -

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

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

MR. YOUNG: Yes, Bob Young.

There is no specific allocation in the current funding formula for information technology. At the end of the NAPE strike - since we are talking about the NAPE strike as a second item - there was an agreement signed that a study would be undertaken between NAPE and the Department of Education to examine the funding for support workers that went on during this activity. One of the issues there is the funding that has possibly been transferred - I say possibly because we are investing that - from other areas of the allocation to provide for IT support, and Dr. Phil Warren was commissioned to head up that study group. He is in the process of finishing up his work and will be presenting a report to the department some time during the month of December - probably early December to the middle of December - in which area I understand he will be making some recommendations about the use of formula to accommodate IT support in the school boards. You are correct in saying that at the moment there is no specific allocation for IT support in the school districts.

MR. FITZGERALD: So the school districts that are responsible and have hired IT support take that allocation from their own budget.

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

MR. FITZGERALD: So, why would you be looking for them to put those savings back and be taken from their budget when it was a cost that was directly incurred by a budget that was already approved and it was an extra funding provided by you to that board anyway?

MR. YOUNG: When the NAPE strike was finished, we had a direction from Treasury Board that funds saved during the strike had to be returned to the provincial Treasury. The exception to that was, we were permitted to charge off expenses that were incurred during the strike. So, for example, management staff who worked overtime, or specialized equipment that had to be borrowed, or persons who were hired for security and that sort of thing, could be allowed to stay with the Board for those purposes; but, on balance, the funds had to be returned. So we work with the boards to make a determination as to what, on a net basis, should have been returned, and they had to be returned as per direction we received from Treasury Board.

MR. FITZGERALD: School buses -

CHAIR: Mr. Fitzgerald, while we are on the topic, before we shift to buses, I was just wondering, with reference to the sale of assets when a school is closed, are there any restrictions set on how these funds can be disbursed and utilized by the board? What are the limitations, if any, or is it completely at the boards discretion how they spend that? Are there any other repercussions or clawbacks as a result? If there was a school, for example, being built that costs $4 million and they realized $500,000 from the sale of an asset of a school, would there be an expectation to utilize funding in this regard or any regard as far as that matters?

DR. PRESS: None, that I am aware of. It has not come up in the year and a half or so that I have been here. I am really not aware that it went on before. If there is a closure and sale of a school where the students would go to an alternate school and there are obviously certain repairs and renovations that might need to be done to that other school, there certainly will be an expectation on my part that they would take any revenues they got from one nearby school and apply it to what they are doing in a school that is close by.

CHAIR: Has that happened, for example, in cases in the past? There have been a fair number of school closures, I know, and a fair cost in getting those new or expanded schools or renovated schools ready. Have there been instances where there have been a utilization of funds for that purpose?

MR. HATCHER: There are different answers to your question, I guess, because schools prior to 1966 where all owned by the churches. After school board integration in 1966 the Protestant schools were vested in the boards. However, there was an agreement that if the schools were ever sold the churches would get the first right of refusal. That has happened in some cases. The Protestant schools that were built after 1966 were vested in the board and if they were sold, and some of them have been, the board has free rein on how they use the money. Generally speaking, boards have put that into repairs, renovations, extensions of new schools to accommodate the children from the schools that were closed.

Schools that were previously operated by Roman Catholic School Boards are vested in the Roman Catholic Episcopal Corporation and all of the boards have entered into an agreement, as required in the Schools Act, with the Episcopal Corporation to deal with disposition of those buildings should that become necessary. In those cases some of the money goes back to the church if they are sold. First of all, they have to decide and agree how much church money was in the building and how much government money was in the building. If that was 50/50, then if was sold, 50 per cent would go back to the church, 50 per cent would go to the current school board and they would be free to use that as they see fit. Again, most of them use it for capital improvements on an existing building. The same would apply to the Pentecostal board.

MR. WALSH: The same subject.

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

Mr. Walsh.

MR. WALSH: You partly answered the question that I had with respect to the ownership of the church by the church. Has there been any case where the ownership by a church, for example, may have been 40 per cent, government investment was 60 per cent, that the numbers would have been reversed or the churches would have received more than the actual investment that they had?

MR. HATCHER: Not that I am aware.

MR. WALSH: And the policy still continues?

MR. HATCHER: Yes. In the case of the Roman Catholic church, each school board has entered into an agreement with the Episcopal Corporation and that agreement stands from the time of consolidation forward.

MR. WALSH: Would there have been any allowances made - for example, we build a building in x year, we maintain it for twenty years out of public funds, government funds, the building now, because it has not deteriorated over that twenty years, is worth xy dollars - on the sale of the property based simply on the input of funds from both groups? By that, I mean, is the government getting its fair share of what it has cost to maintain those properties less what anybody else has put into it? If you are following what I am saying. In other words, are we getting back for the taxpayer the fair allowance of money that has gone in? Not just for the building, the construction purposes, but for the maintenance and the ongoing repairs? Has that been deduced from the other side?

MR. HATCHER: The answer to your question is, no. The formula for disbursement of funds at sale is based upon the proportion of investment (inaudible) the construction of the building, or any extensions that might have come since.

In the case of the Roman Catholic boards, some of the schools were built with 100 per cent church monies. Some had a percentage of government monies in it. It is the proportion of the funds at the time of construction that determines the proportion of disbursement.

MR. WALSH: So it has no bearing on who maintained it and who paid the cost all the way through?

MR. HATCHER: That is correct.

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

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

MR. FITZGERALD: School buses; my understanding is that some boards probably maintain or operate all the school buses that operate within their regions. Others have some, probably others have none. There must be a tremendous savings to be able to be realized by contracting out school bussing. There has to be, when you see the expenses incurred by the department having their own school buses. Is the department actively looking at that, or is it a situation that will be done by attrition, that people who normally operate the buses now or is the status quo going to be the order of the day?

DR. PRESS: We are not actively looking at that, although we are working with school boards because some of them, for the most part, would have all contracted services or all board-owned services. There are a few with partial, one or the other. As they feel they want to go to contracted services, we will support them in a system in that process but there are advantages and disadvantages to both. Certainly, the disadvantage is one of cost but an advantage of board-owned services gives you more flexibility to deal with afternoon bussing and some of the other things. Some of them actually would prefer it but it brings with them a bigger headache in terms of maintaining those buses and keeping them safe and running in the board; but, it is their decision and we will support them. We have not told them we want to go one way or the other but we will support them, local decisions.

MR. FITZGERALD: It was certainly quite evident during the NAPE strike what buses were owned by school boards and what buses were privately operated when you saw students coming to and from school. It was a great issue in the district where I live because here there has been a mixture of contracts and school-owned buses.

Most school boards have seen double-digit drops in enrollment, all except two, I think, over the past year. How does enrollment drop affect budgeting that is allotted to school boards?

DR. PRESS: I will just make a comment on the drop, if I could, and Bob can speak to the actual grants themselves.

The enrollment drop, I think, is probably one of the more serious things facing us as a Province because not only has it doubled-digit dropped in enrollment but it has been dropping since 1972. That is almost thirty years and we have gone from a fairly significant young population where the median age - and that is where half your population is below that and half is above that - was, I believe, sixteen years. So half our population was school age or preschool age, and now we are at a point where our median age is about thirty. What it has meant in schools is, back when the Chair was teaching, probably, we had 16,000 births; so that means five years later we had about 16,000 coming into kindergarten. Now we have 5,000 and soon to be fewer than 5,000. In another eight years, it is likely to be fewer than 3,500. Part of the challenge for an education system, and it is not the department but our school boards and so on, is: How do we manage in an era of those kinds of significant declines? It will become evidently more challenging in the future as fewer and fewer students are in small schools which cannot be consolidated, because we have seen significant consolidation over the last five or six years. In the next five or six years we will not have those efficiencies where you can consolidate and merge a couple of schools together to have a much more diverse program and so on.

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

MR. YOUNG: The allocation process that we provided to boards for those pieces that are driven by enrolment, typically over the last number of years we have gone back to the previous year's annual general return. For example, when looking at our budget for 2003-2004, we would look at the enrolment that was in the school at the end of September, 2002.

In order to leave more money in the education system and in the hands of the school boards, we have not gone back one year for the last two to three years. We have gone back two years, so that there is a greater population upon which we base the allocation. As a result of doing that, we are leaving more money in the hands of the boards.

In recognition of why we have declining enrolments, it is not always a nice one-to-one relationship. I mean, if you take one student out of every class, it really does not matter a heck of a lot in terms of the total scheme. So what we try to do is leave as much money as possible in the system, and we do that by going back two years instead of one.

CHAIR: I would like to ask a question with reference to a statement you made. There are two boards that have deficits, District #1 and District #7, I think.

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

CHAIR: District #1 and District #3, okay. District #7 has been eliminated, because they had a fairly high one. That is a considerable turnaround. I know there are certain concerns. District #1, for example. With the allocations, are they sufficient to be able to operate there? If there is an ongoing deficit, there is neither an inherent problem with allocations or they need to do certain things in their operation that are going to be more efficient. I think you indicated that there is a plan in place to achieve that. What were the concerns or what were the problems in getting to that, and what are the remedies, basically, in trying to eliminate that?

DR. PRESS: I didn't mention the boards, but since you did, District #3 has a deficit. Right now, they have a deficit reduction plan in place to eliminate that deficit, the one that we are still working with. Our view is, work with the boards as opposed to a stick model and what you can hang over them to force them to come through with a deficit reduction plan. Our view has been to work with them as close as we can to identify the issues and the challenges they face and see if we can get a deficit reduction plan in place. The minister has clearly said to them, each of them, that she will not be going to her colleagues to find the funds to underwrite any debts that they have. That clearly has been communicated to them, and what we have tried to do is work with them to let them know how serious this is, the matter that we have, and what are some of the things we can do to eliminate it.

In Labrador, there is no doubt there are challenges that they face there that some other boards do not have to the same extent. Certainly travel is one, but at the same time we have allocated an additional $100,000 for each of the last three years just for travel, to assist them in board travel, meetings and so on, travel that the executives and the staff at the board have to do in going back and forth.

A big challenge has been maintenance in their schools and so on, but for most of the coastal schools now they have new schools, for the most part, and a new one is being built now in Postville. They have challenges in relation to housing. What they have, and what we have talked to them about, is, look, housing is not an issue that is important to them. They have been into it for a little while, and housing is a significant component of that deficit that it has maintained. They want to get out of housing but they know they need to do that so it does not have a negative impact on attracting teachers into there. One of the things that we have done over the last year is provide, for example, coastal teachers with an additional $5,000 to their salary in order to deal with things like the high cost of food and accommodations and so on.

Hopefully, in working together, we will be able to come up with their school district deficit reduction plan which will eliminate that deficit and at the same time not jeopardize programs and services to students, because first and foremost that has been the goal that we have set in sitting down with all of these boards: whatever deficit reduction plan they put in place, that it is not to significantly affect the programs and services of children in their schools.

CHAIR: Thank you.

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

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

In terms of students who are facing both physical challenges, and mentally-challenged children as well, over the last number of years - and it ties somewhat to what we are doing here today but it is an opportunity for me to ask the question - I have had parents who go through the nightmare every September of trying to find the funds necessary to allocate help within the school for their children. I am wondering, is there any reason why the department itself, or indeed the school boards, have not, at the end of a school year, completed an assessment on a child so that when September rolls around they are not going through this horrific: child is back in school, no idea who is going to doing the help that is required, no idea whether or not it is going to take a day, a week or three months? Is there any reason why those funds are not allocated in advance or, more important, that families do not have to go through this constant annual trauma? The child starts in Grade 1. At the end of the year the teachers know if the child is going to Grade 2. If they are in Grade 5, they know if they are going into Grade 6. They know exactly where they are going to be come September, and yet parents are forced to go through this horrendous ordeal of calling upon anyone they can, including their members, their MHAs, to try to solve the problem. It takes up a lot of time and energy on our part, which, I guess, all of us would be delighted to do. It takes up a tremendous amount of time and energy with us chasing down department officials, hours and weeks in some cases, to come up with the same conclusion that we had the year before. We are three or four weeks late getting something started for these children and yet we always end up solving the problem. I am just wondering why the assessments are not done at the end of the year by the department and/or the department instructing school boards to do it?

DR. PRESS: The answer to the question is, I think a lot has been done. I think the calls that you talked about, and so on, you probably have not seen in the last year or so. Up until now, the ISSP process, which is an Individual Student Support Plan, which is done by everyone involved who has an influence over that child, including the medical profession, the teacher, the principal of the school, the parents and even students, if they are old enough and capable enough to participate, that is done throughout the year and updated as timely as necessary.

For the most part what you are talking about, I think, are student assistant support which comes out at the end of each year. For those who have severe needs and so on, we now provide a three-year commitment to them. So, in fact, what we have done now, beginning last year, was, we gave out three-year commitments to most of those who had severe needs. To those who have what we call severe emotional behaviour, which has been a significant increase in student assistant support over the last four or five years, the information gets out to parents by June. That has been a significant improvement over past practice, which happened last year and, I believe, the year before. They know that they are getting student assistant support, they do not necessarily know who, and that is for collective agreement.

It is pretty difficult to assign somebody for a school if somehow over the summer months - apparently, with this particular group, there is a significant amount of bumping and so on that takes place and somebody may move into a job and so on. So it is very difficult to say to a parent that you might get x student assistant even though there may - realistically, you still might, because you have to respect the rights of student assistants if they want to change, if they want to go to a community which is in their home community and so on, as opposed to getting in the car and having to go to a different school or whatever. That is why the boards cannot tell them, until they go back to school in September, who they would get and the total number of hours. They are informed by June, at the end of the school year before they go home, whether or not they will get student assistant support in September when they come back. I think that is a significant improvement. Going the next step is problematic for us simply because it is very difficult to make those commitments and then find out in September that people have moved and so on, that you cannot deliver on those commitments.

MR. WALSH: So that is the reason why - even though the parents are aware that something will be waiting for them in September, it may not be the individual the child has grown accustomed to.

DR. PRESS: Absolutely; or it may be that the total number of hours may change. For example, if somebody transfers to another community. There may be five hours for that particular student - and I am just giving a hypothetical example now. Five hours for a particular student, and if another student transfers into that school over the summer - and most of the transfers occur during the summer months when schools are shut down - then that would influence the total number of hours for the school. We do not assign hours - even though parents seem to think so - to individuals, we sign hours to schools and teachers. They are called teacher assistants in Nova Scotia and New Brunswick when really they do exactly the same thing as our student assistants do. That would mean that the number of hours would still remain - they might remain at five hours for that school. So, that might be the change in the total number of hours that would be there for that student.

MR. WALSH: That is where some of the arguments may have come in this year because I know some parents who were expecting, we will say the five hours, and suddenly ended up with a lesser amount simply because another student with need had moved in. What is the greater concern here? I say this not necessarily tongue in cheek. I do not really care about the teachers. I really do not care about the school board and I probably care less about the student assistants. It is the child who has the need that would be my greatest concern. If we are meeting that need it should actually domino effect to look after all of the other ones that I said I do not care about. They should fall into place as the child's needs are met.

It seems to me that the emphasis is still on - the child is at the end of the domino as opposed to the beginning of the domino effect. The child is there - we know the need is coming, if somebody has transferred in. I understand if somebody transfers in September and all the decisions are made, but the child who was there with five hours may now end up with two-and-a-half, and the racket, as I refer to it, starts again. It is the school board dealing with the department, dealing with the student assistant. It seems like we have to solve all their needs while the student is still being met. Is there a way to heighten the response or quicken the response to meet those needs, or is it just going to be an arduous affair as we go along?

DR. PRESS: I do not think it is as arduous as you have presented it; no disrespect. It has improved a significant amount. We have an advisory committee with all of the stakeholder groups at the table where we are sitting down, rolling up our sleeves, and trying to come up with the best solutions that we can, given the tools and the resources that we have to work with. Barring throwing any more money at it, right now the system is working, I think reasonably effectively, in getting information out to parents and children; not just before school closes but three weeks before school closes we get out the information from the school boards, even earlier than that. It is not perfect but I think it is a system that has much improved over the past two years.

CHAIR: I guess final decisions cannot be made until September anyway, until students move in. If you get two of a certain criteria or three, there are economies in the number of hours within a school. A school might be assigned - three hours assigned, for instance, in three different schools at five hours. All in the one might only necessitate nine hours or eleven hours. Those are the types of things, I guess, you are referring to when you say that you have to look at a specific school. They are attached to the school based on the needs of the school rather than to an individual, that is a transferable hour from one location to another. I think that would be accurate, would it?

DR. PRESS: Yes it would.

CHAIR: Mr. Osborne.

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

Over the past number of years there has been a significant decline in student enrollment throughout the Province. Has the department done any projections to determine whether or not that trend is going to continue? If so, to what extent? I guess to focus even more clearly, what areas of the Province do you see suffering the highest levels of decline if that is to be the case?

DR. PRESS: I will not comment on the suffering decline, but we have done projections. I am going to try and do this from memory now, because I have seen them. Enrollments are going to decline well into the foreseeable future. To give you some prospective, we have gone from about 163,000 when it peaked in 1972, this year - we do not have the final figures in but the preliminary figures are about 84,000. Now that is not comparing apples and apples because in 1972 we had a K-11 system. So if you had a Grade 12 cohort there, then 163,000 probably would have been closer to 170,000. It is about 170,000 down to 84,000.

Our projections are that by the end of this decade, which is eight years away, it will be fewer than 60,000. Again, these are projections only. So you can get two people doing two different projections. If you wrote it out five years from that, then it is likely to be closer to 50,000. Just to give you some contacts, the Toronto Metro School Board is 300,000, which is one school board.

While a lot of school consolidation has already taken place, we feel there is not, other than some instances, probably one or two instances, in many of the boards now where they probably can consolidate one or maybe two schools, but for the most part it is done. You cannot consolidate Grey River. You cannot consolidate Gaultois. You cannot consolidate Norman Bay. So that presents to us challenges that are even greater than in the past few years in trying to meet the needs. That is why, in my view, the Center for Distance Learning and Innovation, is not the answer, but it is an important tool in trying to provide diversity of program.

In very small isolated schools, that you can all identify in your own districts, it will not replace the teacher in the classroom. What it will do is enable the students in it to do chemistry, which they otherwise could not do - or physics, or advanced mathematics and so on, some of these courses - by some of the best teachers in the Province. Even if you could recruit a chemistry teacher it is unlikely you are going to recruit that teacher to go to Gaultois, even if you had the allocations here. I mean this is a tool that we must develop and further develop and make it available throughout the Island and not just the rural areas either, because I think to make it acceptable to rural Newfoundland - I think part of that challenge is putting it in urban Newfoundland. That is why Holy Heart has been piloting courses and so on. That then enables every student - no matter where you are, you have access to a high-quality curriculum and a diverse high-quality curriculum that will enable you to go into engineering and go into medical science and so on. For many of these small communities, these courses and these opportunities would never, ever be available without that.

MR. T. OSBORNE: Thank you.

A question extending from that is - as you said, some areas are not going to be consolidated. It is impossible to consolidate them. School costs are going to continue. School busing is going to continue. In fact, students may have to be bused even greater distances than they had been in the past. How does the declining population into the future, considering our geography, how is that going to affect grant allocation? Because it is only so thin you can stretch the thread before it breaks.

DR. PRESS: You are absolutely right, and it does present challenges. How the grant allocation will be affected in the future years, that is an area I really cannot speak to, but certainly all we can do, as an organization, is understand the environment, present the implications to those who are resourcing us, whom we resource further and so on, and to make a very strong case to the Cabinet and so on during the budget process so that when decisions are made, they are made with their eyes open. But certainly there is not a one-to-one relationship between the reduction in students and sort of a concomitant reduction in costs. It is just not there because you may have to keep certain schools open even though there will be fewer schools. Normans Bay is a good example. Normans Bay has eight students, K through 12. We have allocated two teachers there and it is a very, very expensive operation. So, even if that is down by one, to seven students, it is really not going to change too much your bottom line cost of delivering the program to those seven students.

I am not answering your question directly, but indirectly what it does is, it presents challenges to us that we have to present to our leaders in terms of what the challenges are and so on, so that sort of a concomitant decline in costs, or decrease in costs, is probably not possible and not doable.

That is one of the reasons why I pointed out with my opening remarks that what we have seen over the last five boards, when we created these boards, has not been a similar cost in provincial grants to these boards. In fact, the cost has gone up. In fact, the cost per student has gone up right now from the lowest in Canada. Ten years ago it was probably $4,000 compared with $1,000 more per student than the rest of Canada. Right now, we have increased 30 per cent in ten years in the per student cost of schooling, which is now at about $6,500, which is probably close to the Canadian average. That has all been because of having to do deal with the high cost of delivering programs and services to rural Newfoundland.

MR. T. OSBORNE: Thank you.

CHAIR: I guess the point you made there, too, Dr. Press, is that it is not a one-on-one, the same as increases are not one on one, basically. There is a certain base you have to start with overall.

The trend, basically, if you look at the tables and charts, is that there have been usually 2,000 now, on the average, less coming in than going out. That is current, and I guess we can only really safely project back for five years, I suppose, because the people who are going to come in are not yet born or moved here, whatever the case may be, or what the migration trends are. Your projections, I guess, would be fairly accurate over a five-year period, I would assume. Would it be safe to draw that conclusion?

DR. PRESS: With any projection there are always unknowns that you cannot predict, if you will, but projections as opposed to predictions where you simply just use your best guess to predict. Projections are based upon trends, and what you do is project out those trends and make certain assumptions around them. In the first five years, yes, you can, because you know what the births are. They are already there. They show you, and you can roll out those numbers based on some assumptions on migration, but five years out and so on, if the births have been declining at a reasonably constant level at one way or the other you can project them fairly accurately as well.

There is no doubt that the projections will be less valid over time. The more you move away from year one to year five or year ten, yes, they become less valid. Have they given us some indication of direction in terms of where enrolments have been going? Our projections have been fairly accurate when you roll out five or ten years, but are they a prediction of the actual numbers? No.

CHAIR: Okay. Thank you.

Any particular questions?

MR. FITZGERALD: Yes, just a quick question.

Most capital projects now, school board funding when it comes to new school construction, how is that financing done? If there is a new school to be built, does that funding come from government directly to that school board, or to the Department of Education, for new school construction and major renovation?

DR. PRESS: I will let Gary speak to the specifics of it, but the funding of school boards in the last five years is done through the EIC, which is the Education Investment Corporation, which allocates monies for these projects. I do not think the money goes directly to school boards. The money would simply be managed through the EIC.

MR. FITZGERALD: Has it caused problems the way that this particular funding is now carried through with Works, Services and Transportation being the engineering firm that carries out the studies and does the engineering work? It seems to me to be a level of bureaucracy that did not exist before. Has it been troublesome to you to have Works, Services and Transportation dealing there rather than directly with the school board looking after its own affairs?

MR. HATCHER: The Department of Works, Services and Transportation provides us with consulting services, project management services. The actual engineering studies and the design work for schools is done by independent architects. They are hired or appointed and are under contract with the Department of Works, Services and Transportation.

The staff of the Department of Education, we have two engineers on staff and we work with the consultant and the school boards in the design of the school. The Department of Works, Services and Transportation helps us through the actual mechanics of it.

The funding, as Dr. Press mentioned, is held in the Education Investment Corporation and, just as the mechanics of it work, a contractor is out working on a project and at some point in time sends in claims for expenditures or for contract costs, sends the invoices through the project manager, the Department of Works, Services and Transportation, who verifies that in fact the work is done, and then these are sent to the Department of Education for budget approval and the cheques are actually cut by the Department of Finance.

MR. FITZGERALD: With the Department of Works, Services and Transportation involved, it is not causing any problems? It is working quite well, in comparison to the way it was before.

MR. HATCHER: That is correct. Before, it was handled through the churches, through the Denominational Education Council. Since government took over the full responsibility for school construction in 1996-1997, Works, Services and Transportation has expertise that the Department of Education does not have, project management expertise, and they are quite helpful to us.

CHAIR: On that topic, before, I guess, the DEC's made the decision on school construction, on what got constructed. Now, basically, I guess, it is made by the department. Would that be accurate, looking at how much money is allocated in line with looking at the board's priorities that they submit?

MR. HATCHER: That is correct. Under the denominational system, if government allocated $10 million for school construction in a particular year, it was distributed on a percentage basis to each of the denominational groups, based upon the census and the population of that particular faith in the Province. Currently, the money is voted to the EIC. The EIC is given permission to raise that money, and its decisions as to which projects are funded are made with the Department of Education and the Education Investment Corporation. Our determination is usually based upon assessments and needs prioritized by the boards and throughout the Province.

CHAIR: Yes. So the boards all prioritized theirs and submit them. Some have varying amounts of priorities and the department decides how much you are going to get, and one board might get its number one and two priority, and another board might get its number one and two, but the numbers in these boards may not be the top provincial priorities. Number four with one board might be a higher priority than number one with another. So I guess that comes down to the channeling of money. That probably falls more into the political circle than into a need then. My concern is the number one priority for a school should get it and number two should get it, whether they are all in Labrador or Corner Brook or on the South Coast, wherever they are. Whereas before, I think, the DECs got their money based on their specific boards, and they had freedom all over the Province to put their priorities in place then. Whereas right now that does not really happen. There are more boards than there were DECs. So right now there are more opportunities for priorities not to get served in that aspect. If you would like to comment on that.

DR. PRESS: I will, if I may. You raise an important point. There is no doubt that in a perfect system we would have sufficient numbers of engineers located throughout the Province and so on. So every identified need, we would go out and get an independent assessment of that and we could rank that then into a pool which would include all 323 schools and so on, and be able to come down and actually pick which are the more important projects.

Admittedly, we do not have the tools to be able to do that. When they send in priorities for us, certainly the large projects, the major roofing projects, the main renovations and so on, we will usually get one of our engineers, or hire an engineering firm, to go into this facility and give an independent sort of assessment of what the problems are, what the need is, and what the cost is of rectifying that.

There is no doubt, you don't always make perfect decisions with all of the available information. I think there is sufficient knowledge, particularly by the engineers here and in Works Services, who have visited most of the schools around the Province now, who have a good indication of where some of the significant need is and so on. It is not perfect, but I think there are enough safeguards in there that we are making some of the good choices around what are the important provincial priorities.

CHAIR: Would it be safe to say that a board's number one priority will get done before number a number two priority?

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

CHAIR: So the board would have the final say, that its number one priority gets done before its number two priority.

DR. PRESS: That is correct. I was really speaking about sort of competing, if you will, number one priorities.

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

MR. FITZGERALD: Another quick question, as it comes to mind. School board, I guess you would call them, directors or board administrators now serve at the wish of the Department of Education, that they are employed by the Department of Education rather than the school board.

DR. PRESS: No.

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

DR. PRESS: Absolutely correct.

MR. FITZGERALD: Okay. So is it up to the school board what wages the administrator receives and what benefit they receive, because I understand it is far ranging and quite a difference exists between a lot of the school boards in the Province?

DR. PRESS: You are correct on the first and second part of your question. There is a wide-ranging difference among the salaries of the individual directors and so on, as there is a wide-ranging difference in the salaries among the deputy ministers and the executive of government. It is based on the Hay system. The Hay system has a number of guidelines, which are based upon your experience and your qualifications and so on. You are ranked according to so many points and put on a place on the scale. So that would mean that somebody in one board who might come forward with qualifications and experience, that might pay somebody higher than in another board. That is the case, yes.

MR. FITZGERALD: Isn't it also the case that some of those school board administrators or directors even get paid higher than the highest scale on the Hay scale and get many other benefits?

DR. PRESS: They are not outside the Hay scale but there have been - I will give you an example. In board nine, the assistant director was hired who came from the University of Windsor and because of his particular qualifications and because his particular salary coming into it was at a certain level it had to be honored and he could not get a lower salary. So he came in on a significantly higher income level than somebody who might be in a similar position in another board. Those are some of the anomalies that exist with the Hay system not necessarily with directors and assistant directors.

CHAIR: Just a comment: The matter pertaining to that with a specific board - actually, two boards came before Public Accounts prior to my term here I know. I think that was an issue about two years ago. It was addressed with one if not two specific boards. I am not sure.

I guess one of the concerns that I know was alluded to in your opening was with the severance aspect, basically. Boards are showing, if you look at the Auditor General's Report of 2001, a $96.7 million severance liability. Of course, their operating liability was, I think, $3.2 million, $3.3 million almost, which is pretty well eliminated now, I think, except in two. That is back on course, I think. Some of the higher ones have all been dealt with.

I think you mentioned the Comptroller General, the recommendation came that it should be carried that way. Could you just elaborate on that ? It is a cost that is going to be paid from the Province, and we are talking about the severance of all employees, I gather, from teachers down which would be the main group there. It is really a cost on the board. There is a receivable going to be due from the government to eliminate that as it comes due, I guess, on an annual basis. What is the rational there based on the Comptroller General's advise? Why is this? I know that is an issue that the Auditor General raised here. Could you comment first? I would certainly like to hear the Auditor General then on this particular item.

MR. YOUNG: I guess in the accounting practice, generally speaking, if you set up an accrued liability like this you would also set up a receivable, for example, coming from government. In this particular case it is the issue of a grant versus an entitlement. The Comptroller General has, from an accounting practice or an accounting principle perspective, said to the Department of Education that you will be voted, on an annualized basis, a sum of money through a grant for severance cost. It is not an entitlement that necessarily will - because we do not know on a year over year basis the specifics of retirements and severance related to that and so on. So, we will vote that in the Legislature on a year over year basis and as a result, the receivable that is set up, if you want, is only of the order of $6 million or $7 million per annum. It is dealt with on a per annum basis rather than on a true account receivable basis as typically would be set up if you use accrual accounting. From the department's perspective - I mean ideally, we would like to see it set up as an accrual, and we commented on that in our observation back to the Auditor General, that we take no exception to this. It is just that the Comptroller General, responsible for the accounting practices of government, has indicated to us that this is not an entitlement but rather a grant and therefore it should not be set up as a receivable by the school boards but left as we have identified.

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

Mr. Noseworthy.

MR. NOSEWORTHY: The Comptroller General is correct in suggesting that a receivable not be set up. The Province prepares consolidated summary financial statements which would include all of the operations of these boards and gets reported that way in the House of Assembly, which is the way it should be.

To put this in perspective, the hospitals also have deficits. They do not record receivables from the Consolidated Revenue Fund. They have deficits out there, and that is the way you record them. If you are not going to fund them, you do not set up a receivable. The Consolidated Revenue Fund is an appropriate place to record those grants, but in this particular instance the recording of the severance here, without the receivable, is the way it should be. It is appropriate, and we support that.

CHAIR: No questions? If not, we thank you for your time today. We will give Dr. Press an opportunity, if you want, to have any particular closing comments.

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

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

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

Thank you all. The meeting is adjourned.

On motion, Committee adjourned.