2009 Legislative Session: First Session, 39th Parliament

SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

MINUTES AND HANSARD

MINUTES SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

Monday, September 28, 2009

9 a.m.

Strategy Room 320, Morris J. Wosk Centre for Dialogue

580 West Hastings Street, Vancouver, B.C.

Present: John Les, MLA (Chair); Doug Donaldson, MLA (Deputy Chair); Norm Letnick, MLA; Don McRae, MLA; Michelle Mungall, MLA; Bruce Ralston, MLA; Bill Routley, MLA; John Rustad, MLA; Jane Thornthwaite, MLA; John van Dongen, MLA

1. The Chair called the Committee to order at 9:00 a.m.

2. Opening statements by John Les, MLA, Chair

3. The following witnesses appeared before the Committee and answered questions:

4. The Committee recessed from 12:14 p.m. to 1:02 p.m.

5. The Committee adjourned at 5:20 p.m. to the call of the Chair.

The following electronic version is for informational purposes only.

The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

select standing committee on
Finance and Government Services

Monday, September 28, 2009

Issue No. 3

ISSN 1499-4178

[ Page 15 ]

MONDAY, SEPTEMBER 28, 2009

The committee met at 9 a.m.

[J. Les in the chair.]

J. Les (Chair): Good morning, everyone. My name is John Les. I'm the MLA for Chilliwack and Chair of this select standing committee. I'd like to welcome everyone who's here so far this morning and taking the time to participate in this important process.

This is something that we do every year in preparation for the budget that comes up in the following year. The Minister of Finance starts the process by releasing a budget consultation paper by September 15, which he did this year as well. That paper presents a current fiscal forecast. It identifies the key issues that need to be addressed in the next budget. The paper provides a focus for the consultations of this committee and includes information on how members of the public may provide their views on budget priorities.

The Standing Committee on Finance and Government Services is the parliamentary committee which is responsible to conduct public consultations for that upcoming provincial budget. Our committee is required to report back to the Legislature no later than November 15.

This year we are going to be holding ten public hearings in different parts of the province. These meetings have been scheduled in conjunction with the ongoing demands of the fall session of the Legislature this year in Victoria.

Our first hearing, obviously, is here, followed up with one in Victoria. While we're in the provincial capital, we're also going to be trying for the first time to do some video conferencing. Using that method, we'll be hearing from residents in Courtenay, Cranbrook and Dawson Creek. In mid-October we'll be travelling to Smithers, Prince George, Kamloops, Kelowna and Surrey.

If you've not yet received or reviewed the Budget 2010 consultation paper, we have extra print copies here today. These are available on the information table at the back of the room.

In addition to public hearings, there are many other ways that British Columbians can share their ideas with us. We accept written submissions by letter or e-mail, and for the first time, as I've already indicated, we'll be accepting video and audio files as well. For information on how people may participate using one of these methods, go to the website at www.leg.bc.ca/budgetconsultations.

Any public input that the committee receives, in whatever form it is expressed, is given the same full consideration as any oral presentations that are made here at these kinds of meetings. Our deadline to receive written or electronic submissions is Friday, October 23.

Today we're going to hear from a number of presenters, who may speak for up to ten minutes, with up to five additional minutes allotted for questions by members of the committee. Time permitting, we'll also have an open-mike session at the end of today's hearing, with five minutes allotted for each presentation.

At this point I'll ask members of the committee to introduce themselves, starting with Bill.

B. Routley: Bill Routley, MLA for Cowichan Valley.

M. Mungall: Michelle Mungall, MLA for Nelson-Creston.

D. Donaldson (Deputy Chair): Hello there. Doug Donaldson, MLA for Stikine, way up in the northwest.

J. Thornthwaite: Jane Thornthwaite, MLA for North Vancouver–Seymour.

N. Letnick: Good morning. Norm Letnick, MLA, Kelowna–Lake Country.

D. McRae: Hello. Don McRae, MLA for the Comox Valley.

J. van Dongen: Good morning. John van Dongen, MLA for Abbotsford South.

J. Les (Chair): There are two committee members not yet here: MLA Bruce Ralston, who will be here later on, and MLA John Rustad, who is on the Canada Line as we speak, hustling to get over here.

We're also joined today by our Clerk, to my immediate left, Kate Ryan-Lloyd. Also here is Jonathan Fershau. He's at the table at the back staffing the registration desk, and staff from Hansard Services, Michael Baer and Polly Vaughan, will record and prepare the written transcript of these meetings.

With that, I'd now like to turn the floor over to James Bond and Caroline Nevin of the Canadian Bar Association, B. C. branch, to start off our hearings.

Good morning.

J. Bond: Good morning. Thank you, Mr. Chairman, Deputy Chairman and members of the committee, Madam Clerk.

As you know, my name is James Bond, and I am the president of the Canadian Bar Association, British Columbia branch. I am joined here by Caroline Nevin, the executive director of our branch.

As president, I am pleased to speak to you today on behalf of almost 6,500 practising lawyers, judges and law students from across the province. I'm proud to
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say that this is our seventh submission to the Finance Committee. We value the invitation to participate in this process every year.

I'd also like to take this opportunity to thank the government for the implementation of the RRSP legislation that we were pleased to consult with you on last year. We proposed this legislation not only because it's important for our members but because it's important for all British Columbians to save for retirement outside their company pension plans.

This year I would like to focus our comments on access to justice and how the deliberations of your committee may affect it. Like many stakeholders in the justice system, the British Columbia lawyers represented by the CBA are concerned about both perceived and real barriers to British Columbians accessing the justice system and its component parts.

Access to justice is a fundamental part of our legal system and the foundation upon which our society is based. The Canadian Bar Association has a legislated mandate, which appears in its parliamentary charter, to protect and preserve the administration of justice, and promoting access to justice is a fundamental part of that.

However, the government of British Columbia is also responsible for ensuring that British Columbians have access to justice. British Columbians must be able to enforce their rights and seek legal remedies where those rights have been ignored or impeded. Otherwise, our laws become hollow words.

[0905]

Those rights of individuals and our ability to seek redress where those rights have been impacted upon are as fundamental to a proper functioning of society as the rights of British Columbians to health care or education. In fact, it is the rule of law, the administration of justice and the ability to access that justice that are keys to ensuring that all other rights of our citizens are protected.

British Columbia's lawyers and judges see firsthand the problems associated with limited or no access to our justice system — lack of lawyers; increasing numbers of self-represented litigants; clogged courts, which result from both of those things — and the subsequent impacts on health and social service systems are clear.

Lawyers understand the privileged place they hold in society as officers of the courts and defenders of the rule of law, and we are doing what we can to alleviate that issue, as I will describe later. However, there are three key areas where we believe the government needs to act to assist also.

First, taxation of any kind on legal services creates an additional barrier to access and should be removed. While the proposed HST system will allow corporate entities to claim input tax credits in most instances, the full cost of the tax will be borne by individuals, and it is individuals, such as parents involved in custody and access disputes or injured individuals seeking compensation, that are least able to bear such a burden.

Second, reasonable and sustainable funding for the legal aid system must be implemented. There is an increasing proportion of the population that does not qualify for the very limited services available through legal aid currently, cannot afford a lawyer and need more legal services than are available to them through pro bono clinics provided by the profession.

In communities across the province the legal profession does its part to help fill that gap by providing tens of thousands of free hours of reduced-fee services. However, we can only do so much. A properly funded legal system is crucial to bridge the growing chasm between the available services and those who need them in today's economy.

We know that those who administer the justice system are struggling to ensure access to legal services, court resources and timely resolution of legal problems. Certainly, the government is to be commended for not cutting the government funding of the Legal Services Society for the current fiscal year. However, the increased demand for services by those most in need will not be met because other economy-sensitive sources of funding have plummeted by at least $2 million.

Just like employment insurance in the federal system and social assistance in the provincial system, legal aid needs more funding in times of crisis. The current economic circumstances have hit hardest those who need legal services but cannot afford to pay. This is amply demonstrated by the $4.7 million increase in the demand for services supplied by the Legal Services Society in the last fiscal year.

One of the responses implemented by the Legal Services Society was to cut the family dispute resolution services program, which was already a downgrade from actually supplying a legal aid lawyer. Since 2002 only those families with safety issues in marital breakdown or emergency child access issues qualify for actual legal aid funding.

Behind the statistics are people. The problem has been well studied and surveyed, and a number of reports have been written. It is time for action. The problem is that there is a largely silent group of people being harmed, and that is why I am speaking up today.

I encourage you to come and see unrepresented people trying to solve difficult legal problems in our courts. Or go to your local Legal Services Society office, and ask them to let you meet some of the people that they turn away every day.

The problem is significant and growing, and when the individuals who are unable to access legal aid services represent themselves in court, their lack of understanding of the legal regime — their inability to determine whether they actually have a case or to articulate it if
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they do have one — increases the burden on court resources and leads to longer wait times for disputes to be resolved.

Third, the significant collapse of legal services in rural areas of the province must be addressed. There are 10,200 lawyers licensed to practise law in B.C. Of these, fully 80 percent practise in the counties of Vancouver, New Westminster and Victoria. Of the 263 students currently articling, only 40 are located outside of those three areas.

We know that the average age of lawyers in rural communities of the province is 50 and growing. We also know that in some communities the numbers are significantly higher and growing. For example, in Castlegar the average age of a lawyer is 62.

There are now almost twice as many practising lawyers between 51 and 60 as there were ten years ago and more than three times as many practising lawyers between 61 and 70 as there were in 1998. There are 1,115 lawyers between 61 and 70 practising in British Columbia. That's 10 percent of the legal population in the province.

The aging of the profession in some ways mirrors the changing demographics of B.C.'s population. However, the impact of the baby boom generation's aging is exacerbated by the five-year retention rate among lawyers, which ranges from between 75 percent to 80 percent. What this means is that in the first five years of practice 20 to 25 percent of lawyers cease to practise. Even worse, the number of lawyers being called to the bar upon graduation from law school is also decreasing.

[0910]

We have a crisis of aging lawyers in rural areas, and as these rural lawyers age and retire, there are fewer new lawyers arriving to take their place in small and medium-sized communities. This has a huge impact on the number of self-represented litigants appearing before the court, which in turn costs the province untold hours and dollars in delays and resources.

Citizens without representation or even, indeed, the availability of having legal counsel are left significantly without access to basic justice matters for such everyday legal needs as family law, estate law or personal injury law.

As I said, the lawyers of British Columbia are doing their part, where we can. In March of this year the Canadian Bar Association launched the rural education and access to lawyers, or REAL, initiative, funded by the Law Foundation of British Columbia. The program places second-year law students in summer positions around the province in communities with less than a population of 1,000 or where the lawyer ratio is less than one in 500, and there are many of those.

Our intention is to expose young law students to the opportunities available outside of the Lower Mainland and Victoria. Our hope — and we'll see the results at the end of the three-year project — is that we can begin to address the impending decline in lawyers available to serve rural British Columbians.

I am proud to report that through REAL, we placed 11 students this summer in the communities of Trail, Nanaimo, Kamloops, Powell River, Vanderhoof, Fort St. John, Campbell River, Smithers, Vernon and shared community placements in Squamish-Whistler and in Cranbrook, Fernie and Kimberley. And 2010 will see us placing 17 summer students around the province.

This leads me to our next request for government action, which is student loans. Last year when we addressed this committee, we brought to your attention our concern about the overwhelming debt carried by law students upon graduation. Students are making the economic decision to practise in urban areas, where they can earn more money, instead of rural areas, because of high student loan debt upon graduation. I was one of those 15 years ago who made that decision.

We applaud the government's reaction to the difficulties faced by rural British Columbians trying to access health services by implementing a loan forgiveness program for medical, nursing and pharmacy students who move to rural areas to work. But as I said earlier, access to justice is just as fundamental as access to medical services, and the lack of lawyers in rural areas has reached crisis proportions.

I was in Wells, British Columbia, last weekend for the meeting of the Cariboo County Bar Association. I was told by the lawyers in the Cariboo that they turn away multiple clients every day. I was told by one lawyer in Terrace that when a potential client called to ask for an appointment, his next available time was two months away.

The CBA has the REAL initiative, but the government can help attract lawyers to rural areas who will remain there if the following two recommendations of the CBA are implemented.

First, we recommend that the government acknowledge that the articling period is a full-time educational period. This is the period between class-based studies and being called to the bar to be able to practise law. Students are under the direction of the Law Society during this period. The Law Society has the mandate from the province to set educational standards and requirements, and it oversees the completion of their program and evaluates its students, just like any other educational institution in British Columbia.

However, currently articling students must begin to repay their student loans during their articling period. The financial burden on those students is preventable. We propose that the period while a student articles be considered full-time study. This would result in students staying in the no-payment, interest-free status of student loans for the entire 12 months of articles and then converting to no-payment, interest-accruing status for the six-month period following articles. Currently this
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period commences the moment university classroom studies cease.

Second, we recommend that the current B.C. student loan forgiveness program — which forgives student loans at the rate of one-third per year for three years for doctors, nurses and pharmacists who work for three years in rural British Columbia — be extended to lawyers. This is a tangible commitment to access to justice as well as to supporting our own B.C.-trained students in meaningful community practice and service to our local populations.

In closing, we look forward to reviewing the report and recommendations later this fall and hope that you will relay to the government the significance of addressing these important issues. On behalf of our membership, I thank you for the opportunity to appear before you today. I'll be pleased to answer any questions.

J. Les (Chair): Thank you very much. Questions from committee members, starting with Doug.

D. Donaldson (Deputy Chair): Thank you very much, James and Caroline, for the presentation. Being from a very rural area, Hazelton, I hear what you're saying very much.

I have one quick question. As you know, Linda Locke, the first aboriginal woman who has become a QC, is head of the Upper Skeena Counselling and Legal Assistance Society up there. She describes to me not the Legal Services Society clients but what she calls the working poor and the lack of representation.

I was wondering if you could just expand on how the self-represented litigants cause further delay and costs to the system, as well as the impact that the HST may have on people that would be typified by Linda as the working poor — how that would impact their access to legal representation.

[0915]

J. Bond: Sure. Everything that I'd have to share with you at this point is going to be anecdotal. We haven't conducted any studies, but I think it was notable that when the services report came out for the Attorney General's office as part of the budget, it highlighted the fact that court trials are now taking longer. My first reaction was: "That's not terribly surprising, considering the increased number of self-represented litigants."

Self-represented litigants — we've heard this from judges, and we've heard this from other lawyers who practise in the courts — go into court, don't understand the system, don't understand really what their legal problem is and, for example, as one lawyer shared with me on Saturday, plead guilty and then go on to provide an explanation of why it is that they're actually not guilty, simply because they want to get it over and dealt with.

The result is that somebody needs to take them in hand. It appears that often that's either the judge or the one lawyer, if there is a lawyer in the room, who might be on the other side, who is directed to somehow assist, which creates additional problems.

The fact that the court needs to stop, that direction needs to be given, that people need to be sent away to rethink what they're asking for and come back — those all add to the delays that we're talking about.

As I said, it's all anecdotal, but we hear about it all the time. I actually asked the question on the weekend to somebody who was sitting next to me for our provincial council meeting during a lunch. I said: "How many self-represented litigants do you really come across these days?" He said: "At least half of the people in provincial court are self-represented." I shouldn't even say self-represented. I think that's a bit of a misnomer, because when you're not a lawyer, you're not really in a position to represent. They're really unrepresented litigants.

With respect to the HST issue, all we can say at this point is what we've reiterated with respect to the PST in the past. We produced a study that was released three years ago that showed there is an economic impact on the ability of people to access legal services when there's an additional tax that's placed on these legal services.

Again, in the HST regime, the people that most need the assistance, you could say, are those individuals who are going to be required to make the payment, and they won't be able to claim it for tax credits, like our corporate clients will.

Certainly, it's levelled the playing field with respect to corporate clients — there's no question — but on the individual side, it's a problem.

J. Les (Chair): With that, we have arrived at 20 after nine. Unfortunately, that's all the time I can give you this morning, but on behalf of the committee, let me say thank you very much for a very good presentation.

Next up is the Federation of Post-Secondary Educators.

Good morning.

C. Oliver: Good morning. Thank you again for the opportunity to present before you. I just want you to note that we will be making a written submission to the Clerk of Committees. My comments today will be summarizing from that submission and will also include some of the recommendations we'll be making in that report.

The Federation of Post-Secondary Educators, as many of you know, represents over 10,000 faculty and staff at 22 of B.C.'s public colleges, universities and institutes. We have been regular presenters before this committee over the years, and we appreciate the opportunity to share our views on what priorities should be addressed in the March 2010 provincial budget.
[ Page 19 ]

The importance of the committee's consultation process cannot be overstated, in our view. First and foremost, citizens want and deserve transparency in the budget-making process. But just as important, citizens want and deserve to have confidence in the budget-making process.

Unfortunately, that confidence was dealt a serious setback in the last six months, as it became more and more apparent that the February budget estimates on revenue and final deficit were found to be significantly off target.

Add to that the fact that the Minister of Finance and the Premier announced a tax-shift policy in late July with virtually no consultation, and you can see why the government's approval ratings have fallen so far and so fast.

[0920]

At the very least, your committee has an enormous task in front of it, restoring public confidence in the budget-making process. The more that this committee is prepared to engage in a broad public debate about taxes, revenue projections, public investment priorities and all of the related program funding that is tied to the budget-making, the more likely it is that this committee will actually report some progress in restoring that public confidence.

It's worth noting, as well, that public confidence is closely tied to the willingness of MLAs on both sides of the House to participate in public forums on some of the key issues we face in our province. Our federation is part of a larger group called the Coalition for Public Education, which includes students, educators and staff involved in both the K-to-12 and post-secondary education systems in our province.

We organized a series of all-candidate debates prior to the last provincial election, but unfortunately, B.C. Liberal candidates were consistently no-shows at these events. That's a troubling pattern, in our view, because it simply feeds an underlying cynicism amongst voters, a cynicism that often leads to low voter turnout.

We saw historically low turnouts in the May election, but hopefully, greater transparency and accountability through consultation efforts like this can begin to re-engage voters in the important work of their Legislature.

In our submission we will also be including copies of an Ipsos-Reid opinion poll that was done in mid-August as part of our submission to your committee. When I mentioned earlier that confidence was a key factor in budget-making, it's disturbing to see that close to two-thirds of those polled by Ipsos had lost confidence in the government's fiscal management.

The poll shows that a strong plurality of British Columbians wants to see a budget that invests in public services, programs and infrastructure, even if it means running a deficit. If there's a take-away from this polling data for this committee, it is to be more forthcoming with the public about our fiscal status. You would be pleasantly surprised at how supportive the public can be about making tough choices.

For example, 78 percent of respondents would support higher taxes to pay for things like better health care, better access to education and improvements in public infrastructure. The bottom line: voters are realistic about what needs to get done and are even prepared to support higher taxes to achieve those outcomes.

It's important to note that respondents to the Ipsos poll also wanted to see tax fairness as a key to any tax changes. So 76 percent favoured tax increases for corporations, a move that stands in stark contrast to the current initiative to harmonize PST and GST, in which consumers will see a $1.9 billion shift from business to consumers.

The Ipsos poll gave strong support for more investments in post-secondary education. A full 86 percent of those polled wanted to see the September budget update "invest more in post-secondary education and retraining programs for B.C.'s unemployed."

Unfortunately, those investments have been missing from the last several provincial budgets. The operating grants that are so critical to the funding of our post-secondary institutions have been virtually flatlined in the budget update that was tabled by the Minister of Finance in September. Those operating grants were unilaterally cut by 2.6 percent in 2008. That funding cut has not been restored, continuing a trend in our sector that has put the emphasis on higher tuition fees as a way to source additional revenue, rather than greater fiscal support from the provincial government.

In previous presentations to this committee, some members have been quick to defend the government's funding track record by pointing out that between 2000-2001 and, coming up, 2011-12 funding for post-secondary institutions will have increased by 76 percent. But that's only true if you include the 145 percent increase in tuition fee revenue, which comes out of the pockets of students and their parents and not from government.

In our work with student organizations we are constantly reminded that the affordability crunch is very real and very expensive. Student debt has skyrocketed, along with the enormous spike in tuition fees. At our institutions the real funding crunch is best described in terms of how many inflation-adjusted dollars are provided by the provincial government per full-time student.

That number has fallen steadily over the last nine years. Real per-student funding is 8.8 percent lower now than it was in 2001. When real per-student funding falls by that much, post-secondary institutions are forced to do more with less.

[0925]

Student supports have suffered. Counselling, library services, program supports for adult learners returning to post-secondary, English language training, other language training services, university transfer programs —
[ Page 20 ]
all of these have faced cutbacks over the last eight years as institutions scramble to fit growing needs into limited funding support.

More recently we have been contending with program cuts that emerge not so much because of anticipated funding shortfalls, but rather unanticipated announcements from Victoria about funding cancellations. For example, our organization had lobbied several years ago to have literacy coordinators repatriated back to the public post-secondary system. The ministry agreed and provided $1.7 million to support this initiative, starting in 2007. In June of this year we were told that the funding arrangements for literacy coordinators were cancelled.

A similar situation played out at Langara College, which houses the advanced education media acquisition services. This service buys a wide range of electronic media learning products as part of the consortium arrangement among public post-secondary institutions. It saves the public system money, but it was cut as part of a larger effort by the ministry to further reduce its spending commitments.

We think both examples are more evidence of a shortsighted approach that has been adopted by the government, an approach we hope this committee's report will challenge.

What is troubling about this fiscal priority is that it is out of step with what we know will be an urgent need in the years ahead. British Columbia, like many jurisdictions across North America, is facing a skills shortage. Demographic changes, especially an aging workforce, mean that we will need to do a much better job of training people for the skills that will position our province to emerge that much stronger from the current recession.

Those skills span everything from trades and technical training to certificate and diploma programs, as well as graduate and post-doctoral disciplines. Those are the capacities that our institutions were set up to deliver, but as funding problems accelerate, it becomes increasingly difficult to meet that challenge. In effect, you can't position B.C. for future growth by underinvesting in post-secondary education.

Let me conclude by identifying some specific recommendations that we hope to see in your committee's final report.

First, we would like government to restore the 2.6 percent cut to post-secondary operating grants that was unilaterally imposed on our institutions in 2008.

Second, we would like government to undertake an extensive review of the post-secondary funding formula to ensure that future funding levels are not eroded by ongoing inflation.

Third, as part of that review of the funding formula, we recommend additional efforts be made to close the funding gaps that emerge between our urban and rural post-secondary institutions.

Fourth, we also ask that the Ministry of Advanced Education work with post-secondary stakeholders to ensure that the federal transfers detailed in the labour market agreement, known as the LMA, and the labour market development agreement, the LMDA, fully utilize the existing capacities in our public post-secondary institutions, especially those capacities in the area of English language training, trades training and apprenticeships, and developmental education.

Fifth, we ask government to restore a system of student grants to ensure that post-secondary education is both affordable and accessible to all families, regardless of their income.

Again, I want to thank you for the opportunity to present this to you today.

J. Les (Chair): Thank you very much.

Are there any questions?

N. Letnick: Thank you very much for the presentation. I guess, just a question of philosophy. You've expressed areas where the government can provide more funding for post-secondary education as well as professionals and students through the system. I appreciate that.

You also talk about the Ipsos-Reid poll which says that most people would support running a deficit. The government is projecting maybe around a $2 billion to $3 billion deficit. You also say that the Ipsos-Reid poll supports higher taxes. I gather from that that you're talking about higher taxes on businesses. I think you mentioned that.

Is that the position, as well, of your organization — that we should be raising taxes on businesses and running a larger deficit?

C. Oliver: The position of our organization is that we have to look at tax fairness. That would mean taking a look at how taxes throughout the entire province are levied on corporations, on individuals, on low-income, middle-income…. To do a review of that and to come up with a plan that would exemplify tax fairness is a tenet of our organization.

[0930]

Certainly, we're seeing that amongst people — the average working person — in this province.

N. Letnick: I'm brand-new at this, so I apologize. I'm not too sure what the procedure is. If it's just to ask a question….

J. Les (Chair): Well, one of the procedures will be that this is the last time you get a second question.

C. Oliver: He's been at it for longer.

N. Letnick: I can get into a debate for an hour with you.
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J. Les (Chair): We're not doing that either.

M. Mungall: Just kind of following up on what Norm was bringing forward and what you were talking about — voter confidence in the budget-making process. Would it be your take that an independent budget officer would be able to look at that tax fairness but also be able to restore that voter confidence in the budget-making process?

C. Oliver: Well, I think that, first of all, restoring voter confidence or even citizens' confidence in the budget-making process would be a good thing. I think these are good steps, when the committee travels around the province hearing from the citizens. It's always an excellent opportunity not only for our own organization but many others or even individuals to be able to present their case for the budget planning.

Having an independent officer — perhaps. I think what needs to be done, though, is to really take a look at the taxation system that we have in British Columbia — a critical-eye look at it. See what services have suffered because of the taxation system in British Columbia, and let people have that input. Go around the province and seek that input specifically on that issue, and come up with some kind of a plan that is fair in people's minds.

M. Mungall: So that could be the mandate of an independent budget officer.

C. Oliver: It could be, yes.

P. Legg: Let me add to that.

J. Les (Chair): Very briefly. You've got 30 seconds.

P. Legg: I promise. I just want to read from the phone book first.

The independent budget office is a system that has just been started at the federal level. It seems to be that there are lots of lessons we can learn from that — positive lessons. I think there is some merit in having that independence.

J. Les (Chair): With that, I'd like to thank you for being here this morning and giving us your views. We look forward to your full written submission in the not too distant future.

C. Oliver: Thanks very much, and good luck with all the presentations.

J. Les (Chair): Next up is the Confederation of University Faculty Associations of British Columbia.

Gentlemen, good morning.

R. Clift: Good morning. My name is Robert Clift. I'm the executive director of the Confederation of University Faculty Associations of B.C. That's a mouthful, so we just say CUFABC.

CUFABC represents the professional interests of professors, librarians, instructors, lecturers and other academic staff at UBC, SFU, UVic, UNBC and Royal Roads University. Our purpose is to advocate for a system of higher education and research in British Columbia that is of high quality and serves the diverse needs of British Columbians.

Our president, Dr. Paul Bowles, who is a faculty member at University of Northern British Columbia, had hoped to be here today, and he sends his regrets. Scheduling conflicts with his duties in Prince George made it impossible for him to be here. In his stead I have with me today SFU history professor Dr. Hilmar Pabel, who is the president of the SFU Faculty Association and a member of our executive committee.

I'd like to thank the committee for the opportunity to make an in-person presentation to you this year. I know you have a very tight schedule and not as many dates as you normally do, so we do appreciate the invitation to be here. I hope that what Dr. Pabel and I have to say will prove useful in your deliberations in the coming weeks.

The budget update on September 1 provided good news and bad news for the post-secondary system in B.C. The good news was that funding for public institutions promised in the February 2009 budget would be maintained over the next three years. The bad news was that the funding for public institutions promised in the February 2009 budget would be maintained over the next three years.

We appreciate government's commitment to protect higher education funding in these difficult financial times. But let me be perfectly clear. Flat funding does not protect higher education. In fact, it will mean a deteriorating post-secondary education sector at exactly the time that we should be making major investments in the human capital of our province.

How is this so? Historically, the costs of goods and services necessary for the functioning of universities have risen more quickly than the general costs of consumer goods and services. For example, in 2009 the budget document projects that consumer goods in B.C. will rise by 0.6 percent.

[0935]

The higher education price index, which is published out of the United States, is projected to rise by 2.3 percent over the same period. So if the current dollar value of operating grants to institutions remains flat, this actually means institutions have to cut operating expenses.

Layered on top of this are three other significant cost drivers: the carbon tax, the harmonized sales tax and increased demand for student spaces. B.C.'s universities are supportive of the move to reduce the production of
[ Page 22 ]
greenhouse gases and moving towards carbon neutrality, and we've worked hand in hand with government on that. Like businesses and individuals, the public post-secondary institutions will pay higher taxes on their fuel and energy needs.

Unlike businesses and individuals, the public post-secondary institutions will receive no benefit from corporate or individual tax reductions in order to offset. So rather than a tax shift for colleges and universities, the carbon tax is, unfortunately, simply an additional cost.

Similarly, the harmonized sales tax also represents an additional cost to public post-secondary institutions. Although some ancillary services such as food services, parking and campus bookstores will be able to claim full input tax credits, because educational services will be exempt from HST, they will not be able to claim full input tax credits.

We expect that the existing rebate structure of the GST will apply to the HST, and so the effective taxation rate for services purchased by public institutions will be 3.96 percent rather than 12 percent. Nonetheless, this represents an increase in the cost of taxable goods and services purchased by public post-secondary institutions for educational purposes.

I can't say at this time what that increase will be, although I suppose the committee will be familiar with the report released just, I think, a week or ten days ago from Toronto Dominion bank that suggests there will be a general increase in consumer prices of 0.7 percent due to the HST.

As we predicted earlier this year, enrolment at our five member universities is up. Preliminary figures indicate enrolment is up by 5.2 percent overall, or 5,128 students. We are, of course, pleased that more people are seeking the intellectual employment benefits that come from a higher education.

Unfortunately, our member universities were only provided with funding from the provincial government for 2,396 new student spaces. This means that rather than revoking the offers of admission to a number of students, we created 2,732 unfunded student spaces this fall. This amounts to a revenue shortfall of about $19.7 million. If funding for these new student spaces is not forthcoming in 2010, the institutions will have little choice but to severely restrict new admissions next fall.

To give you some additional examples of potential effects these cost pressures will have on our universities, I'll ask Dr. Pabel to speak to you for a few moments.

H. Pabel: I am grateful to address you, especially when my MLA is in this room, from beautiful North Vancouver. Let me just give you a little bit of the picture at SFU. The university has undergone substantial cuts to its budget over the last couple of years, which has meant the termination of support staff, discontinuation of faculty positions and the elimination of the Canadian studies program in the faculty of arts and social sciences, my own faculty.

The university administration has asked — ordered — faculty deans to model a 10 percent cut over the next three years. I've already looked at the response of the dean of science, who, in trying to reach that target, has suggested that perhaps the faculty of science should close an important electronics facility and terminate at least ten actual teaching positions.

Now, enrolment has increased at SFU in this new academic year by 7 percent. So if the funding to the operations budget remains the same over the next few years and students continue to flock to university, as they often do in hard economic times, and the university, to try to meet its financial pressures, cuts faculty positions, then we're going to have a huge ratio of student to instructor. This will compromise the student learning experience.

[0940]

This will be further compromised by the fact that the library at SFU is facing a 20 percent cut to its collections budget. How can you carry out research and teach students if the university cannot keep up with the newest scholarship, the newest efforts to teach students?

Furthermore, government has been generous in giving capital funding to SFU over the past few years. We have a new building, in which we have our new faculty of health sciences, which I'm sure will contribute greatly to this province. Yet, new buildings need to be maintained, and so there again, flatlining the budget to post-secondary institutions will not be very helpful.

R. Clift: Before closing, I'd also like to draw to your attention the negative consequences stemming from the announcement in the recent budget that public sector wages will be frozen for at least two — and, possibly, as many as four — years. We understand fully why the B.C. government wishes to take this approach, but it is a flawed policy with respect to global labour markets such as that for university professors.

For example, this past spring and summer a number of universities across Canada signed three-year wage settlements offering 2 percent to 3 percent general wage increases in each of the next three years. Internationally, many universities are exploiting wage freezes and funding shortfalls in other countries to lure away professors to their jurisdictions. B.C. is not isolated from this.

Our written submission will be ready for you in about two to three weeks, and we'll go into these matters in more detail. At this time we make six preliminary recommendations to you, some of which we've covered today and others of which will be fully developed in our written submission. These are:

(1) increase average per-full-time-equivalent student funding by at least the rate of growth in the consumer price index for 2009-10 and onwards;
[ Page 23 ]

(2) provide a general increase to institution operating grants for public post-secondary institutions to offset the effects of the carbon tax and the harmonized sales tax;

(3) provide full funding for each of the approximately 2,700 unfunded undergraduate student spaces and 4,300 unfunded graduate student spaces at our universities;

(4) grant Royal Roads University per-full-time-equivalent student operating funds equal to the average funding for each of the four research universities — UBC, SFU, UVic and UNBC;

(5) restore funding to all provincially funded research programs, and in particular, $15 million to the Michael Smith Foundation and $8 million to the forest sciences program; and

(6) that government recognize and address the debilitating effects of a wage freeze for university faculty in a globally competitive labour market.

Thank you again for this opportunity. I'd be happy to answer any of your questions.

J. Les (Chair): Thank you very much.

Any questions?

M. Mungall: First, thank you very much for your presentation today. In the presentation you talked about budget pressures, the HST and the carbon tax and offsets, along with a lot of other things. But going to the increases that are going to be coming from the current budget and how it'll impact the next budget, is the increase in the MSP premiums — going up by 6 percent, proposed for 2009 and, of course, 6 percent again for 2010 and again in 2011…? How are those increases going to be adding to your budget?

R. Clift: They will increase costs. I can't say I'm familiar with the contract language for all the various groups on the campuses, but certainly a number of them simply say that as a benefit, costs of MSP will be covered, as opposed to a specific amount. So the employers, being the university administrations, will be obliged to pick up those costs. Indeed, that's an additional cost pressure on our institutions. There's no doubt about that. I can't quantify that for you, but it is a cost pressure.

D. McRae: Two questions, if I may. Several years ago SFU, and then followed by other major universities, no longer required government exams to be taken by the students and their marks counted for their entrance. At the time I was led to believe, though I may be incorrect, that that was because of being more competitive, trying to attract students, especially in a competitive labour environment.

Can you give me some enlightenment upon why that was happening? And perhaps now, as we see more students applying to post-secondary education, would you be heading back towards taking the government exam results?

[0945]

R. Clift: As I recall, at the time our organization wasn't involved in that decision. That was a decision taken by individual universities. But in looking at the way we choose to admit students to B.C.'s public universities, there are kind of two streams. There's the stream of providing opportunities for British Columbians, and there's the stream — an extremely much smaller stream — of attracting high-quality students, high-potential students, from elsewhere in the country.

That particular policy had to do not with attracting students for the sake of filling spaces. It had to do with that second, smaller stream about attracting high-quality students to British Columbia and hoping that they stay here and contribute to our economy through doing that.

I'm afraid I don't have any information as to what the effect of that policy has been. As far as I know — unless you've heard something different, Hilmar — I've not heard any indication that the institutions, at least SFU, are planning to turn away from that policy.

H. Pabel: No, I'm not aware of it.

D. McRae: My second question was in regards to tuition funding for the average arts or science undergrad. How does B.C. compare to the other provinces across Canada?

R. Clift: I'm afraid I don't have those numbers at hand. As I recall, when I last saw them, we were near the middle of the pack. I think we're slightly above the average. But I'm sorry. I don't have those numbers.

I will put that information in our written submission, since you've asked the question. Indeed, if there are other questions the committee would like answered, submit them to us. We will make sure it's included in the written submission to you.

J. Les (Chair): Okay. Final question for this morning, from John.

J. Rustad: Thank you very much for your submission. Given that we are very short on time, what I would ask is: when you give your written submission, with regards particularly on the wage mandate and attracting teachers and the professionals versus other jurisdictions that may attract them away…. I'm just wondering if you can provide a little bit of relevance with regards to the overall package — in other words, competitive in terms of taxes, attracting people in terms of wanting to live here as opposed to just the wage component. I'd be interested to see where we compare with other jurisdictions around that.
[ Page 24 ]

Just with that point as well, perhaps if you could indicate where you'd suggest we might get the revenue for some of the requests that you have put forward. To be able to meet some of those needs, it would be great to be able to see that as well as part of your calculations as to where that would go, and perhaps some analysis around any kind of impact that may have on other types of issues that we have facing the province.

R. Clift: Very briefly, with respect to the positive environment in B.C., indeed we did a survey a number of years ago in conjunction with the university presidents, which showed that people like to come to B.C. It's an attractive academic environment. It's an attractive physical environment. It's also hellishly expensive to live in the Lower Mainland, independent of the tax regime. That remains a problem, particularly for Vancouver and Victoria increasingly.

With respect to where government might find savings or make other choices, we were not elected to make those hard choices, I'm sorry to say. I have been approached in the past by a number of parties to do so, and I've wisely stayed away from that.

What we're here to indicate to you is the consequences of those decisions. You have to make those decisions. We appreciate that we don't have to sit in your chairs and make those decisions. But there are consequences flowing from all of it. What we want to do is provide you with the most information as to what the consequences might be.

J. Les (Chair): We appreciate your coming this morning and letting us know what you think needs doing. We'll take your submission and do the very best we can.

Next we will hear from the British Columbia Medical Association.

I would almost say: "Good morning, neighbour."

B. Brodie: I was going to say the same.

Mr. Les, thank you very much for the opportunity to speak with you this morning. My name is Brian Brodie. I'm the president of the B.C. Medical Association. We represent over 9,000 practising physicians across the province.

As Mr. Les alluded to, I'm a family doctor in Chilliwack, where I've practised general medicine for the last 11 years, and nine years prior to that in the geographic centre of B.C., up in Burns Lake. I'm pleased to provide some suggestions for the provincial budget in 2010 on behalf of B.C. doctors.

Before I begin, I would like to note that the BCMA and the provincial government have a signed agreement that is in effect until 2012. I'm not coming here today in any kind of negotiations capacity.

Building a stronger British Columbia is an appropriate theme for your committee this year. Our health care system is a critical foundation for a strong British Columbia. It ensures B.C. has a healthy workforce. It employs hundreds of thousands of people. It creates many opportunities for investment.

It also invests, of course, in our future by ensuring our children have access to health care throughout their early years.

[0950]

I do volunteer work in Honduras every year. Each time I come back, it reminds me of how fortunate we are to live in B.C. I think your government calls it "the greatest place on earth."

We know these are tough economic times. Today more than ever we need to have a thoughtful conversation about how to allocate and spend each tax dollar in our health care system. Even with the economic challenges our province faces, we must continue to try to do better. We need to try new ways of delivering care within our public system.

Already the BCMA and government are seeing successes that are improving care and outcomes while also reducing or avoiding costs. It's time to take the focus to other parts of the system.

I will outline for you our three priorities for Budget 2010. First, we need to be strategic about the choices being made in our health authorities at these times. Second, we must continue to improve quality and good outcomes in primary and specialty care through collaboration. Third, we must move forward to improve services for mental health as well as addiction.

Let me begin with the fiscal challenges we are facing. Funding for health care is increasing each year until 2011 and 2012. That is a fact. At the same time, we know that health authorities face tough choices as population growth, aging and demand outstrip these increases.

Some services are being impacted or even cut as a result. That is also a fact. This means we have funding increases and select service cuts happening at the same time. That's been a topic of much conversation in the Legislature and the media these days.

The BCMA knows there will be some impact on services and patient care. Moving forward, we need to include the medical profession in these discussions to avoid decisions that may wind up being the proverbial penny wise, pound foolish.

Let me give you a real-life example from my own community in Chilliwack. At the moment, our hospital is a nationally recognized facility for the training of medical students and residents. The challenge is that we're providing many of these services with a relatively skeletal crew. The loss of one surgeon or operating room in that group will collapse our clinical teaching capacity. You can do it with four surgeons, but you can't do the surgical load and teach with only three. So what seems like a small service reduction winds up mortally wounding our teaching capacity.
[ Page 25 ]

Picture these scenarios occurring across B.C. in the coming year. This applies to other professions and programs, not just physicians. And just personally, I would say, doctors don't think in regions. We understand that administrators do, but we live in communities, and we have commitments to communities, and one slice across the pie doesn't always work. So as service changes roll out, physicians and other health professionals must be included in those discussions so that we know their full impact.

We know that there will be challenges in the emergency departments, waiting lists, acute and long-term care beds and other community services. When critical issues are identified, government and health authorities may need to revisit these programs or services and restore their funding.

That is why I'm recommending that we must have some flexibility as we move forward this year and into Budget 2010.

I do want to acknowledge some of the successful cost-saving measures implemented recently, such as bulk purchasing of supplies, equipment and medications. We congratulate government for pursuing these initiatives. But physicians think it's time to push the envelope in B.C.

For example, we think it's time for us to reconsider how we fund health authorities. Global budgets are imprecise. They do not reward innovation particularly well, and they don't give us good information on the actual costs of providing care. Think about how much has changed in health care over the last 50 years. Yet our approach to funding our institutions is largely unchanged.

The BCMA is in the process of developing a paper on activity-based funding models, which we will release early next year. This will look at how we can fund facilities based on the services they provide and the outcomes they achieve.

I'll now turn to my second point: how to improve quality and outcomes in primary and specialty care through collaboration. The BCMA and the Ministry of Health just released an independent evaluation that appears in the latest issue of Healthcare Quarterly. This study looks at the impact of joint programs of the GP Services Committee designed to improve care for people with chronic illnesses. This study examined 98,000 high-needs patients in B.C. with two common chronic diseases: diabetes and congestive heart failure.

[0955]

We know that many of these high-needs patients unfortunately do not have a regular family doctor. However, by increasing the number of these high-needs patients with a regular family doctor by 5 percent, we have generated savings of $85 million per year.

Let me explain. The average annual hospital cost for a high-needs diabetic patient without a family doctor was almost $17,000 per year. For similar patients with a regular family doctor, the costs fell to $5,900. In the case of congestive heart failure, patients without a regular family doctor cost our acute care system about $30,000 a year but only $12,000 if they had a family doctor. I'm sure you're seeing the picture.

Catching these high-needs, orphaned patients and getting them good primary care — delivered by well-supported and trained family physicians — saves the system significant dollars in resources. We need to reinvest these savings back into the system.

Now this is just a start. Here are some of the other things we've achieved in primary care. In B.C. 108,000 patients now have what's known as a complex care plan in place for their chronic diseases. These plans are improving outcomes, saving resources and, most importantly, making patients healthier. In this province 431 of our general practitioners have completed a program that has decreased their average patient wait time for regular appointments from 4.7 to 1.8 days. These are real savings and real improvements in care that are benefiting British Columbians and the province right now.

I am proud that B.C. physicians are leading the world in many of these improvements, and other countries are looking to us to copy our programs. We have evidence that collaboration, not confrontation, is the way to make meaningful progress, and we're just getting started. The BCMA is ramping up efforts for specialists right now through the specialist services committee, or SSC, so stay tuned for what emerges from these efforts.

These are examples of how we're spending our health care dollars smarter through evidence-based collaboration. We need to do more of these kinds of things, making it a priority for our health budget next year.

Let me turn briefly to the third topic, mental health and addiction. Over the past year the BCMA has released three policy papers regarding depression, addiction and attention deficit disorder, and we've brought those with us today. Through the GPSC we've also launched a mental health collaborative that is improving the screening, diagnosis and treatment of mental health issues in primary care.

As good as this is, we are just starting to address the staggering cost of mental illness in our society. As many as 870,000 British Columbians will experience some form of depression in their lives. Not only do people with depression face significant stigma and discrimination; the economic impact can be staggering. For example, the annual cost of untreated depression for a B.C. company with 500 employees is nearly $1.4 million per year in lost work days and reduced productivity.

Addiction is just as serious. We know there are about 400,000 British Columbians suffering from some form of addiction and substance abuse today. In 2006 — this figure just totally impressed me — it was estimated that substance abuse cost B.C. over $6 billion per year. That's $1,500 for every single British Columbian.
[ Page 26 ]

Consider this. A recent study showed that as many as one in ten visits to Vancouver General Hospital's emergency room was for substance abuse. Now combine that with the fact that each year B.C. uses enough hospital beds for substance abuse care to fill Kelowna General Hospital every day for a year.

We also know that at least one-third of people with mental illness have substance abuse problems. We also see a lot of co-morbidity with other chronic diseases such as diabetes. The case could not be clearer for improving care in mental health and addiction. Please consider this as an area where our system can do a better job. As I said, I'm leaving copies of these papers.

Now this all seems a little daunting — perhaps a little more than daunting — so let me tell you a good-news story that I am very personally involved with. Youth with mental health issues do not often seek medical help, for many reasons. Often these young people are known to school counsellors, but capacity or referral delays can hinder access to timely care. Yet evidence shows that the window of opportunity for intervention for youth is incredibly short, often less than 48 hours.

How do we fix this? Starting this year the BCMA, in partnership with the Vancouver school board, Vancouver Coastal Health and the Ministry of Children and Family Development, has started a pilot project in an East Vancouver secondary school — Killarney.

[1000]

We are creating capacity for this school, as a pilot, to be able to get youth with mental health concerns to care much faster than before. A group of physicians has blocked off times to accommodate urgent referrals from this school. This early intervention can dramatically improve the outcomes for youth by getting them the support they need early on.

We're also improving support and training for physicians in the community to further improve care for their patients with mental health challenges. This project is drawing groups out of their traditional clinical silos and into a much more collaborative model of care. This is an exciting project and one that I'm looking forward to seeing results on in the coming year. Stay tuned on this as well, as the plan is to take this provincewide next year.

I've covered a lot of ground in my comments, so I would encourage you to have a look at the materials that I'm leaving you with. The BCMA is leading in primary care and other areas of policy that other provinces — indeed, other countries — are looking to for leadership.

This is an exciting time. One of the greatest parts of this is that we realize just how much more we can do. I'll be in Ottawa later today and Washington in the next couple of days speaking about this project that's happening right here in B.C. When doctors and government can collaborate, with a focus on quality patient care and within the context of good fiscal value, we can achieve tremendous results.

I will close by saying that we know health care is and will remain a top priority for British Columbians, particularly as our baby boomers begin to retire in the next few years. Even though these are tough financial times, we need to look at this as an opportunity to try new approaches. We are well down this path already in primary care. Now let's keep it going.

Lastly, let me say: to help our health care system out, turn off your cell phone when you get in your car to drive home today.

J. Les (Chair): Some very practical suggestions there. Thank you very much. Unfortunately, we've completely used up the time, which is not a criticism. I think it was a very educational presentation. We will look at the material that you've left behind. Thank you for your contribution today. I think I would be accurate to say that we need a lot of collaboration between the BCMA, the health authorities and government in the years ahead.

The next presentation will be by the Institute of Chartered Accountants. Go ahead.

R. Rees: Good morning. My name is Richard Rees. I'm the chief executive officer for the Institute of Chartered Accountants of British Columbia. We very much welcome the opportunity to present to the Finance and Government Services Committee our recommendations as you consider the 2010 B.C. budget.

I've had the pleasure of appearing before the committee every year since this process was started. I noticed that there are a number of new faces this year, following the last election. Really I want to just say how much we do value the fact that you do this, and we really appreciate the time that you take.

I know that you'll be going around the province. You'll probably be running into a number of my members. They will probably say some of the same things that I'm saying, and they will probably say some very interesting things as well. Hopefully, what they will do is reflect upon the diversity of the province and the challenges that are faced economically across the province.

Our members do have their fingers on the pulse of communities and are often able to identify emerging economic trends. We have 10,000 chartered accountants in the province, and we also have, at the moment, over 2,000 students in British Columbia as well. They are involved in every major business sector, and we dialogue with them extensively. They provide us with a unique perspective that has clarity, context and depth of understanding about what is happening in terms of business investment in the province.

We contribute further to the discourse on public policy and economic matters through this budget consultation process, and we also produce an economic report — the B.C. Check-Up — which is in the process of being published. We will forward it to you shortly.
[ Page 27 ]

As the government begins to develop the budget, we strongly encourage you to consider the recommendations put forward by the institute in today's presentation and include them in any public policy discussions that stem from the proceedings.

[1005]

Let me start by saying that there's no question that the provincial government finds itself in very challenging fiscal times. Our preliminary results of the B.C. Check-Up are clear. Whilst economic indicators did fare well overall in 2008, 2008 had two very distinct phases: pre– and post–financial crisis. In the latter half of 2008 B.C.'s economic fortunes deteriorated rapidly. The Check-Up also found, in 2008, that B.C.'s productivity declined 1.7 percent, and the value of exports per worker declined 9.1 percent.

In 2009 things have only gotten worse. In February of this year the government had forecast a budgeted deficit of $495 million, and by the September budget update, that figure had jumped to $2.8 billion for the 2009-10 fiscal year. Much of the revenue shortfall was generated by slumping natural resource royalties, but government coffers have also experienced a sharp decline in both corporate and personal income taxes.

It is clear that the economic downturn hit the B.C. economy much harder than had been anticipated. However, B.C. is not alone in that regard. I just note that other jurisdictions, like Alberta, are also predicting greatly increased debt as the full implications of the economic downturn become clear.

For these reasons it's really crucial that we continue to think about what we can do to improve the business climate. Improving the business climate stimulates the economy, increases productivity and, out of that, creates jobs, which in turn then create the tax revenues that pay for the services that we value so much. But we do need to make sure that we do this in a fiscally responsible manner.

Right back to 2002, in every prebudget submission that we have made, we have highlighted the economic case for sales tax harmonization as an important component of increasing productivity and capital investment. As such, we were pleased with the recent announcement of moving to an HST as of July 1, 2010. The introduction is projected to save business nearly $2 billion in production input costs, which hopefully will be reflected in increased business investment.

There's also a huge saving in tax compliance costs. We've got about half a million businesses in this province that are currently filling in a sales tax return on a regular basis, which they'll no longer have to do. It's quite extraordinary when you aggregate what it costs to do that, and what it costs the government to process that is so many millions of dollars.

In the short term these savings will, hopefully, provide some welcome relief to a beleaguered economy and help preserve existing jobs. In the long term these savings should lead to greater capital investment and help improve the productivity gap as businesses invest in new machinery, new technology and improved training for workers. All of these things will hopefully lead to higher wages and an improved standard of living for all British Columbians.

However, we're going to urge the government to exercise caution when planning the transition and implementation of the HST. When working through the transitional and implementation framework, policy-makers should strive for certainty and simplicity.

Certainty around tax policy is necessary for businesses to function efficiently. HST transition rules will need to be clearly laid out by the B.C. government as soon as possible so that businesses can readily determine their application to each industry's specific circumstances. There are complex issues inherent in changing tax policy.

The institute recommends that B.C. policy-makers establish and consult with an HST advisory committee, including commodity tax experts, in order to receive assistance on the transitional framework and implementation. A lot of B.C. businesses operate multi-jurisdictionally and operate in jurisdictions where there are value-added taxes. So there's plenty of expertise right here within the province on these issues, which is available to provide support to the B.C. government as they consider these matters.

The B.C. government also needs to try and provide certainty in the lead-up. For example, we must take steps to make sure that construction is not deferred until after the HST is implemented. Policy-makers should consider specific transitional rebates to offset the PST burden included in real property improvements built prior to or under construction at the implementation date, which will be subject to HST on sales after June 2010. Otherwise, we'll really have a double taxation.

[1010]

Consideration also needs to be paid on the impact of the harmonized sales tax to the SUCH sector — universities, schools and hospitals — at the earliest opportunity. It's going to be very important for the provincial government to evaluate whether rebates along the lines of GST rebates will be made available, as these sectors will begin their new fiscal year on April 1, 2010. With the new legislation set to take effect on July 1, 2010, they need to think about this and budget appropriately. Obviously, we don't want to see undue negative impact on the cost structure for those very important institutions.

While certainty allows business to function, simplicity in administration allows businesses to maximize their efficiency. The provincial government has proposed that businesses with an annual taxable sales in excess of $10 million in worldwide revenue and financial institutions would have a provincial portion of HST input tax credits,
[ Page 28 ]
or ITCs, on certain items temporarily restricted. This is in line with the HST implementation framework proposed by the Ontario government.

However, a group called the Tax Executives Institute, which represents the people who do tax work within corporations, was asked by the Ontario government to analyze problematic areas in the proposed framework. Their recommendation was that Ontario should not place the temporary restrictions. In addition, while government will collect some additional revenue from the phase-in, there is a huge administrative burden through the staggered implementation process.

Large corporations have significant accounting departments that can probably easily handle the extra complexity of restricted input tax credits. However, smaller companies will not have this infrastructure in place, making the administrative complexity onerous. Many companies with $10 million in revenue would not be considered large.

Recognizing the fiscal constraints the government is currently facing, should it continue with phased-in restrictions, ICABC would ask government to consider significantly increasing the low $10 million threshold to minimize the impact of this on small and medium-sized businesses.

It's critical that whatever restrictions are put in place, they should be clear, concise and easily administered by all taxpayers. In keeping with the importance of simplicity in administration, we recommend that the paperwork for the HST should be as similar as possible to the current GST forms, which are easy to manage and remit.

In addition, some exemptions should not be provided to special interest groups. Some sectors — there's no doubt — will be challenged by the taxation change. However, government should consider mechanisms other than exemptions, such as providing home renovation tax credits, an accelerated capital cost allowance on a temporary basis to alleviate the impact.

As you can see by just a few examples I provided here today, the move to HST will be very complex. If B.C. is to sidestep potential hurdles, consultations will be crucial.

Having said that, the decision to harmonize is one of the most significant tax policy changes ever implemented in this province, and we commend the government for committing to what is no doubt — based on the reaction — a courageous step. Again, I think, in terms of the economic analysis, it's clearly the right thing to do.

That concludes my remarks today. We will be pleased to submit a final submission by the October 23 deadline. I'd be most interested in any comments you might have to make or will respond to any questions.

D. Donaldson (Deputy Chair): Thank you for the presentation. It's great that you raised the points you raised because, of course, it is a topic of major interest at this point — the HST especially.

I really like your comments about certainty. I've been in touch with chartered accountants in our area, in Smithers, on the small business aspect of needing that certainty and lowering the threshold. So I appreciate those comments.

One quick question I have for you is around whether you would be able to provide the committee with any studies around how the HST could help preserve existing jobs, as you've pointed to in your paper here. I'd be interested in seeing those studies — and if they're peer-reviewed, even better.

R. Rees: I'm sure we can. We're affiliated with the Canadian Institute of Chartered Accountants. We are a B.C. body that's set up under the legislation in B.C., but we have an affiliation. Nationally, we did do economic studies around the time of the GST thing, which I think remain valid and do talk about that.

The key element, really, is around the decision-making around capital investment. I know that on similar matters, when we talk about tax competitiveness, I sort of talk about…. The best way to think about it is to think about doing a spreadsheet and trying to add up all the costs that it costs to do something like locate a new paper machine in a mill in B.C.

[1015]

When the company is doing that, obviously there are factors like the availability of raw materials and things like that. But then there are other things that come into the mix that we have advantages in, like power costs.

But then, when you have a situation when they're looking at whether they put it in the plant in B.C. or put it in the plant in Ontario or Alberta, it's a big problem when we have the PST sitting there and the other guys don't have it. I mean, it just increments the cost.

What we hope will happen out of all of this is that by being tax-competitive, we will see investment being made in this province, and that's how we will preserve and build jobs. That's sort of the nub of it. I'll be delighted to include material in that regard for you. Thank you for your question.

B. Routley: Thank you for coming here today. I noted with great interest that there are a lot of words like "should" and "hopefully" in the context of all the wonderful things this is going to bring to British Columbians, but I don't see much attention paid to the impact on the groups like the unemployed, the disabled, people on fixed income and the poor.

I'd be interested in your comments, from a chartered accountant's point of view, of what exactly your view is and how all of these people are going to fare with the HST and the impact.

R. Rees: Absolutely. As an organization, I think that we don't try and comment on health and social issues,
[ Page 29 ]
particularly. There are a number of people, like the gentleman who was in this chair before me, who have much more in-depth knowledge. I've been a president and chair of a large social agency in Vancouver and have some experience in that regard. I think that the core competency that we bring to the table in meeting with this committee is around finance and fiscal matters.

In that regard, simply put, I think the name of the game is that our health and social welfare and education systems in this province rely on the government having the capacity to fund them. I know that it's a never-ending situation.

I attended the Ismaili walk for women's health yesterday because my wife is very involved with the women's hospital. The list of their needs is as long as your arm, but at the end of the day, the objective I think that we have to have is, as far as possible, to have as strong and vibrant an economy as we can. That will produce the government's capacity to raise the revenues to fund it.

As regards, then, to how those funds are used, there are a lot of other organizations and people, many of whom will appear before you, who will be much better qualified to comment on that than we would.

J. Les (Chair): A final question from Jane.

J. Thornthwaite: I was really interested in your comment about the construction industry and your request of having decisions not deferred until after the HST is implemented. I'm wondering: in your report, could you include other industries as well that might come to mind with regards to that?

Usually we hear the opposite as far as: "It's coming into play as of July 2010, and everybody's going to be scrambling to get stuff done before July of 2010." Now you're saying here…. I'd like more examples of industries that would actually have the benefit — in the opposite direction.

R. Rees: I'd be very pleased to do that. Obviously, time-constrained for what we could say today, we picked that one out because I thought it was something that would resonate. What we've done is we've actually approached all of the larger accounting firms and asked if they would make available….

They all have commodity tax specialists, and what we've done is we've formed a group, and we've initiated the process to try and identify potential problem areas. They've started to come up with a list, and we will be providing that to the Ministry of Finance. I'd be happy to see if we can expand on that in our submission by the 23rd.

J. Les (Chair): All right. We're out of time, Richard. Thank you again for presenting to the committee. We very much appreciate your expertise.

R. Rees: Thanks again to all of you for doing this. We really appreciate it.

J. Les (Chair): The next presenters will be with Geoscience B.C.

[1020]

L. Anglin: Good morning, Mr. Chair, Mr. Deputy Chair and members of the committee. Thank you very much for the opportunity to present this year. I make this a bit of an annual pilgrimage, on behalf of Geoscience B.C., to report back to government on what we've been doing with the money that was granted to us.

What I'd like to do today is give you a brief overview of what we are, who we are and what we've done, some of the impacts of geoscience, the importance of investing in geosciences, and recommendations for the future.

I am joined today by Mr. Jim Gray, who is a member of my board of directors. Jim is a CA, a partner in De Visser Gray here in downtown Vancouver and has many clients in the mineral exploration and mining sector. He knows quite a bit about the industry.

The PowerPoint I've prepared for you today is in the deck. I'll just quickly go through that. I am going to try and go very quickly so that I leave some time for questions at the end, because I'm sure you may have some.

Essentially, investing in geoscience we see as an important role for government to take in positioning B.C. for the economic recovery. Essentially, minerals and oil and gas are key economic drivers for the province. It's very interesting that we've been followed by presenters from the education sector, the health sector and the finance sector. Really, I think we are one of the fundamentals to stimulating economic activity, which helps us keep B.C. competitive and helps us pay for health care, education and the social services on which we all depend and feel very strongly about maintaining.

Geoscience B.C. as an organization is a not-for-profit society that was started in 2005 with a large grant made to the Association for Mineral Exploration and given a mandate to attract new mineral and oil and gas investment to B.C. through the provision of geoscience data, knowledge and expertise.

We're essentially a government-industry partnership, where government has provided the bulk of the funding. Industry directs the organization and provides the focus to it through a volunteer board of directors — a highly technically credible group of technical advisers, again, drawn from volunteers in industry. We are able to operate with a small staff and very low overhead and behave in a very entrepreneurial way, so we're responsive and flexible.

We find that focusing on partnering is one of the key things that we've been able to do. We work with communities and first nations. We work with other government
[ Page 30 ]
geoscience organizations, academia and industry to design and deliver our programs.

On the next page, a couple of slides just give you a quick overview of some of the major projects that we have invested in. Our flagship project is the QUEST project. To give you a little bit of geology, QUEST is an acronym for Quesnellia Exploration Strategy. The Quesnellia is a belt of rocks that runs from the U.S. border up to the Yukon border and hosts most of our copper-gold-porphyry deposits, like Mount Polley and Mount Milligan, which is in development, Highland Valley, Gibraltar — we're not so sure whether it's in that belt of rocks or not; geologists will argue about that.

The key thing is that it's a really important target. But the central part of B.C., which also, coincidentally, is affected by the mountain pine beetle, is a difficult area for exploration because it's covered by younger rocks — either volcanics or what the glaciers left behind.

What our technical advisory committee told us is to bring new geoscience, bring new technical products to see through that cover to help advance exploration in that area. It certainly goes to show that when you listen to industry, industry responds. So we delivered a project which started with QUEST, which ran from Williams Lake up to Mackenzie, and then QUEST West over to Smithers and Terrace. Now we've just initiated QUEST South to work from Williams Lake south to the U.S. border.

Those projects have probably generated over a million hectares in new staking, and that continues. As we release data products, industry follows up. I've just heard through the grapevine that a fairly major company that has optioned some properties from a junior company is planning to do some drilling in the covered areas, I think north of Prince George, this fall. Here's hoping they find something, because it's that kind of economic driver that pays off.

What we also see is that prospectors are using our maps to stake claims and then option properties to other companies. That keeps them in business.

On the oil and gas side, we've had a couple of major projects in the Nechako Basin, one of the Interior basins. We recently completed a seismic survey to update some of the information around that area on the oil and gas potential.

What we've seen is that that area is still not high on the oil and gas industry's priority list, because it's still a complicated geological target, and there are a lot bigger prospects in northeast B.C. That's where their targets are now.

[1025]

We've also been working on the Horn River basin in northeast B.C. with a large project that is focused on understanding sources of water in that basin. It's a shale gas resource. It will require a whole lot of water to produce that gas. The Horn River basin producers group — the companies that have that land tenure — doesn't want to impact the surface environment if they can possibly help it.

We're involved in a partnership project with them to understand the subsurface non-potable water that exists well below the water table and whether they can use that water, if there's enough there to use to produce the gas, and then if they can use those same rock aquifers to put back down any wastewater that's been produced. So that's very much an interesting project that's all about reducing environmental impact and facilitating development.

On the next page, a couple of points there. Future opportunities — positioning B.C. for economic recovery. The map on the top slide is essentially all the priority areas that our technical advisory committees — we have one for oil and gas and one for minerals — have identified as prospective areas that could benefit from additional geoscience.

You can see that there's a lot of work to be done. In addition, we would argue very strongly that the value of geoscience is really investing in developing the resource in the province and developing it effectively.

The photo I included in that second slide, which is beetle-kill pine in the interior of B.C…. My point there is that under all that beetle-kill wood, there are other resources. The challenge is to find them. You can tell from looking at that photo. That's what a lot of the interior of B.C. looks like. It's hard for prospectors and exploration companies to work in that terrain, because there's no rock exposed at surface. So the more we can do to provide some context for their work and stimulus for them to go in and look and follow up, the better we can stimulate the industry.

Basically, geoscience is important for exploration. You have to have exploration to make new discoveries, and those new discoveries are then what become new mines. So just a snapshot.

Then on the next slide, our funding. We've been granted $36.7 million from the provincial government since 2005. We've been able to leverage that in cash and in-kind contributions of at least $12 million, plus almost $2.5 million from the Northern Development Initiative Trust.

As I said, we're very low overhead — less than 15 percent in terms of our program delivery. Right now we're looking at about $9 million left that's uncommitted. We have more than that in the bank, but much of it has been committed to multi-year projects. But we have about $9 million left. So we're looking at completing all of our project activities by March 2011 and wrapping everything up by March 2012, unless there is new funding.

Just to summarize that bottom slide. GBC, we think, provides very effective delivery of geoscience. We are attracting exploration industry interest and investment. We work very hard in engaging with the people that we
[ Page 31 ]
think really count — the industry, communities and first nations, other geoscience organizations to make sure we're not duplicating services or that we're getting the best bang for our buck. We're funding a lot of students and those future employees for the industry in research projects through universities and colleges.

As I said, we may start winding down in 2011, but we've identified a lot of key areas where new geoscience information could be really key to stimulating the industry. And the recent announcement about the Highway 37 transmission corridor…. There's a whole lot of potential up there — mineral potential especially — and a lot of gaps in the geoscience.

Our recommendations to government are to continue investing in geoscience to help B.C. position for the recovery. Essentially, I think we're seeing that the mineral industry is probably in a good position. Gold prices are high. Coal has stayed high. Copper has stayed pretty solid. So I think that may be one of the leading edges in the economic recovery.

We'd like you to also consider reinvesting some of the fees that you collect from the exploration industry back into exploration and to consider renewing funding for Geoscience B.C.

Just the final slide. I'd be remiss if I didn't thank a lot of the partners we've worked with. There's a plethora of logos there, and that doesn't include all of the industry — the companies, contractors, consultants — and all the academic institutions that we have also worked with. Principally, thank you to the province for the opportunity to create Geoscience B.C. to do this work and for your ongoing support.

J. Les (Chair): Thank you very much, 'Lyn. I have a question from John.

J. Rustad: Having worked with you — well, not so much directly with you, but just as an MLA and seeing the work that you've done in the area — I just want to thank you for the work that you have been doing. I know what a tremendous impact it's had in my riding and throughout many areas in terms of driving exploration and interest and an understanding of mining and also, of course, of opportunities in oil and gas.

[1030]

You mentioned at the end the consideration or the thought around how to get some more dollars to Geoscience B.C. I know that we have a lot of real tough decisions in front of us with health care and education and the economic challenge that we're facing. But I also know that you need to be able to have strategic investments in our resource industry to be able to further opportunities for jobs that support communities and that ultimately support government funding.

You mentioned the idea of maybe looking at perhaps something off of royalties or some other way to be able to provide a funding source. Can you elaborate on that any more, in terms of what your thoughts are and how something like that might work?

L. Anglin: Well, in a very general way, because I have to admit we haven't done a lot of work on the topic. I think some of my colleagues in the Association for Mineral Explorations can probably provide a better answer.

But we've looked at things like the staking fees that are paid to the mineral titles branch, which is done online, and the possibility of whether there would be a portion of that funding or other fees that are charged to the mineral exploration community that could be redirected to invest in geoscience to allow a continuation of this type of work, which I think then just ends up paying itself back to the government in terms of stimulating industry activity. There might be similar models that we could look at in oil and gas as well.

J. Les (Chair): Okay. Final question from Doug.

D. Donaldson (Deputy Chair): I just want to thank you for the work of Geoscience B.C. I'm from Stikine, and so I'm very familiar with the work that you've been doing. It's the kind of work we need.

Just to quickly follow up on John's comments, yes, I think I would appreciate some of the comments you had about royalty revenues or fees. Just looking at the grant money from the province versus the leveraging of the other contributions, I know in other non-profit worlds that it's usually at least a one-to-one. So ideas about how to increase the partners' contribution to the government's contribution would be welcome.

Quick question. One area I wasn't familiar with was water exploration, the groundwater that you talked about. Considering the kind of development that is being proposed especially for the northwest, is it Geoscience that implements groundwater well…? You know, the wells that are required to monitor groundwater — is that something that you're going to be implementing more in the northwest? I know there are perhaps not enough of those.

L. Anglin: It's something that we haven't done before. Our project in northeast B.C. on the Horn River basin is the first time we've been involved in a groundwater-type program.

I was actually a little remiss. My board had suggested that I do bring up the topic of groundwater and groundwater resources and also geothermal resources, because those are fundamentally geoscience questions. There are a lot of things in that area that the expertise and the model of project delivery that we've developed through Geoscience B.C. might be quite applicable to approaching some of the questions that you've raised around groundwater. It's not something we've done before. The
[ Page 32 ]
project in northeast B.C. is our first, but it's certainly an area that we could consider being involved in.

One thing I just wanted to say in terms of the leveraging. I hear your comment in terms of direct dollars. What I didn't include on that list more discretely is the indirect dollars that we have leveraged — i.e., what the exploration industry has spent following up on our activities.

We're still trying to get an estimate of that. Often there's a two- or three-year time lag as they work through. We think in the QUEST area alone there's probably been $10 million or $15 million spent following up on what we've done. In some of the other project areas, maybe not that big a number but still significant. So it's another form of leverage that isn't as directly captured.

J. Les (Chair): Thank you very much. Very good presentation. Very exciting things going on.

The next presentation is from the Canadian Centre for Policy Alternatives.

M. Lee: Good morning, Mr. Chair, members of the committee. Thank you very much for the invitation to appear before this committee and present some of our insights. We are taking a much broader approach to the B.C. budget, similar to the committee's, rather than the more narrow approach from the last presentation. We're going to cover a lot of ground in the next ten minutes.

As you know, the CCPA has been engaged on B.C. budget issues for many years. I'm pleased to point out to the committee that our forecasting record has been better than the Ministry of Finance's.

I'm joined today by Iglika Ivanova, who's taking over much of the work for our office on the fiscal and economic situation for the CCPA. She's going to outline some of our overall priorities, particularly on the expenditure front, and I'll close with a few thoughts around climate action and revenues.

[1035]

I. Ivanova: We all know that B.C. was hit hard by the global economic crisis and that government revenues have suffered as a result. However, taking the overall perspective, now is not the time to be making large cuts to government spending.

You will see some of the arguments that we made in the September Budget Reality Check, which came out before the budget was announced. Some of the arguments made are still very relevant. That's why we thought you should have a copy of it.

Essentially, we have seen some evidence that the pace of the economic deterioration is slowing, and in Vancouver specifically there have been some signs of economic recovery. However, we think that it is way too early to celebrate the end of the recession quite yet.

Unemployment will continue to rise months or even years after the economy stops contracting, and a meaningful recovery throughout the entire province is still a long way away. This is why it is essential that the government does not make large cuts to government spending in Budget 2010. Our prebudget report, of which you all have copies, argues that, and I think you will consider that.

In the current hard economic times, cuts will create more problems than they solve as they further depress provincial GDP and increase unemployment. From the macroeconomic perspective, this is simply a question of the government spending having ripple effects throughout the economy, so a change in output, or GDP, caused by a decrease in government spending is greater than the actual cut in government spending.

For the economy as a whole, less money floating around translates to higher unemployment and lower aggregate income — a drag on the economy at exactly the wrong time. For B.C. families, spending cuts mean reduced access to public services like libraries, seniors care facilities and community health services. For the most vulnerable among us, it means reduced support.

For thousands of people, this will translate into job losses, and that is on top of the job losses we already have driven by the recession. This will deepen the recession-driven hardship for the most vulnerable British Columbians and will force many into poverty and homelessness.

To prevent this from happening, the B.C. government should allow for the cyclical deficits to run as high as necessary to accommodate the revenue shortfalls. Most economists agree that running a deficit is the best response to a serious recession.

On the upside, B.C. is well positioned to run temporary deficits, because we have the lowest debt-to-GDP ratio of all provinces except Alberta. When economic conditions improve, the government will be able to balance the budget without having to cut public services.

Essentially, when designing Budget 2010, government needs to remember that despite the recession, B.C. is still one of the wealthiest provinces in Canada, and it is one of the biggest economies in the world. We have the capacity to make strategic investments that will increase quality of life for all British Columbians and will cushion the blow of the economic downturn to the more vulnerable individuals and families among us. These should be the top priorities of the 2010 budget.

The way to do it starts with protecting the budgets of key services. This includes fully funding budget shortfalls of health authorities and school boards. Funding for K-to-12 education should, at a minimum, keep pace with inflation.

In addition, all cuts to public programs and grants that were made since the February 2009 budget should be repealed. These cuts represent minimal savings on a $40 billion provincial budget, yet they have devastating consequences in the communities and service agencies. This will essentially involve running a higher deficit, but
[ Page 33 ]
deficits are entirely appropriate, given the current economic conditions.

Beyond simply accommodating the revenue shortfalls that come from the recession, B.C. Budget 2010 should introduce new spending measures to keep the economy rolling in a way that moves us closer to our social and environmental objectives.

We believe that poverty reduction should be a key element of the economic stimulus plan for B.C. B.C. is now one of only three provinces in this country that are not planning or implementing a poverty reduction plan. Combatting poverty is just the kind of investment our province needs now. It will provide an immediate boost to the provincial economy and address some of the pressing social problems in the long run. So it does good for the economy in both the short run and long run.

[1040]

In addition, B.C. needs to reform our social assistance program. Cuts to welfare done in the mid-'90s and in the early 2000s have seriously restricted accessibility and have undermined welfare's ability to stabilize the economy during a recession. Benefit rates should be increased by 50 percent and indexed to inflation so their value does not go down.

Arbitrary barriers that compromise accessibility of financial help to people in need should be removed. The provincial government should also work with the federal government to strengthen employment insurance, which is another key automatic stabilizer for the economy.

Visa 2010 should include targeted public investment in social infrastructure as well as physical infrastructure. Investments in early child care and education and in a more accessible post-secondary education system are just two examples of high-return public investments that will create jobs and boost the economy now, while positioning B.C. as a leader in the knowledge-based economy of the future.

Marc will offer some additional recommendations that will help B.C. meet our climate change goals and address the revenue side of the provincial budget.

M. Lee: I should point out that the reality check we circulated was a document we produced before the September Budget Update was tabled, so some of the information there is a little dated, although I point out that our forecasts, again, are pretty much spot-on, especially when you consider the transitional funding for the HST and the difference that makes in terms of the provincial bottom line.

I'd like to just take one moment to say — and I know this is sort of beyond the purview of this committee — that I think it's really important that B.C. get its climate action plan back on track, including funding for the climate action secretariat and specific climate programs — things like LiveSmart B.C. that have been cut fairly recently. I think B.C. made some very important first steps in 2007 and 2008, but in recent months these have essentially been washed away by the rising tide of the deficit.

An aggressive action plan must build out our public transit infrastructure, dramatically boost the energy efficiency in our buildings and develop an industrial strategy that sees B.C. decarbonize its economy over the coming decades. As Iglika has noted, there needs to be an expansion of public services consistent with best practices in other advanced countries, which currently beat our performance on things like poverty, homelessness and early childhood development, to name a few key areas.

I'd like to end with some thoughts on revenues. Overall, we've seen a lot of change on the revenue side of the ledger in recent years and an erosion of fiscal capacity — in fairness, due to tax cuts.

We'd recommend that B.C. actually introduce a fair tax commission, similar to what Ontario had in the early 1990s — a body that would go around the province and engage British Columbians specifically about the services that they want and how we pay for them fairly.

What follows are a few thoughts of my own about priority tax reforms. First, the carbon tax. Based on some modelling done by myself and Toby Sanger, we found that the carbon tax regime, while starting out on a fairly progressive footing, meaning that the credits and tax cuts going to low-income earners exceeded the tax that they were going to pay in the early years…. The system essentially becomes regressive as of 2010-11.

This is because the low-income credit has only grown by 5 percent as of this year. It's not scheduled to grow at all as of July 2010, but by next year the carbon tax will have doubled, and that will make the overall system regressive. Even the planned increase in the credit as of summer 2011 is far from sufficient to rectify that situation.

Having made that adjustment, I would suggest that the carbon tax should also be increased and that its base be expanded to cover 100 percent of greenhouse gas emissions. The regime should break with revenue neutrality, and half the funds should be used to fund this credit, as I talked about. The other half should be used to support climate actions that we need.

From a climate perspective, we also need to look long and hard at our approach to the oil and gas sector, it being a major source of B.C.'s greenhouse gas emissions. We should be looking at things like increasing the royalties on oil and gas development, applying the carbon tax to all flaring and phasing out subsidies to the industry.

[1045]

The second broad area of recent controversy, the HST. In principle, I don't see any problem with harmonization, although I think the benefits of harmonization have been greatly overstated. The big problem right now with the HST when it comes into effect, unless there are
[ Page 34 ]
changes, is around who gains and loses in a $2 billion tax shift from business to consumers.

Consumers will be paying new taxes on goods and services previously exempt, as you know. While the government has proposed a credit for low-income households with incomes for individuals under $20,000 and families under $25,000, it phases out very quickly after that. This means that modest- to middle-income households will be faced with hundreds of dollars in additional taxes.

However, for all the furor about the HST, fixing it is relatively easy to do. The key is that very same credit that's paid back to households. In particular, by increasing the threshold upon which the credit applies to, for example, $30,000 of income and phasing it out more slowly so that a large majority of households get something back — this is the model that Canada uses for the Canada child tax benefit or old age security — and by expanding the value of the credit itself, the government can protect the most adversely affected households while retaining the benefits of the tax.

This will cost some money, but that's why the federal government is providing $1.6 billion in transitional funding. I think it was a great disappointment that the September B.C. budget update has the government not using a single penny for transition on HST — only to reduce the provincial deficit in the next three years.

Finally, I'd go one step further. To the extent that businesses sock away savings that they previously paid on PST and to higher profits, this will be a windfall for higher income earners in the province. And since 2001 B.C.'s wealthiest have already racked up some fairly significant reductions in their tax bills.

So we need to compensate, and one way of doing that would be to add a new top income tax bracket kicking in at income over $150,000. Only a tiny fraction of B.C. taxpayers would ever be affected by this new bracket, and it would raise substantial additional revenues. If the government does want to lower its deficit, one way of doing that is getting it from the people who have the most money.

Alternatively, I would suggest that a tax cut I would like to see is the elimination of the MSP premium. This is essentially a poll tax, and because it is applied in a way that exempts the very poorest — but for many of us it's paid by our employers — it becomes essentially a tax on the working poor. That's all the time we have. We'd be happy to answer any questions the committee has.

J. Les (Chair): I think I only have time for one question, and that'll be John.

J. Rustad: Thanks very much for your presentation. There were many things you talked about that would be great to be able to chat on, but we don't have the time. I want to focus in on your talk about running larger deficits.

When you have an economy that's gone through such a dramatic shift that we have seen — in particular around the world, but in B.C. as well — we now have a lower base from which to start the next economic cycle. If you try to maintain spending at the same cycle and as cost pressures go with that, how does your growth from a lower base end up surpassing your cost structure as it increases, if you don't adjust that cost structure?

What I'm concerned about is if the cost structure on government services continues to grow at the relative pace that it has in the past, and you're now at a lower base for economic growth, the chances of that economic growth expanding beyond the point of what our cost structure is in terms of government revenues means that we would be stuck in deficits indefinitely — particularly because, you know, there will be another recession. We'll see another economic downturn. If our deficits are running too high, at what point do you see that we might actually get to a balanced budget again?

I. Ivanova: Even though the recession has generated a lot of news and the people are worried about it, the GDP decline we're going to see in B.C. is only 5 percent. This is less than the GDP fell in the 1980s recession in our province in particular. I mean, a lot of jurisdictions are harder hit. Ontario comes to mind.

So I don't think we're growing from that much of a lower base. If you look at the budget brief that we've provided, we actually model the growth rate using exactly the growth rate from the Economic Forecast Council, the guys that advise the Minister of Finance. We see that even with that economic growth rate and the spending rates projected in the previous budget, we're going to be at a balanced budget again in three or four years.

[1050]

It's really not that big of a deal. Economic growth will bring us back to a balanced budget fairly quickly if we don't make any cuts at this stage. This is because, essentially, we are a pretty strong economy. Before the recession, with the same tax base, we actually had huge surpluses. Surpluses were bigger than the deficit we see right now. So that suggests that we're well positioned to weather this out and wait it out. It's temporary. It's going to end fairly quickly. I think it's misguided to actually make big cuts right now that will be permanent to deal with a temporary problem.

J. Les (Chair): I'd love to keep you on longer, but our time is up, although I suspect we'll hear from you from time to time anyway. Thank you very much.

The next presentation is from Vancouver Parents for Successful Inclusion.

D. Steele: You should all have copies of handouts of my presentation. I was asked to mention that I'm also on the board of B.C. FamilyNet, which is another family group that has presented regularly to this committee. On behalf of our president, Anita Dadson, I want to
[ Page 35 ]
apologize that they were unable to present today due to the short notice of today's hearing. B.C. FamilyNet will be submitting a written brief.

I wanted to thank the province for preserving community living funding in the face of the current fiscal challenges but also to raise some concerns about planning that are going on. So you'll be hearing about that further in writing.

But to the Vancouver Parents for Successful Inclusion — changing hats. My brief tells you a little bit about our group. This is our third time presenting to this committee. We're a Vancouver parent group that supports successful inclusion of students with special needs. We've been a member of the Vancouver Special Education Advisory Committee since the 1990s, and we represent all special needs reporting and diagnostic categories. That's about 60,000 students provincewide and around 5,000 to 6,000 in Vancouver alone.

We work with local and provincial special education advocacy groups, parent networks, and district and education partners to address barriers to successful inclusion and to promote successful outcomes for students with special needs.

I start out by talking a little bit about provincial special education trends, just to provide some background on budget and enrolment trends, because it's helpful to know where we're starting from before looking at where we're going. I started by looking at the ministry service plan, which I did not find was very helpful in terms of shedding light on what we are spending on special education right now.

In fact, one of two references in the plan states that the number of children receiving supplemental funding has increased by more than 4,500 in the last six years to an estimated 22,646. But reality check — if we go back and actually look at 2001, before the funding formula was changed…. In 2001 we were actually funding 55,000 students, which is twice as many as are being funded today.

The ministry is also not providing a current breakdown of total funding being provided for special education, but it's pretty straightforward. It's put together from the funding formula. There are three categories of supplemental funding grants: level 1, $32,000; level 2, $16,000 per student; and level 3, $8,000.

When you add up the number of students who are entitled to those grants provincewide, that comes to a total budget of $314 million. When you add in another $26 million for provincial resource programs that serve students across the province, we're talking about $340 million that we're currently spending in targeted funding for special education throughout B.C. If you want to compare that to what we were spending in 1999, that was $422 million. So we're spending $80 million less now than we were almost a decade ago.

[1055]

When we look at enrolment of students with special needs in the province, the figures do not line up with that significant reduction in funding that is going out to districts. In fact, we have actually seen increases in both years since 2001. We currently have 50,000 identified students with special needs and about another 8,000 or 9,000 identified as gifted.

I'm not sure how many of you are familiar with the history of special education funding, but in 2002 the ministry changed its funding formula and eliminated targeted funding for gifted and students with learning disabilities — all of the so-called high-incidence students, which is why we've had such a dramatic shortfall in special education funding in the province.

Another side effect of de-targeting funding for special education is that students identified in these categories have dropped significantly. For example, students in the gifted category have dropped by over 50 percent since 2001. These students haven't disappeared. Districts have stopped identifying them because they don't get funding for them — which does a disservice to the students. It does a disservice to the teachers who have to deal with them with no formal assessment or support. And it does a disservice to the other students and the rest of the system. It puts an enormous strain on the system.

So basically, in conclusion, B.C. is spending significantly less on special education than a decade ago, despite continuing increases in the number of students with special needs. And further, a growing number of students are not being identified and counted since supplements were discontinued in 2002.

Taking you to district impacts in Vancouver. Provincial special education funding grants, $32 million. District expenditures on special education are about twice that amount. There's an annual shortfall in provincial funding for Vancouver alone of $28 million.

The results of this significant and chronic shortfall include…. Since 2001 Vancouver has been forced to reduce the number of special education teachers by 26 percent, despite a 29 percent increase in the number of students with special needs. Unacceptable caseloads have made it increasingly difficult to find qualified staff willing to fill these roles. Many special education teachers now lack the appropriate training for their roles.

There's no ministry monitoring of student outcomes, although there are anecdotal reports of declining performance and growing frustration among parents, teachers and administration as unsupported students with special needs strain the entire system.

Turning to accountability, the second reference to students with special needs in the current ministry service plan is under objective 1.1: "Improved academic achievement for all students." It refers to a strategy that involves assessing, monitoring and reporting achievement levels for the overall student population, including students with special needs.
[ Page 36 ]

When you look at the ministry service plan, there are no performance measures associated with this goal or strategy. And when you actually look at strategies in place to assess, monitor and report an outcome among students with special needs, we find that the most recent annual ministry report on outcomes for these students was published in April 2006, with data as recent as 2004, 2005. Nothing since then.

Foundation skills assessments. These students are excluded, for the most part, from foundation skills assessments, so they're not counted. The one measure that the ministry is following is a six-year completion rate. When you look at that completion rate, it jumped from 20 percent to about 43 percent and then just levelled off there.

That would suggest we've done remarkably well by doubling the completion rate, but that achievement was simply accomplished by removing most of the students who have the most severe challenges from those who are counted. So we no longer count physically dependent, deaf, blind, moderate to profound intellectual disability, physical disability, chronic health impairment, autism spectrum disorder or mild intellectual disability.

These students account for $290 million of the annual special education grants — 92 percent of the provincial special education budget — and yet we are doing absolutely nothing to monitor whether these funds are being effectively spent or producing any outcomes whatsoever. There's a total and utter lack of accountability for 92 percent of B.C.'s special education budget.

So that's the bad news. The good news is that we can do better, and we are doing better in some very small cases.

Section 5 of my report, which I'll rush through, is a success story. This is a situation where our group worked with Vancouver to identify a problem that was particularly acute in our district, and that's the services for kids with learning disabilities, who were particularly hard-hit when funding was de-targeted in 2002.

[1100]

We approached our district; they responded. They involved many Ministry of Education staff, who responded with a small grant, $410,000 — compare that to the $290 million — and helped us establish a model program in Vancouver that is now up and running. It will serve 32 students this year — these are 32 of the most severely impaired students with learning disabilities in the early primary grades — with a four-month intensive intervention program that will then send those students back to their home schools and also provide training for the teachers who serve them in their home schools.

So we're not only serving students by providing early intervention, setting students on track who would otherwise cost the system enormous amounts of money in the future, but we're also using that program to provide training for the staff so that those students can be better supported. This is an example of what we can do, this is an example of what we should be doing, and this is an example of what we can do right here and now without breaking the provincial piggy bank.

Basically, in conclusion, thoughtfully targeted funding, collaborative program development, evidence-based practice, early intervention, professionalism, initiatives that involve and respond to community-identified priorities — these are all the factors that were involved here. These are the things that work. These investments save us far more than they cost in the long run, and we all need to work together to do much more of this, especially when funding is tight — and when is it ever otherwise?

Recommendations: (1) more time-targeted pilots like this. We've shown we can do it. It doesn't cost a lot of money. We can put money into thoughtfully targeted programs that really help students and save us money in the long run. An accountability framework — we cannot be throwing $300 million at special education with nobody looking at whether there's anything being achieved with this. We need to start putting in place an accountability framework, and the Ministry of Education can get to work on this tomorrow, with no increase in budget.

Mindful of the current fiscal situation, we're also calling for phased restoration of the targeted grants that were eliminated. We're asking that the province commit to restoring…. The first two items were things that we can do in Budget 2010. Number 3 is phased restoration of targeted funding for all students with special needs over the next three to five years to bring provincial grants in line with what districts are actually spending on these students.

The fourth is to report on a public shift. I sort of skipped over that earlier because I'm running over time. What we have seen as a result of the huge gaps in the public school is an increasing number of families of children with special needs being forced to turn to private solutions — in some cases, unaccredited programs, uncertified staff. That's all that's available to help these kids. They’re paying out of pocket. In some cases, the ministry is providing some supplemental funding. There's no accountability, no certification, no accreditation.

We really think that this deserves investigation. It's a disaster waiting to happen: lawsuits — you name it — accountability, the good name of the provincial education system. They're all at stake here. These children deserve access to educational programs appropriate to their needs, just like any other child in B.C.

J. Les (Chair): Thank you.

D. McRae: Thank you very much for your presentation. I notice the total enrolment on your sheet from 2001 to 2009 has decreased by roughly 12 percent and that special ed enrolment has increased by approximately 1 percent at the time. What do you account for
[ Page 37 ]
the difference there? Obviously, statistically we're still seeing a large number of special ed students — in fact, more. Is that because we're doing a better job of identifying students with special ed issues?

D. Steele: It's a complex question to answer. There are certain categories like autism where there has been a huge growth in the number of students. Part of it is a change in the autism category that occurred midway and part of it is that we are seeing an increase in the number of children diagnosed with autism. It's a global trend. The scientists aren't sure why. We are seeing greater numbers of students with various learning disabilities worldwide.

It's still thought that B.C.'s identified population is — that we're not identifying a lot of students…. Just because when you look at incidence rates — standard incidence rates for the U.S. and Canada — we're still looking at 8 to 9 percent of the student population. Most studies put the overall prevalence of special needs in K-to-12 at well over that; 12 percent is the most conservative. Some estimates are up to 18 percent.

So we know that there are a lot of grey-area kids or kids that aren't fitting these narrow categories that are out there and that are straining the system, without any support.

D. McRae: Sorry, I have one more question, if I may.

J. Les (Chair): No, sorry. You don't have time.

[1105]

M. Mungall: Thanks very much, Dawn. My question pertains to oversize classrooms. I come from rural British Columbia, and I was speaking with a school that has a high number of special needs students coming from low-income families. They don't even have the option of going to private school, not only because they don't have the money. It's just not in my area.

Can you speak to how oversize classrooms are also impacting the educational needs of special needs students?

D. Steele: Yes, I actually looked at it while researching this paper over the weekend — a fun weekend, it was — and our average class sizes have not come down, despite the introduction of Bill 33. In addition, what we are seeing is that where you have blips in the ratio of identified students with special needs, which does occur…. What schools are being forced to do is either make undersize classes to meet those requirements, or you just simply take all the students with special needs and throw them aside in a segregated class, and that solves your class composition requirement.

It doesn't do anything for the students, because you could actually make a class as large as you want, as long as it's a special education class, not a regular class.

J. Les (Chair): We have more questions, but we don't have time.

D. Steele: I'm happy to answer questions. Our e-mail and our website are provided.

J. Les (Chair): Great. We might take you up on that. Thank you for coming.

The next presenters are with the B.C. Interactive Group.

Good morning. The floor is yours.

K. Zmak: Good morning, and it is a beautiful day out there. We've had the privilege of actually walking in, in the beautiful weather coming in.

My name is Kelly Zmak. I'm the president of Radical Entertainment. This is Sean Murch. Sean is the business development manager for Next Level Games. This is Wendy Boylan. She is the PR marketing manager for Ubisoft Vancouver.

We are here as a group of collective business leaders to really talk about the interactive industry here in B.C., to lay out, if it's the right term, some education as to the size of our business and what we see as the opportunities for this business to grow here in B.C.

I am not here, actually, representing just myself. There are a number of individuals involved in this. We have over 30 B.C. interactive companies that are involved in some recent data-gathering.

We have been proactively putting together our messaging in regards to how we as an organization, as a group of organizations, can work together with the B.C. government and the local post-secondary and secondary education systems to bring the real value of what the interactive industry brings to this generation and the generation coming in front of us.

Behind me we have several representatives from various companies, including Vetrona Hallez, who is the acting general manager of Ubisoft Vancouver. Ubisoft is a very large organization with some very large presence in several of our other provinces. We also have Sarah Frost, who is here representing Electronic Arts Canada.

I apologize. Howard Donaldson from Disney Interactive is not able to be here. We had the Tokyo Game Show going on this weekend back in Tokyo, so a number of our counterparts are actually overseas in Asia and cannot make it here for this particular meeting. We also have Warren Franklin, the CEO of Rainmaker Entertainment.

My point with all of these introductions is that we as a group have come together to try to make B.C. a stronger place for this industry. For those of you who are not familiar with our industry, we are probably best known for our products — Electronic Arts Canada for the NHL10 product which recently shipped; Ubisoft for the Assassin's Creed and a number of action products; Radical for Simpsons Hit and Run and the Crash products. Even the Next Level group is responsible for the
[ Page 38 ]
Mario Strikers project with Nintendo and for Punch-Out.

I'm hoping these resonate with you. If they don't, hopefully they resonate with your kids or your grandkids.

J. Les (Chair): I was going to say: "Check my grandkids."

K. Zmak: The thing that is worthy of note is that our industry is a cultural influence on my generation, the generation behind me, the generation behind them. My two daughters, at 16 and 17, have spent their lives playing video games. We as a family play video games.

[1110]

There's a tremendous amount there. We have over 60 game development studios in B.C. Club Penguin out of Kelowna. We have the major publishers: Relic, which is owned by THQ here in B.C., as well as all of the major players….

What is not known is the 140 companies that are associated with the gaming development process. These are cinematic companies, these are writers, these are scriptors, these are audio development, these are engineers, these are programmers, and these are artists, conceptual artists, storytellers. It goes on and on. We are a dynamic entertainment media in the industry today, and it is that wonderful mix of art and science that makes us a truly unique entertainment form in today's industry.

We are represented by a large number. I will not read the list of companies that we have involved, but I can assure you that we are largely represented across B.C. I will be citing some stats today. The stats are largely pulled from in-industry and out-of-industry media sources, so we didn't make that stuff up on our own. We try to pull from stats with regards to the size of our business and where we're going. If you need a copy of this document, which is the Global Entertainment and Media Outlook Guide by PWC, I can arrange to have copies sent to each of you.

J. Les (Chair): That would be good, if you could provide us with that.

K. Zmak: Absolutely. We will make sure that happens.

To give you an idea of the size of our industry, which I think is important…. You know, when we talk about games, people think that it's a casual affair. The truth is that games are a serious business. There are currently over 53 million Nintendo Wiis worldwide in the marketplace. For those of you who aren't familiar with that box, it's one of the most casual, friendly systems that spans all ages and demographics. My 76-year-old father bought one this last Christmas so that he can play bowling with his great-grandchild.

It is a unique machine, and it is remarkable in the marketplace with a current retail of about $199 in the U.S. There are 28 million Wii Fits, which is basically a large electronic scale for the Nintendo Wii that they manage to convince people to pay $99 for so that they can be told that they're fat. It's a lot of fun to play. It's actually a great box, but it is the truth. I don't care how good shape you're in. My 16-year-old daughter was told she's overweight.

All of these pieces of electronics that are coming into the home are actually changing the dynamics of who is buying and playing video games today. There are 32 million Xbox 360s in the marketplace. There are 24 million PS3s worldwide. There are 110 Nintendo DS systems, 51 million PSP systems and 40 million iPhone systems. All of these are being used to play games. It is what the generation behind me is choosing to play.

They are moving away from television. They are moving away from every other form of media, and we are becoming the most powerful cultural influence in society today. Our industry spans all ages and demographics. We have really reached into society — some positive and some negative — as a form of entertainment that is powerful, meaningful and cannot be ignored from a business side, an education side or an opportunity side.

Our employees are highly paid, with an average median salary of $76,000. They're 33 on average. They have families. They own homes, and they are involved in the community. These people are active knowledge workers. They don't need anything I provide, or we provide, as an organization, because they have everything they need to do their jobs in their heads. I merely provide a place for them to work, the equipment for them to do it on, and they choose to do it at our location.

The entertainment industry is broad also in what we use in regards to talent. We have engineers, programmers, artists. All of those are known in our industry. But what's not known is that we also have storytellers and writers, cinematographers, video experts, audio engineers, audio designers, audio recorders. We have a broad depth of talent in each of these entertainment media that span, in some cases, two years with a group of a hundred to 120 people working closely together during that time to create something that we call a game.

It's also broad in regards to what it means from a demographic standpoint, from a business standpoint. We not only ship our products through retail product distribution, we ship our products on line. The on-line element of our games isn't even tracked in most of the major reports. The company I'm related with is Activision Blizzard. We have a product called World of Warcraft, which has 11½ million players that pay a monthly subscription fee to play that game each month, and they've been in business over five years.

[1115]

That product is the largest chat room you can imagine, and in that chat room is the social experience that basically starts to create that experience for those players. The
[ Page 39 ]
gameplay experience, if you've played it, isn't unique. But the social experience, while mixed with the gameplay, is what really makes it unique.

Making games, as I said, is a multidiscipline effort. The talent required, in regards to the education of our employees, is enormous. Our post-secondary requirements are very high. We need mathematicians; we need artists. I have told multiple secondary and post-secondary tours throughout my facility whenever they come in: "If you're an engineer, learn how to draw. If you're an artist, learn math." The convergence of the two is coming together, and it's absolutely critical that we marry those two pieces together.

We are offering students a chance to make math and science fun, exciting and innovative. They want to make games. There's an entire generation following us that wants to make games, because they have never known an entire society without it. They live in an instant-on society, where if you want an iTunes and you've got an iPhone or you've got a mobile phone, you connect and download, and it's automatically built. That on-line model, the distribution model, the social aspects permeate all of our customers in regards to who and what is playing games in today's market.

We have a great cross-talent with the animation and film industry, and we think there's a huge opportunity for us to continue to drive that cross-talent opportunity as we go forward in today's marketplace. All of the hardware above requires software to make. All of the software for those machines is what generates the vast majority of revenue around our business, and that's what B.C. does best. B.C. makes some of the best games in our industry, some of the best-selling products across the world. We are a dominant player.

This leads me to our challenge. We're losing our foothold due to the lack of competitive nature here in B.C. We're starting to see opportunities slip away. After above-industry growth, year in and year out over the last six, seven years, our industry has declined 4 percent in the last year. It's largely because of very large — I believe unsustainable — economic models that are being established in North America, other provinces, the United States and even other countries.

I say unsustainable because we're not asking for parity with those other groups. We don't believe they have long-term viability. What we are asking for in the coming weeks will be an opportunity to marry a union between what the government needs, what the business needs and what the educational system needs in order for us to continue to be a powerhouse right here in British Columbia.

We have over 3,000 employees right here in B.C. with an excess of $235 million in base salaries; over $20 million in related expenses with additional companies here in B.C.; a high level of expendable income.

But here is the most important thing: our organization employees are highly mobile. They are highly mobile. They are knowledge workers. They will go where the jobs are, they will go where the salaries are, and they will go where they're going to make games they want to play. That's what drives the vast majority of these employees.

It is an entertainment media. We have a lot of fun. And I have an open invitation to all of you. If you would like to see a game development studio, you are more than welcome to come to Radical. We're located right off of Terminal Avenue. I know others would feel the same. If you'd like to come visit our studios, I strongly encourage you to come talk to our staff. Find out what our people do. Find out the environment we work in.

This is an outstanding, outstanding industry. And it's a huge opportunity, because not only do we cross all demographics outside with our products, but we cross all demographics inside with our employees.

I apologize if I'm running through this, but I'm very sensitive to your time. So I'm going to do my best.

J. Les (Chair): You've got three minutes left.

K. Zmak: Thank you very much.

As I said, the average employee is 33 years old. They are married with children and have a highly expendable income. B.C. has some huge advantages: low income rates, quality of life, commitment to post-secondary education. This is a great place to live. This is a fantastic place to be. We should not be losing out on our opportunity for this group of workers to be here and make this the place of choice for them to live. This is a huge opportunity for us to take that and to grow it and to get back on the footing that we were before.

In the coming weeks we will be bringing suggestions, ideas and recommendations to the table that will affect the budget for next year. We believe that these are intelligent, long-lasting and sustainable ideas that put the bulk of the burden right on us as a business.

We believe there's opportunity for us to do more, and we believe there is a greater opportunity for us to marry the partnership between our business, not as a trade group — no offence to trade groups — but as a group of leaderships coming together that recognize we have a problem. We believe we can partner with you to help solve some of the issues we're facing in regards to our business but also help some of the challenges in the other areas that our business affects.

I think I'm done.

[1120]

J. Les (Chair): Thanks, Kelly. I think you take the prize this morning for passion. A good presentation.

We look forward to your specific recommendations in the weeks ahead. I certainly would like to review those carefully to see how we can, as you say, marry the interests of your industry along with the policies of government for some mutual success.

We have time, one minute, for one question.
[ Page 40 ]

N. Letnick: Thank you very much. Club Penguin is in my riding in Kelowna, so I'm very familiar with their challenges. They're being lured, as much as Disney can, down to California. They're fighting that and staying in Kelowna, in B.C. My question has to do with that.

When you provide your recommendations to this committee on what we can do to increase the amount of mobile knowledge workers that actually apply here and stay here, could you also review our taxation policy and impacts? We've heard some other presenters today that B.C. should take on a fairer taxation policy.

I'd be very interested, and I'm sure the committee would also be very interested, to see what you consider as fair taxation, given that we are competing in a worldwide marketplace.

K. Zmak: Certainly, we have and are taking that into consideration, and we're working on that from multiple fronts. We believe that B.C. has some huge advantages in regards to tax in regards to the work economy here.

One of our key areas of this recommendation will be…. So many of our parent companies, so many of the acquiring companies here in B.C. are not based in B.C. We would love to find a way to make B.C. the home for these locations, going forward.

For those of you who are not familiar with that small company called EA Canada…. As you know, they started as Distinctive Software in 1986. In 1991 they merged with EA to become EA Canada. That same year Radical Entertainment was merged. Nearly every single game development studio in Vancouver, B.C., today was seeded by the staff and employees of those two development studios right here, because it was their home, it was their passion, and it was their base.

We would like to believe that by working with you guys — and through a series of recommendations that are not just going to start and end this year but are going to continue going forward year in, year out — we can continue to make this a place where people want to be, where it's smart for business to be.

J. Les (Chair): Good. Thank you very much. Appreciate you coming this morning and, again, bring us your recommendations when you can.

K. Zmak: Absolutely.

J. Les (Chair): The next presenters are from the Mining Association of British Columbia. The floor is yours whenever you're ready.

P. Gratton: Note to self: don't follow Kelly. I think the only way to stand out is to use a very dull monotone.

What's also interesting is that I just got my daughter a Nintendo DS, which is great because now I get to play her Nintendo Wii.

I also think it's worth pointing out, too, that there is a very strong link between their world and ours in that we're a very high-tech sector — often overlooked. Robotics, simulators and remote mining are all part of our business today. We couldn't do what we do without the use of high technology.

Thank you for the opportunity to present to you today. In your kits you'll see three different documents. There is a written brief; a presentation, which I'll go through now; and, also, central to the message I want to leave with you is a snapshot on six major mining projects that are nearing the finish line and should be entering operations in the next few years. I'd like to focus on that as I go through this.

I'm sure all of you are very familiar with mining in B.C. It's a very important sector and has been for many, many years, and our future, certainly, has the potential to be very bright indeed.

It's an $8 billion industry — over $8 billion. There are some 14,000 direct jobs and an additional 35,000 indirect jobs on the supply side. The multiplier for mining is very significant — one of the highest multipliers you'll find of 2.5 for every direct job.

One of the good things at the moment for mining, which a lot of people may not be aware of…. We have started to come out rather strongly from the economic turmoil of the past year and a lot faster than we would have expected.

[1125]

When copper hit $1.30 a pound back in January…. Our industry in B.C. is known for copper and steelmaking coal and molybdenum primarily. All three commodities…. Well, coal was uncertain, but copper hit $1.30 after hitting highs of $5 during the supercycle that we experienced. We're now close to $3 a pound, and the industry is starting to make money again, and there's growing optimism for the future.

The fundamentals we've always felt are strong. Because of the demand from China and India and other emerging economies, we knew we'd get back to an era of prosperity. We just didn't think it would take only six months to start rebounding.

The price for coal, too — though it's a far cry from last year's record prices — is still, on average, one of the historical highs. Our steelmaking coal industry — 90 percent of our coal being used for steel — is also doing quite well. Some of our other commodities — zinc and molybdenum — have started to climb back, a little more slowly perhaps than copper. Gold has held up all the way through this crisis.

So our industry is actually in reasonably good shape going forward. I can't say quite the same about mineral exploration, and I'll come to that in a moment. The mineral exploration sector. Of course, the juniors raised their money on the stock exchange, and it takes a bit more optimism in the market — and sustained optimism
[ Page 41 ]
— for that to really return aggressively. We're going to see, certainly, in 2009 a sharp decline in exploration expenditures over previous record years, and I think that's something that we should turn to if we want to think about the sustainability of our industry over the long term.

I should tip my hat to B.C. First of all, on tax issues generally, B.C. is a pretty competitive jurisdiction on a tax basis. There is no secret why. A number of things have been done over the past number of years that have made the province much more competitive, whether it's the removal of the capital tax, lower corporate tax rates at the individual level and so on. Of course, we are one of those who also welcome the harmonized sales tax, which is of great benefit to us.

A lot of the inputs, whether it was energy used for production or a lot of the capital equipment…. In the past we had often presented before you looking for the removal of the PST on some capital equipment used in mining and succeeded slowly but surely in some areas, but there was still a lot to be done. The HST essentially addresses that issue for us in a pretty significant way.

We're one of 28 coalition members in favour of the HST. We estimate it is going to reduce operating costs for most mines anywhere between, you know, half a million dollars to a million and a half a year. It should reduce the cost of a new mine by some $10 million — certainly the estimates for one of our mining projects that I will refer to.

We see this as making our industry in B.C. that much more competitive, that much more attractive to new investment. When we are competing with jurisdictions like Australia and Chile and so on, this makes it much easier for us to bring our product to market. So we certainly applaud the government for moving in this area. It allows us to bring our workers back faster, frankly, with the upturn. The bottom line has just improved.

Let me turn to this sheet and the six mining projects that are on the near horizon. We are, in many ways, at a bit of a fork in the road, because in the next two years, two of our major copper mines are also scheduled to close. Those are the Kemess and Huckleberry. Their ore is exhausted. If that happens and there aren't new mines that come on stream to replace those, our base metal production in this province will decline significantly. Frankly, the future of our industry would be compromised.

Fortunately, there are at least a half-dozen projects that are very close. Copper Mountain near Princeton expects to be in operations in 2011. The Mount Milligan project — John Rustad is very familiar with it — is just completing its federal EA. The provincial process is completed. They've got some of their major provincial permits as well.

Taken together, these projects — all six of them — could put us in a stronger position in B.C. mining than we have seen in a couple of decades. So there's real chance for a significant re-emergence of our industry, creating thousands of new jobs and creating a lot more opportunities for the province.

[1130]

If you just look at the potential, all of these mines are between 12 and 25 estimated years of life. They're in four different regions of the province, offering a lot of opportunities for northern and southern and remote regions of B.C.

Thousands of jobs, as I mentioned. The Prosperity project near Williams Lake has been estimated to have the annual value of holding the Olympic Games every year for the next 25 years. Major mines are actually quite rare. We only have 19 major operating mines in the province, but each one is huge, and I think that sometimes gets overlooked. They're few and far between, but when you find them, they offer an awful lot to the province.

Our major challenges are — frankly, for this committee — less on the tax side than they are on the regulatory side, as I'm sure you're familiar. Again, John is certainly familiar, having watched the challenges that Mount Milligan has faced. Federal-provincial duplication is a huge issue for us. The province has come a long way in improving its environmental assessment process, but the feds lag significantly, and we're often facing, as we're facing with most of these projects, consecutive EAs.

Continued uncertainty with respect to land claims and aboriginal rights is another issue that we face. Infrastructure is always a key issue for us, but the Highway 37 power line was a big boost for us.

Turning to some specific recommendations for you in tax areas, I mentioned earlier that exploration has been hit hard. There are some forecasts that see exploration being a third of what it was last year. The government has, year upon year, renewed the super flow-through tax credit. We're recommending that you provide the exploration industry with some security about the future and in the next budget provide an indication that it won't just be renewed for one year. Renew it for three years. Send a signal that this is an important tax measure that's here to stay.

Something that we've been looking for as well. A few years ago the province reduced the statute of limitations for the B.C. provincial sales tax, which is now a non-issue — or it's going to be a non-issue — from six to four years. We're looking for the same thing for the mineral tax. That will, frankly, just ease the administrative burden that we face, by just having the period in which you would audit the mineral tax returns to four years.

Another major issue we face, of course, is related to climate change. We're an energy-intensive industry. We're a globally competitive industry. What it costs to produce copper here…. We sell it for the same price that anybody else sells it around the world. So we've been working very closely with the province on the climate
[ Page 42 ]
change strategy. There are some gains to be had through energy efficiency. Because we're energy-intensive, there's also a lot of money to be saved by reducing emissions. But some of our longer-term solutions are technology-based.

There are a number of recommendations here that we think might incent more significant reductions in our sector, such as a two-for-one biodiesel carbon tax credit and also raising the taxable income threshold for scientific research and experimental development. I think it's currently set at $3 million. We're suggesting you go a bit higher than that to spur on the next generation of research that would support reduced emissions.

Lastly, also related to exploration, one of the most significant innovations that B.C. has done in the last few years. I think you've just heard from Geoscience B.C. I think other Canadian jurisdictions envy B.C. for what we've done by creating this entity. It has driven a lot of geoscience research in areas that the industry identifies as priorities for the province. It's been hugely successful. But their funding is going to run out in the next couple of years, so we're looking to you to also recommend that geoscience funding be renewed so that they can continue to provide great value for the province.

And I'll stop there.

J. Les (Chair): Thank you, Pierre.

D. Donaldson (Deputy Chair): Thank you very much for your presentation. It really hits home. Where I live, I have many friends in the exploration industry as well as many who've worked for the mines that have existed in Stikine. So thanks for the presentation and the information.

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I just want to touch on the great potential that you mention. I believe that there is great potential, especially…. You mentioned the green credits and that aspect of mining. But the one I'm particularly interested in is getting our ducks in a row around certainty on the land base. I know that in my area especially but in other areas of the province, that's been a major factor.

The CEO of Teck Cominco made a presentation at Prince George last year and talked about how we need that certainty. I don't know about the progress or the lack of progress on that front. Could you just elaborate a little bit on that and give us your thoughts around the certainty on the land base and the impact that has on whether we can get some mines going in the province?

P. Gratton: Well, there's no question that that is the single-largest issue that we're facing today. It's not taxes issues, frankly; it's regulatory and certainty on the land base.

It's not a uniquely B.C. challenge. You'll see this across Canada. But I think the vast number of unsettled land claims here in B.C. and the overlapping claims we face make uncertainty with respect to aboriginal title a bigger challenge here in B.C. than perhaps elsewhere in the country.

We can often get caught as the ham in the sandwich, as you'll see, like with the Mount Milligan project. You've got one first nation that is generally supportive of the mine and one that has more serious concerns with it. They're both claiming title to the land, and the company is caught in the middle. So looking for the province to resolve those, recognizing it's not easy, is one of the most important things that the province could do.

Regulatory uncertainty — there are plenty of examples. You could look at Red Chris, another one of the major mines that's in here. It went through a full provincial assessment and got its B.C. certificate and went through a federal assessment and got its federal approval. Then the federal government was taken to court because MiningWatch has alleged that the feds did not have the discretion to scope the way they scoped. This case is now going to the Supreme Court in October. It'll be heard in October. We're interveners in that case. That kind of uncertainty doesn't help either.

The whole federal side of things is a huge challenge in terms of there being no timelines, unlike in B.C. There's a lack of coordination between different departments. You'll see more coordination here in the province. So it is a huge issue.

We're certainly looking for amendments to the Canadian Environmental Assessment Act that would provide for equivalency, where the federal government, on a case-by-case basis, could accept the B.C. process as equivalent. It's not to say that the feds wouldn't be involved in the B.C. process. They are now. But it would have the B.C. EAO, when agreed to by both governments, be the lead and single environment assessment regulator for mines, and that would help a lot.

B. Routley: I assume that you would agree with me that prices on these commodities are set by the market — right? They're world prices. So do you have any way of helping us out with…? I've heard a lot about how we're going to pass on the benefits to the consumer of the HST. Could you illustrate how that's going to happen?

P. Gratton: I was wondering if I'd get that question. For mining, it's less obvious. Our copper is sold on the global market, so it's bought through the London Metal Exchange. You don't have manufacturers buying our copper here and then passing the reduced cost on to the consumer. So in our case you can't make the argument that you can make, say, for a number of domestic or provincial manufacturers where you will see, I think, very legitimate cost savings passed on to the consumer because the inputs have been reduced.

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But what it does do for mining, and I think the same could be said for forestry and other resource sectors…. By making us more competitive, we're able to…. We pay the highest wages of any industrial sector in the province. We're a high-cost jurisdiction. For that reason, among others, this makes us more competitive and allows us to retain workers during downturns. It allows us to pay the wages that we pay. It makes it more attractive to attract new investment for new mines.

I think it is a very sound policy. There is a reason why 130 jurisdictions, I think, around the world have moved to a value-added tax. B.C. is no different from that. So I think there are obvious advantages to that tax.

But in terms of mining and passing it on, that is less obvious. Having said that, a number of the suppliers to our sector will do so. If you're in the construction industry, you will be…. The lower input costs that you will be paying, you will then pass on to others that you provide a service to.

J. Les (Chair): Unfortunately, that's all the time we have this morning, but very interesting. I hope you get those mines on line soon.

P. Gratton: So do we.

J. Les (Chair): Thank you very much.

The next presenters will be from TELUS. The future is friendly, or something.

K. Logan: You know it.

My name's Kim Logan. I am the government relations director for B.C. for TELUS. I have brought along a PowerPoint for you to refer to. You don't have to look at it. It's just to summarize some of the points that I'm going to be making today.

I thought I'd just give you a quick overview of TELUS's activities in B.C. As I hope you know, we are the largest private sector employer in B.C. We're headquartered right here in Vancouver, although we are a national telecommunications company in Canada. We provide a wide range of communications products and services, including data, Internet, voice, entertainment and video.

We generate more than $9 billion in annual revenue nationally. Last year our total compensation in B.C. was more than $625 million. We employ highly skilled workers whose average annual compensation is approximately $67,000.

TELUS makes a significant contribution to the economy and community in B.C. We paid more than $64 million in property and business taxes, capital taxes and sales on goods and services used by TELUS in B.C. We collected and remitted $133 million in PST to the B.C. government.

If you want to turn to slide 3….

I just wanted to talk about our philosophy in terms of community investment, which is: we give where we live. We've invested $50 million in the community in B.C. since the year 2000. Last year TELUS community boards funded $1.2 million in initiatives in B.C. Our TELUS community boards, for those of you who aren't aware…. We've got one in Victoria and one in Vancouver.

The boards are comprised of community leaders external to TELUS, as well as TELUS members. Together they review funding requests and make decisions on small community grants, approximately $5,000 or $10,000 each The idea is to be able to actually fund some of those smaller organizations that find it hard to access corporate funding.

This year, despite challenging economic times, TELUS and its team members are donating more than $4 million to over 600 Lower Mainland charities. More than 300 charities on Vancouver Island will receive donations totalling more than $500,000.

We announced this summer that we are bringing the 2010 TELUS Skins Game to Bear Mountain in Victoria. For those who aren't aware of this event, it's a world-class event broadcasted on TSN involving big names in golf such as Phil Mickelson, Greg Norman and Jack Nicklaus, and favourites such as Mike Weir.

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We also announced that through this event, TELUS would be donating $100,000 towards the construction of Jeneece Place, which is an eight-to-ten-bedroom facility for families of children who need to travel to Victoria for treatment. Many children come to B.C.'s Children's Hospital, but a lot of kids up-Island also have to go down to Victoria for treatment, and currently there is no facility like that for them. It's been, actually, the dream of a remarkable girl named Jeneece Edroff. I invite you to learn more about it. You can visit jeneeceplace.org to find out more.

I also wanted to quickly mention the TELUS community ambassadors program. It's the largest corporate-based volunteer organization in western Canada, with 12 clubs in B.C. This involves the volunteer work of our retirees from TELUS, so over time it actually amounts to a significant number of people.

To demonstrate the power of this network, within hours of the evacuation order in Kelowna this past summer, on July 18, TELUS began to mobilize support for the estimated 17,000 residents impacted. The TELUS community ambassadors fire fund collected goods and financial donations from the public through drop-off locations at TELUS buildings. They also packed and provided more than 2,000 comfort kits packed with toiletries and other essential items for residents displaced by the fires. We have 250 employees in Kelowna, so it's a demonstration of how the philosophy of "we give where we live" can have a huge impact on the community.

Moving to slide 4, I wanted to talk a little bit about the significant economic activity that TELUS does provide
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in the province. We've invested more than $19 billion in operating and capital expenditures in this province since the year 2000, with a $600 million capital investment in B.C. this year alone.

To give you a sense of the types of projects that we've been working on, in February we completed a $1.3 million renovation to our contact centre in Prince George so that we can double its capacity to 150 members. In June we completed a $1.1 million project to boost high-speed Internet in the Ucluelet and Tofino regions, and in July we completed a $600,000 cell tower project in Armstrong to boost mobile coverage in that area. You can see how immense the reach that we have in the province is and how great the ripple effect can be once we put resources towards economic activity as well as community investment.

On the next slide, I just wanted to talk a little bit about the HST, which I know has been controversial in its implementation. I just wanted to reaffirm, as it has been in the media, that TELUS is supportive of B.C.'s decision to adopt the HST. We think it makes sense, given Ontario's decision, and it will enable B.C. to remain competitive with other jurisdictions.

We have right now a complex patchwork of sales tax regimes across Canada. These different tax regimes represent an onerous compliance burden which, as a national company, is costly and time-consuming for TELUS to administer. In addition, an HST is a key element to support economic growth in B.C. because it encourages investment, it enhances competitiveness for businesses, and it eliminates cascading double taxation for consumers.

The benefits of HST are best summed up by this quote from our chief financial officer, Robert McFarlane. He said that by simplifying the province's tax structure, the HST will take costs and double taxation out of our business and thousands of other businesses across the province. That will make B.C. a more attractive and competitive place to do business, encouraging innovation and price reductions for consumers and exports.

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TELUS is investing $600 million in wireless and wired broadband infrastructure in B.C. this year alone. Savings from HST will allow us to invest more than previously possible in B.C. in the future. Applying that across all industries, this announcement will mean more investment in our province and more jobs.

Just moving to the last slide. In terms of recommendations to the committee, I urge you to recognize the important role that technology will play in B.C.'s future competitiveness and economic growth. Government should continue to support the use of technology to help increase productivity, find efficiencies and reduce ongoing expenditures. Take advantage of the ideas, innovation and expertise that the private sector has to offer.

Just two examples of successful collaborations with TELUS include the government's outsourcing of its payroll services to TELUS Sourcing Solutions, which will save government $30 million over ten years. Another example includes the connecting communities agreement between TELUS and the B.C. government, in which TELUS invested $110 million to help bridge the digital divide in B.C.

These types of innovative collaborations all start with an idea and a conversation, and we invite the government to engage in that conversation with the private sector.

J. Les (Chair): Thank you very much. I have two quick questions from Norm and then Michelle.

N. Letnick: I'll make it quick. First, thank you very much, and thanks to TELUS for participating in planting trees in my community in Kelowna and for everything else that it does. It's just amazing.

Exports. Is TELUS currently exporting a lot of value-added goods to other countries? With the HST, I imagine that'll make it even more competitive. Could you talk a little bit about that?

K. Logan: Actually, I would say that the vast majority of our activity is serving the domestic market here in Canada.

N. Letnick: Right. Well, being the largest private sector company in the province, is there anything that we can do to work with you as a government to encourage you to get into exports and provide more jobs in B.C. that are actually values used somewhere else in the world?

K. Logan: Absolutely. We do some work overseas trying to secure business from other markets around the world. In terms of what the B.C. government can do, you're definitely on the right track. I mean, you provide the kind of business climate that we need to be able to keep our talent here in B.C. so that we can find the highly skilled workers that we need for a wide range of senior-management-level positions.

In terms of our executive leadership team, I would say that the greatest proportion of those who are actually residing in a province is in B.C. We do want to be able to attract skilled workers. So continue on with your investments in advanced education and in really thinking about the skills shortage that may come in the future, because TELUS faces exactly the same challenges that the B.C. government faces in terms of an aging workforce. There are lots of those.

Keeping your tax regime competitive with other jurisdictions is very important. Anything that helps us attract and retain talent here in the province, I think, would be extremely helpful to us, and the HST does help to make sure that other jurisdictions don't appear more attractive to us in terms of a lot of the business activity that we do here in the province.
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As you may or may not know, we do a lot of business in Ontario. I think if Ontario were to move to the HST and B.C. weren't, there might be an argument made to move some of our activities over there, but since you've decided to keep your focus here on B.C. and to remain competitive, I think that really does help.

M. Mungall: I hear a lot of talk about how the HST is just going to be the end-all and be-all to creating competitiveness in British Columbia. You have to appreciate that my position is to really weigh the facts — right? — not just the claims, so I'm trying to get to the facts on this.

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What I read in your presentation is that, for instance, you'll be able to invest more in broadband infrastructure. One of my thoughts is: does TELUS actually have a plan to increase their investment, then, if the HST comes in? How would the HST allow you to create that greater infrastructure? I'm hoping that in rural areas, where we need it the most….

K. Logan: Absolutely.

M. Mungall: Because we do already have a value-added tax in British Columbia, and that is the PST — right? We also have the GST. Just because it's not together in the form of the HST, why does that make us less competitive than Ontario, for instance? And what are the other factors that actually do impact our competitiveness, other than just a simple sales tax?

K. Logan: Well, right now we are definitely looking at the HST and trying to figure out the logistics of moving over to a HST versus the systems we have right now and looking at trying to evaluate what the impact will be to TELUS in terms of our access to those input tax credits.

Because the transition rules around HST haven't been announced yet, I don't know if we actually know what the dollar figure would be. But I can tell you that the telecommunications industry is heavily capital intensive. We just have to constantly make investments to expand as well as upgrade our infrastructure.

You mentioned the rural communities. We have been working closely with the B.C. government as well as on our own to try and expand that infrastructure as broadly as possible, because we truly believe that the power of the Internet is key to bringing economic and educational opportunities to some of the smaller communities.

It's capital intensive. It costs a lot of money — $600 million in capital investment this year — when you compare it to other large companies. It's actually much more than some of these other companies are investing. So what the HST brings, I think, is access to those input tax credits. All it means is that there will be more funds available to broaden that investment out to other communities.

J. Les (Chair): Okay. Unfortunately, again, we've run out of time but very much appreciate you coming — I must say, for the first time, I guess, this morning — at very short notice. So again, thank you.

Our final presentation this morning, which is highly appropriate given it's almost lunchtime, is from the B.C. Agriculture Council.

R. Driediger: Sorry. We didn't bring lunch.

J. Les (Chair): No, but the agriculture industry, somehow, is going to be responsible for whatever it is we are eating this afternoon.

I want to thank you. I know that this was very short notice for yourselves as well in terms of presenting today. That's just the way it is this year. We've got to do these things in a hurry, and you've responded, and we appreciate that.

R. Driediger: I'll say thank you on behalf of Andrew, who really did all the work.

Good morning, and thank you very much for allowing us to be here to present and meet with the committee. It's greatly appreciated. I just want to go over a little bit….

Some of you know the B.C. Agriculture Council. We are the umbrella group. The smaller industries such as B.C. Cattlemen and Raspberry Council would belong to the B.C. Ag Council. The Ag Council would do the policy work and representation on behalf of growers and producers throughout B.C. We also, then, represent B.C. on a national level. We represent 12,000 farmers out of roughly 20,000, although we represent 95 percent of the value of agricultural products within B.C.

B.C. farmers and ranchers serve as a foundation for diverse agriculture and food systems, which include production, processing, distribution and sale of food, and other agricultural goods such as flowers and nursery products — which generate over $35 billion in revenues and employ 290,000 people. We just like to remind every committee and every time we go before a group that we are a large employer of people, and we are a significant contributor to the provincial economy.

A multifaceted system, we account for 2.3 percent of the GDP and 14 percent of the provincial workforce. While these numbers clearly demonstrate a significant economic contribution, there are some very unfortunate trends. I'm probably going to focus on the unfortunate or the negative side, and then we're going to let Andy do the positive side within agriculture.

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One disturbing trend — and sorry; I do speak fairly quickly, because I know we're short of time — is the level of support that we receive in agriculture as compared to the rest of the country. We are behind. I believe we are 2 percent of GDP. We're looking at over 10 percent for provinces like Alberta, Saskatchewan and Quebec.
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We'd like to see the level of overall support within agriculture go up to the level that other provinces enjoy at this point.

Secondly, and most importantly, Stats Canada reported in June that net income for B.C. farmers and ranchers in 2008 was negative $134 million. I'm sure everyone appreciates the fact that you can only continue to lose money for so long before we lose an entire industry, an entire sector. This follows losses of $113 million in 2007 and $122 million in 2006.

Andy has pulled those numbers. If you do have questions about them, Andy would love to answer those.

We've witnessed an unprecedented third year of losses. That factors into how we also look at our safety net funding and how we can access that funding. If you have continual losses, you have a negative margin, and it's very difficult to access those funds in years of need.

As we know, we have several industries that are heavy hit. Most of those have met with you individually. I'm not going to discuss the blueberry one today, although I'm a blueberry grower.

I'd like to move on to the HST. Again, the BCAC is fully in support of the HST. We have joined the coalition led by the B.C. Business Council and other industry associations to promote its implementation.

It's actually something we've worked on with the provincial government because we have a very negative effect with the PST. It's very archaic. It's a system that retailers hate, farmers hate. It's been very difficult, so we've worked with the government for the last three or four years to establish a better PST system.

Well, along came the HST, which pretty much solves — hopefully — that problem, as long as the implementation, which is explained here in the next paragraph, is what we're looking for.

It will give us a much-needed boost. It goes back to Michelle's question as well: "What do you see that boost being?" It's the input tax credits. I mean, that's a significant amount of money that's tied up, month to month, quarter to quarter, that can be used to fund…. Well, obviously towards profitability, but also to fund expansion within agriculture.

That's really what we'd like to see in the future too — value-added services and expansion. But if your money is tied up in PST — or the problem of getting it back — and the retailers having fights with retailers all the time…. That's what we'd like to see the HST do for us.

Andy's going to go over some other points. Yes, I am skipping ahead here.

The provincial carbon tax. Yay, HST; boo, provincial carbon tax. Now some people in agriculture, myself included, are net benefiters of the carbon tax. Greenhouse? Net loss. When you're looking at an industry that's already under siege, has high energy costs and had no opportunity to make changes before the carbon tax came in, they're being brutally hit with the carbon tax.

They will be doing another presentation as well. They have been working with the ministries to lessen the impact of the carbon tax. But it's a very difficult position for one industry to be in that was already suffering and is having a lot of…. The high Canadian dollar and a lot of other negative effects are attacking their bottom line. This was just another, let's say, slap.

Probably if they had had time to react to it and time to look at other energy sources and ways of using that money for investment rather than paying a carbon tax…. But we'll move on, and they'll move on from that and address you personally.

The other one I was going to speak to is the domestic branding. I think, John, that you're familiar with the Buy B.C. program. Then we went to the Pick Me, Pick B.C. program, which didn't really fly. There was money set aside to go back to Buy B.C., and that has evaporated.

We would like to see that money be recommitted in the future. It's perfect timing, as we all know. It's eat local, hundred-mile diet, support your local grower, and there are no funds there.

There are some of our groups — myself included — that spend a lot of our own money to promote local and promote the benefits of buying local. We'd like to see some funding and some support from the provincial government.

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I think it's a small amount of money. It was $1 million. I'm sure you've heard that a lot over your sessions — a million dollars is a small amount of money. But it really is and can be used effectively.

I'll take all the negative questions. Then Andy can speak to you about the positive aspects of agriculture.

A. Dolberg: Of which there are many. I'm not going to go into further detail here. I think the brief is in front of you — the issues that Rhonda didn't touch on.

Farmland assessment. There are some recommendations from that report. There's one in particular — you know, one of the committee members was a big part of that — that we'd like to see implemented.

Ministry of Agriculture and Lands extension services. A number of our members cite this as very important for them to ensure that there is continued collaboration with the ministry, particularly in tough economic times and in times where a lot of producers are looking to value-added and changing what they're doing in order to be able to make a return. That collaboration is particularly important.

Meat industry enhancement. You'll be hearing from the B.C. Food Processors Association that they have been managing programs on behalf of government which have been assisting the industry in getting processing capacity established as a result of the meat inspection regulation being put in place some years ago. It's still an ongoing challenge in some regions, and they'll be providing more
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detail, I believe. At the October Surrey session they'll be presenting to you.

The school fruit and vegetable nutrition program is another one that a number of our members raise as being very important. One thing I'd note on this program is what we've suggested for a long time. There needs to be more of a connection between health policy and agriculture policy. Agriculture overall has a lot to contribute for a healthy society.

When we look at the amount of money in Health budgets and the very minuscule amount in Agriculture in comparison, we think that if there's a little bit more connection and collaboration there, it could go a long way to improving the health. We cite this program as an example of something that has changed attitudes and behaviours with respect to eating. When you're looking at those attitudes and behaviours changing with a young population, that can go miles in the long term to reducing government costs.

Those are sort of the other areas I wanted to highlight. I'll leave it to questions, other than that.

J. Les (Chair): Good. Thank you very much.

John had a question, and then Jane and then Doug.

J. van Dongen: On the transfer of administration of the AgriStability program, Rhonda and Andy, I think it would be good to explain to the committee why that's so important to B.C. agriculture.

A. Dolberg: Well, if any of you have been speaking to any farmers that have used that particular program in the last number of years, I don't think you would hear one positive comment about it with respect to its administration. It's administered out of Winnipeg by the federal government. I think, in summary, it's been quite a disaster. That was one message that certainly came through very loud and clear during the agriculture plan consultations: that this needed to change.

Having the program run in Kelowna, there'll be more of a connection with B.C. agriculture and B.C. agriculture's needs, which are much different than prairie agriculture. Staff there are geared up to run the program. Everything is in place, but there are challenges with a transfer like that. Our point here is that we want to make sure that it stays on schedule, even if that means some increased costs temporarily. In the long term it will be a significant improvement for agriculture.

J. Thornthwaite: I notice that on your health and agriculture discussion on the school fruit and vegetable nutritional program, you were commenting that it was very successful. Have you got any other suggestions as far as partnerships with other groups like Overwaitea and Saputo or any other ideas?

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A. Dolberg: We'd like to enter into those discussions with government, really. We don't have specific proposals. We're citing that one as an example where industry and government are working together to provide those health benefits over the long term. The point there is that by citing those companies involved, it is truly a collaborative effort, and industry is contributing in a number of ways.

D. Donaldson (Deputy Chair): Thanks very much for the presentation. It's close to home. I've worked in local food action for the last seven years, and I have had a small farm for the last twenty years, so it's a topic that I'm very interested in.

The health policy and agricultural policy link, I think, is a very good point. We had some food security initiatives that we ran in our local area of Northern Health, and we worked with local producers, but that link to the agriculture policy sector just wasn't there. I hope that maybe going from the 2 percent of GDP to the 10 percent might increase the ability for us in communities to link with the Ministry of Agriculture on that. I don't think it's a lack of will; I think it's a lack of resources for the people in that ministry to do the work.

My specific question would be on the HST, so I guess it's for you, Rhonda. I notice that the council is in support, but based on the understanding that the tax paid on all farm inputs are not zero-rated.

From what I understand, there were maybe ten or 15 pages of exemptions with the PST. Maybe you can shed some light on whether those exemptions will be under the HST as well.

Just so I get it right: the support of the council is on the understanding that those exemptions will also apply under the HST — that's where the support comes from?

R. Driediger: As an input tax, yeah.

D. Donaldson (Deputy Chair): Yeah. Okay.

R. Driediger: I think what we're looking at is a very narrow group that will be excluded, versus a very large group right now that's excluded for PST exemption. You're also relying on a retailer right now to assess that list and work with the farmer to determine whether or not it's truly exempted.

Then you have, of course, the provincial revenue guys that come out every three years and check to make sure. It's quite an onerous system on the retailer, because the farmer is asking for the exemption, saying: "It is exempted." The retailer is unsure. If they exempt it, they don't charge them. Three years later, they're having to pay the tax. We're trying to eliminate that.

We're trying to have it open the classification, the amount of input tax credit, to be much broader than what we have right now. That tax is very narrow. It's
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quite an old-fashioned, shall we say, way of doing farming. A lot of those things we don't even use anymore. We have to ask the provincial government to update it each year, and then there's a discussion back and forth whether or not it should be exempted.

Now we can just be clean. There's no involvement from the retailer. It's simply: they charge it; we claim it back. I can't see that there'd be many things within that list anymore that wouldn't be exempted or that you wouldn't be able to claim back.

A. Dolberg: That's the important thing. The one really big one that farmers weren't able to…is building materials. If you have a general expansion, you had to pay the tax on it, and there was no ability to get it back, whereas provided that it's implemented the same way the GST is currently administered — and farmers have to go through that paperwork anyway — it's a much cleaner system. They'll be able to claim all of those tax inputs back.

J. Les (Chair): Thank you both very much for a good presentation.

I'm going to apologize to the committee. I ran twelve minutes over. The bad news is that we're still going to reconvene at one o'clock. We're recessed until then.

The committee recessed from 12:14 p.m. to 1:02 p.m.

[J. Les in the chair.]

D. Donaldson (Deputy Chair): Mr. Chair, can I have a point of order before we start up again?

J. Les (Chair): Sure.

D. Donaldson (Deputy Chair): It's been brought to my attention by a number of the groups that you see here today and others who tried to call in to the Office of the Clerk to reserve a time for today that, because of the short notice, the spots were already filled up.

I believe that there is a great interest level shown not just by the broad coalition of groups that we see here today but also from other groups we've heard from that weren't able to get spots in the Vancouver session. I think in today's time of great cynicism, here are a number of groups who want to be involved, who want to participate and want to give their input on the budget.

I would move, considering the interest level here, that we attempt to add another date in Vancouver for this committee to hear input from organizations in the Lower Mainland, considering that's where many of these groups are from.

J. Les (Chair): Thank you. I'm not sure if that's a point of order, but I'm always, of course, interested to enable people to participate to the fullest extent.

This year, because this was an election year, the work of the committee has been truncated somewhat, but we still have to have our submission in to the Legislature by the 15th of November, and of course, we're still in the middle of a fall session at the Legislature, too, at the present time — all of which means that we've been somewhat limited in the number of days that we have available.

We have a schedule of hearings. Right now I believe it takes us through to the 23rd of October, if I'm not mistaken. Following up, though, on MLA Donaldson's suggestion, I ask committee members to turn their minds to a potential other date that we can work out that works with our schedules. Perhaps later today or when we convene next week in Victoria, perhaps we can put our schedules together and see if we can find another time. I'm certainly open to that.

Our purpose is to include as many people as possible, not to exclude anyone. I would point out, as well, that these public hearings are one forum through which participation is possible. It is, obviously, open to anyone to make presentations via electronic means such as e-mails. We're going to do some video conferencing this year. We're also going to take some video presentations as well, so there are lots of ways in which you can make your views known. If we can find another day somewhere that's workable, then certainly, I would be open to that.

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This is not the final day that we're going to be sitting in the Lower Mainland. We have a meeting scheduled for Surrey as well, which will be an all-day session. That, I think, is on the 16th of October. So we're trying to make it work with the limited time resources that we have available this year.

I would like to acknowledge the significant increase in observers this afternoon compared to what we had this morning. Welcome to all of you, and without further ado I will call the next presenters, who are from the B.C. Association for Community Living.

And having welcomed everyone here this afternoon, please try to keep in mind that the presenters only have a limited period of time, so try not to interrupt or make it difficult for them. Thank you.

F. Bodnar: Well, good afternoon. My name is Faith Bodnar, and I'm the executive director of the B.C. Association for Community Living. I'm here with two of our board members, Leila Rahemtulla and Tim Stainton, both of whom are parents of children with developmental disabilities. I also want to thank you on behalf of BCACL for the opportunity to present to you.

BCACL is part of a provincial, national and international networking federation of families with developmental disabilities, people with developmental disabilities and organizations that serve them. We have a long, rich history going back 55 years in Canada.
[ Page 49 ]

As I opened, I want to say that we appreciate the opportunity to come here, and we also want to thank the government's decision to safeguard the new investment in supports for people with developmental disabilities in the September financial statement. BCACL presents at the budget consultation every year, and we want to thank you for listening last spring.

I also want to underscore the vulnerability of families and people with disabilities, not only to the decisions that you make but to the overwhelming poverty many face — the lack of access to safe, affordable housing and the erosion of basic services such as education. We know that other powerful interests will also impact your decisions, but we encourage you to infuse your decisions with a vision of equity, fairness and justice regarding people with developmental disabilities and their families, the most vulnerable people in our province.

In particular, we all know that the non-profit sector are some of the most responsive, effective, efficient and powerful community builders and agents in our province. The moneys invested in organizations build strong, vibrant and inclusive communities all across this province. They are the backbone of a prosperous province.

Recent decisions regarding strategic gaming grants to non-profits and cutting of autism funds to families, while relatively small investments, have created great uncertainty and confusion in our community. While these dollars are relatively small, they are strategic and lever exponentially in the lives of people with developmental disabilities, their families, the organizations that support them and the communities that they live in.

So while we recognize the need for fiscal sustainability and responsibility, we ask that you recognize that doing so in a way that pushes the most vulnerable deeper into lives of exclusion and poverty, and who are already under-supported, weakens our entire province and in fact leads to higher fiscal and social costs in the future.

T. Stainton: Thanks again for this opportunity to speak to you. I just wanted to start by reminding you that this is Community Living Month in the proclamation of the province which emphasizes inclusive education and the importance of that to our children and indeed to all children in our community.

I'm going to focus a bit on education. We know that the research on inclusive education supports the benefits not only for our kids with special needs but for all children in our communities. They will grow in and grow up in communities that are inclusive, and that will, hopefully, lead to a much more inclusive community when they are the ones who are sitting in our chairs.

While there haven't been any direct cuts to special needs funding in recent times, there have been a whole series of cuts that are impacting a whole series of issues.

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Obviously, the $110 million facilities grant has squeezed the school boards. On top of that, the budget freeze, the increasing charges in MSP that they'll have to deal with, the greenhouse initiatives, full-day kindergarten and the introduction of the HST are all going to squeeze the school board budgets. And unfortunately, it's often the case that that rolls down to our kids.

Rather than tell you the story of my family…. My son has had his TA hours cut back, and we struggle with that, but to be honest, he's one of the lucky ones in the limits of those cuts. But I just want to share with you briefly a letter that I got from a family that I think says much better than I can about what this means for that family and those children.

"We have four children in the school system, three with special needs. I realize that we are a challenge for the system, and I have to say the elementary school has bent over backwards despite the cuts. But we are still feeling it.

"The elementary school is having trouble getting supports in place because of cuts. Our guy in grade 4 is expressing lots of frustration and anxiety because of it, and many tears. He says the work is too tough, and when he asks for help, no one is there to help him in the class, and he feels the teacher is mad at him for asking. I believe it's her frustration, not anger at him, that he's picking up on.

"He was mostly integrated last year with a half-time aide. This year he's in classroom less than half the time because he has to go to a resource room instead of inside the class.

"Our guy in grade 2 no longer has care first thing and last thing in the day, and as a result, a lot of critical details fall through the cracks, like medication, communication. Sometimes he comes home with no coat, no shoes or someone else's shoes. He is also acting up in class because of the lack of aide support resulting in confusion in that classroom.

"High school is much worse. Our gal there is totally lost in the system, and we are in the process of paying for private assessment because they now will not do the psych-ed assessment they promised us three years ago. We believe if this assessment doesn't happen this year, we will be sunk. She will not be able to continue without a better understanding of her learning needs.

"The psychologist that is doing her testing is appalled by the lack of support and said she doesn't know how our gal has coped for the last three years without a system. What it has done to her self-esteem and to behavioural issues is our main concern."

I think that's a fairly poignant reminder of the impact that it can have on this family. But I think the key point that's our concern is the sense of confusion and chaos this creates. I mean, all families with special needs kids expect the first month to be chaotic as they argue for TA hours and work out who that's going to be and try to educate them. But it's just increasing with the cuts to TA hours, the non-replacement of TAs for sick leave.

All of this is creating a frustration for the teachers. Inevitably, some of that's going to spill over into blaming that child and blaming that family — and, most critically, a movement away from inclusion and into more and more use of resource rooms and segregated schools.

It also has a very direct impact on the economy. It is very typical for families with special needs kids for one of the parents to have to leave work just in order to deal
[ Page 50 ]
with all these extra-time things. They're no longer contributing; they're no longer paying taxes.

To sum up, I think the long-term effect of what we understand is not the intention of the government but an indirect impact of a series of issues is that our kids are going to be more and more excluded. They're going to grow up with fewer skills, with less ability, and we're going to continue to pay for supporting them for the rest of their lives rather than investing now to make sure that they can be full citizens in our community, contribute to our communities and not have to rely on services and supports for their lifetime.

L. Rahemtulla: Thank you again for giving this opportunity to speak and your willingness to hear from us on behalf of our families. We know that the government is facing some difficult times in the financial decisions it has to make. We can appreciate the need to balance the books and to be fiscally responsible.

However, as a parent of a special needs child, I'm one of those people that Tim is talking about. I must ask that the committee take into account the immediate and long-term impact of its decisions on one of our most vulnerable populations.

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When we start making cuts to education and critical services or making demands on the personal resources of people who are barely keeping it together, we're really hurting a group that may not even be able to come to the table to be heard. I'm here because I feel like I have to speak on their behalf. Let us not move forward in a way that furthers their disconnect with society and disenfranchises them more.

I believe that we need to be financially aware. As a family we've had to make decisions based on the current economic times. We've had to take care as we plan for our future, but at no time do we look at our children and say: "Let them go without." They are in our care. We are responsible for them. They are vulnerable. They are our future.

I ask that the government look at our vulnerable populations with the same lens. Filter your decisions and recommendations with a balanced accountability to social principles. There are three things that I'd like the committee to consider: (1) rethink its present and future cuts to people with special needs and their families; (2) consider exemptions if the taxation and cuts must go through, to achieve a fair and balanced outcome; and finally, (3) be thoughtful in your decision-making.

Don’t rush things. Take into account the long-term impact and the unintentional consequences that might be occurring. As much as this has been a challenging time for many people, I am heartened by a process that allows us to speak. I am proud to be a British Columbian, and I'm grateful for so much of what has been done for people with disabilities.

I am very concerned about some of the most recent events, and concerned that it's reflective of a trend that causes us to lose sight of the ethical responsibility we have to our community. I feel confident that I speak for most people of the province when we ask that you consider us in your decisions. No one wants to believe that we balanced our books and became financially accountable on the backs of our most vulnerable citizens.

M. Mungall: Thank you very much for your presentation. Faith, you brought up the cuts to B.C. gaming grants. One of the programs that have been cut is the Special Olympics. I'm wondering if you can elaborate on how this is going to impact people with developmental disabilities.

F. Bodnar: In terms of Special Olympics?

M. Mungall: Yes.

F. Bodnar: Well, I have a long background and history in supporting people with developmental disabilities, and that is one of the activities and things that they often value the most. With the opportunities for inclusive activities not being that evident and in place in communities, and with the camaraderie and the peer support that they get, I think it's important that we look at those kinds of programs and make sure that we support them.

J. Les (Chair): Okay. Any other questions?

Seeing none, I'd like to, on behalf of the committee, thank the three of you. We're actually out of time as well. We're trying to pack a lot of presentations into one day here. So again, thank you for coming. Very well-presented.

Our next presentation is by the Truck Loggers Association.

D. Lewis: Good afternoon. Thank you very much for the opportunity to present to you once again. I'm Dave Lewis. I'm the executive director of the Truck Loggers Association. Like so many others, my family's livelihood depends on the coastal forest sector. Unlike so many others, I'm quite fortunate because I still have a job.

We represent the independent businesses that are involved in the harvesting sector and the manufacturing sector on the coast. While our average members may not be corporate giants in terms of market share, they're definitely corporate giants in each of their respective rural communities. In many of these communities our members have suffered a tremendous amount over the last year.

Last year I had about 500 member companies. This year I've got about 450. Most of that has been a result of business failures. You know, we've cut costs to the point
[ Page 51 ]
that there's really not much more to do on the cost side. From the government's standpoint, all partisan stuff aside, you all realize it's a revenue problem that you're facing going forward, and no one wants to focus on cutting costs.

What I'd like to do today is challenge not only us presenters but the committee to find ways to increase revenues and to look for that, going forward.

We realize that the government has a lot of limitations in terms of what they can do in the forest sector, due to the softwood lumber agreement. We realize there are budgetary issues as well. But with that in mind, the TLA sees two key policy measures that the government could act on that will assist in raising revenues and improving the business environment.

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The first, in terms of tax policy, that will assist our sector is the introduction of the HST. Over the past three years, average logging companies have had negative returns in terms of the investments that they've made into their companies. From a self-serving viewpoint, it's going to reduce our red tape. It's going to reduce our accounting costs. It's going to increase our efficiencies and our productivity.

Take, for example, the following scenario. You are a small business operator. You've got some machines that you use for logging-road construction and logging activities. Presently there is an exemption on forestry activities for equipment; there isn't on road construction. Same machines. Same filters. Same hoses. They do two different jobs.

Imagine yourself having to track, as a small business owner, which parts were used on which machine and for which job. Imagine the hassle that would arise during an audit, trying to provide the paperwork that says: "I used this filter on this machine for this job, not that job."

For years we've lobbied to remove the PST on road construction materials and equipment simply because of this complexity that it creates. Introducing the HST, from a self-serving standpoint, is going to do that for these guys.

In terms of buying a new piece of equipment, some people will say: "Well, right now you get a PST exemption at the point-of-sale. That's going to disappear." They are exactly right. That will be turned into an input tax credit.

We've already seen manufacturers and financers deal with that situation. If I go to buy a million-dollar piece of equipment and I'm getting a $70,000 extra bill at the point-of-purchase, what they'll do is create a balloon payment, approximately three to four months down the road, so that by the time someone gets their rebate, they can then apply it to it and it's taken care of. So really, it's negligible — the impact up front — in terms of a consumer standpoint.

The thing that is important in this sense, though, is the time it takes to get a rebate. Because they'll be financing this, the turnaround time of working with the feds to ensure that that's minimized is extremely important for us and anyone else who is purchasing major pieces of equipment like this.

While the HST is going to provide our sector with some benefits from an individual perspective, I think it's more important to note that it's going to provide some major benefits that will relate to improved global competitiveness and that it will ensure that we don't lose investment dollars to other jurisdictions that have harmonized tax regimes.

In the forest industry we export about 95 percent of the forest products that we produce. Our ability to compete on a global scale is paramount to our survival. The softwood lumber agreement not only restricts our ability to compete; it severely diminishes the policy efforts that can be taken to help us be competitive.

With the introduction of the HST, we're going to see reduced costs throughout our sector. Those costs are going to help us reduce the price of our products, which will then help us compete globally. There will be a direct drop in the costs of our products, and we'll be able to compete much better with foreign jurisdictions.

Our recommendation is that it's critical that the provincial government not only move forward with implementing the HST but that you ensure that the time for applicants to receive their HST rebates is shortened as much as humanly possible.

The second area of interest that I'd like to explore relates to government stumpage revenues. It wasn't too long ago that the government was receiving about $1.3 billion annually in stumpage revenues. Next year the revenue from those is forecast at $350 million. That's a lot of school sports programs.

Why are the revenues so low? I think they're the product of three inputs. One, that's the amount of revenue that the Crown receives per tree. Two, it relates to the costs that are needed in order to administer the system to get them out. But third — and most importantly — is the volume of trees that has been harvested.

Presently the value of the Crown's timber is lower now than it was in 1981 and 1991, when you adjust for inflation. So definitely, we've felt some pain because of the lower market that's pervasive right now. In terms of our cost structure, I think that's something that could be looked at. We roughly bring in one-quarter of the revenue, and we're still maintaining the same bureaucracy.

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Now, in terms of B.C. Timber Sales, which is an arm's-length agency, they're responsible for providing the pricing signals for 80 percent of the wood. Their job is to go out and deliver timber to an auction so that people can bid on it. The prices from that auction are then used to set stumpage for the remainder of the industry. Very difficult to cut that budget. That's critical if we want to continue to move forward and comply with softwood regulations.
[ Page 52 ]

In terms of the biggest impact that you could have at the budget level, we're looking at the volume of timber that's harvested. To the end of August we've harvested about 35 percent of our sustainable level of cut on the coast. We're not projecting that we're going to hit 50 percent by the end of the year. That's a tremendous amount of revenue lost.

While it's always been desirable to manufacture B.C. logs here in B.C., the reality is that with our coastal manufacturing cost structure, we're not harvesting those logs because we can't afford to manufacture them. Our coastal dimension lumber mills have production costs that are approximately 30 percent higher than the global average. Because the companies that own those mills are also the largest licensees on the coast, if they can't afford to make lumber out of them, they're not harvesting that timber.

I think the question that has to be asked is: are there others in other jurisdictions who would pay us enough so that we could actually afford to harvest some of this timber that's left there, to create revenue, create employment? The simple answer is yes, there are. However, we've always had a penchant for restricting the export of logs. This continues to hinder our ability to provide these markets with the logs they want and provide us with the revenues we need.

I think government needs to seriously rationalize its present stance on log exports. I don't think we should be discouraging the export of logs, especially at a time when local mills can't afford to manufacture them. By the end of this year there's going to be, in my estimation, nine million cubic metres of wood that sits standing on the stump, unharvested, from a sustainable land base, simply because we've got people who control that timber who can't afford to manufacture them here.

Now, the minister has the ability to remove some of the barriers to export. That would increase the value of this timber, increase the amount that's harvested, increase the employment, increase all the taxes that are paid, etc., reduce social costs.

I don't think we have the luxury anymore of hanging onto an archaic and economically out-of-date policy such as this at this time. My written submission goes much further into detail. I won't get into those right now. I know that there are some people that are looking into this at a government level. I highly support them doing that. For every one job in a manufacturing plant on the coast, there are two jobs that are available in the woods. I think it's far better to put two people back to work if that other one isn't going to work anyway.

That's the end of my presentation this morning. It's a bit more detailed in the copies handed to you.

J. Les (Chair): Thank you very much, Dave.

D. McRae: I'm also very proud that Dave is here, because he's also a constituent of mine and works very hard for the industry and has done a lot for the Comox Valley. So thank you very much for the efforts you do in maintaining two homes and a job that takes a lot of you.

You talk about global competitiveness and how we struggle to make that sure we have enough logs to export — to supply some of our home markets as well. Is it government policy in this province that is preventing it, or is it the fact that the world is just a global economy and the logs go where it's easiest to invest to manufacture them into secondary products?

D. Lewis: They definitely flow where they should flow, but I think you'll find that we do a very good job at restricting exports. We have things called fees in lieu of manufacture, which is really a bit of an oxymoron, because none of that wood is being manufactured anyway. We're paying a fee, in essence, instead of it having to sit there and do nothing. It seems counterintuitive to me.

We have something called a surplus test. Our proposal says to maintain the backbone of the surplus test. That's where you offer the logs up locally. If someone wants them locally, they stay local. If they don't, then you can export them. We have a lot of issues with the way that's administered. It takes far too long. There's far too much of a bureaucracy in place, so that the actual person selling the logs and the person buying the logs…. There's too much in between. It just creates transactional friction that really kills the sales.

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We had a company like Western Forest Products on the coast — the largest licensee — who controlled 42 percent of the cut on the coast. They would brag that they didn't export logs. They said that they exported 0.12 percent of their log base last year. They're almost bankrupt.

They've got some new management in, and two barges left Port Alice last week — small log hemlock; no one wants it here — going to Korea. People are logging. Because of it, those communities are benefiting.

There're a lot of things that can be done, Don, that would improve our situation and bring jobs back to the coast.

B. Routley: Thank you for coming here today.

I find it interesting. It sounds like you're a bit conflicted. On the one hand, you're pointing out that we have the softwood lumber issues and that…. Obviously, you're aware of the conundrum that we face in global markets with what's happening. The sub-prime mortgage meltdown is probably the greatest contributor to what's happening in North America — the greed and the wealth-taking by banks and putting people out of business.

Surely you don't suggest that somehow exporting logs to our competitors so that they can take our jobs…? I mean, the evidence is very clear that when you cut a log
[ Page 53 ]
in British Columbia and put it through a sawmill and a remanufacturing plant, a pulp mill, it creates all kinds of spinoff jobs and also spinoff wealth for the people of British Columbia.

Where is this extra market for log exports going to come from when….? Do you really believe it's a good idea to send logs to our competitors, to put more British Columbians out of work?

D. Lewis: I appreciate the question, Bill.

What we propose is short term. It's not permanent policy changes. It says: "Here's the economic environment we're working in. Here's how it's changed." If we simply stay at a standstill, keep all the same policies, all the same spending, I think it's a pretty quick road to ruin. I think we have to adjust how we do things.

These jobs that are local that you talk about. I don't know where they are. I really don't. I mean, the manufacturing jobs aren't there, and as a result, because we don't export, the logging jobs aren't there. So in a short-term sense, it makes all the sense in the world to export logs right now.

Now, in terms of, "Well, we don't want to give them to our competitors," well, when we're not operating, we're really not competing that much. I look at it, and I say that yeah, if we were going back to where we were, I agree with you.

The softwood lumber agreement is designed to get our logs. They would love to have our logs in the long term and restrict our lumber.

But I'm not looking long term. I'm looking short term. We're looking at survival stuff. We're looking at buffeting the revenue loss right now. The more detailed stuff in our submission…. I'd appreciate it if you had a look at that, and if you want to talk off line, I'm happy to do that.

We represent manufacturers. We represent Neucel pulp mill on the north coast, and the only reason they're getting their logs right now is because of export policy. On the north coast there's a high proportion of commodity-grade timber, and there's a small proportion of high-grade. The fact that they can export that high-grade and get a premium for it from people that won't buy it locally allows them to harvest the low-grade at the same time, and Neucel benefits from it.

I think there are about 450 CEP members that are working there right now because of those export restrictions that have been lifted through an order-in-council.

We looked at those sorts of short-term things to help the situation and to help those on the harvesting side. And yeah, we'd have to watch it closely. As the market turns around, as we start getting more home sales, let's go back to manufacturing here in B.C. I support that 100 percent.

J. Les (Chair): And a final question from John.

J. Rustad: Thank you very much for your presentation. I know that time is very short here, so I'll keep this quite brief.

We know that we have about anywhere from 6 to 20 percent of the trees left in the forest, perhaps even 30 percent in some areas, just from the way that our logging practices are in place. We've been trying to encourage utilization of that, which of course improves and increases the amount of jobs, particularly for trucking but also for all the forestry activities.

I'm just wondering, particularly because you're more focused on the coast and the Island than up in other areas of the province: what do we need to do as a government to try to encourage more utilization of that fibre so that, first of all, it creates the additional employment and it creates additional opportunities for value?

Recognizing how short the time is, you may want to do that as a written submission.

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D. Lewis: I'll definitely address that, John. The one comment I'd make, being brief, is that we have to be careful we don't put on regulation that adds costs to the current system which limits the amount of harvesting that can happen now. I've been through a Utilities Commission hearing. I've done lots of work with power plants, so I'm happy to let you know. Increase the price of power, and that will enable everything else.

J. Les (Chair): Thank you very much, Dave. I appreciate you coming today.

Our next presenter is the New Car Dealers association.

B. Qualey: Good afternoon, Mr. Chair, ladies and gentlemen.

Interjection.

J. Les (Chair): Send us an e-mail.

Interjection.

J. Les (Chair): Good.

Sorry for that interruption.

B. Qualey: Thank you for allowing me to appear today to discuss some issues currently confronting our membership and the automotive sector in British Columbia — an important engine of British Columbia's economy.

Quickly, just an overview for those of you that might not know too much about the New Car Dealers of British Columbia. We have 374 members around the province in 53 communities. They employ over 16,000 British Columbians, have annual economic activity upwards of $10 billion and sold some 210,000 vehicles in the previous year.
[ Page 54 ]

PST collected from the members is about $679 million. They also are some of the largest taxpayers as far as — beyond PST — income tax, luxury tax, corporate taxes and, of course, in many communities are large property holders and pay significant property tax. Moreover, one in seven jobs is somehow tied in British Columbia to the auto sector. Actually, that's a number across Canada — one in seven jobs.

It's essential, given the current economic and environmental challenges facing all of us at a local, national and international level, that we work with the government to ensure that B.C.'s economy is as strong as possible and to protect our industry, of course, and the many valuable jobs which are held there.

In addition, it's imperative that we have a government in Victoria that has sound and economic tax policies in place, which can provide the strong leadership we need through these difficult, unusual and challenging times. This has been one of the most difficult years in the hundred-and-some-year history of the automotive sector. I'm pleased to report that the members of the New Car Dealers are alive and well and kicking out there, despite the challenges thrown at them this year.

The government over the years has been assisting the dealer network in a number of ways, and we appreciate that. Raising the threshold at which the luxury tax kicks in on new vehicles, reducing the number of what we consider useless regulations dealing with the issues around vicarious liability…. The government, of course, reduced corporate income taxes by some 44 percent and this year alone cut small business taxes — in which many of our members are classified — by 33 percent. This is on top of a hundred different taxes that have been cut since the current Liberal government has been in power.

The dealers have always promoted the need for a strong and vibrant economy because a healthy business sector provides employment, which is vital to all of the 53 communities in which our members work. By providing jobs and purchasing goods from local suppliers, our competitive enterprises make a huge contribution to the tax base for all levels of government that British Columbians use on a day-to-day basis — social services in the province.

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The New Car Dealers of B.C. have come out fully in support of the harmonization of the PST and the GST. The issues our members are looking at now with respect to the actual implementation of HST and what impacts that will have…. We see it as reducing the cost for our dealers.

As I mentioned earlier, many are small businesses. By reducing paperwork in having to do the filing of two different taxes, it'll allow our dealers to hopefully reduce their costs, meaning they can reduce the price of vehicles that they sell to consumers. They can reduce costs of repairs. More importantly, hopefully, they can hang on to their good people who work for them throughout British Columbia.

One of the areas in which dealers have been very committed is the area of the environment. The dealers are anxious that we and our manufacturer partners, as well as our customers, play our respective roles in combatting climate change in British Columbia.

We've constantly shared with government our commitment to work with all three stakeholders — the auto sector, consumers and government — to achieve the best possible improvements for light vehicle–generated emissions. It's the responsibility of every segment to increase the level of consciousness of all aspects of climate change. The dealers feel very strongly about this. Some of them, on a day-to-day basis, recycle their oils and other fluids, tires, batteries and other used parts.

In 2008 the association released its Five Steps to Carbon Neutral plan, which we actively engage with. Quickly, those steps are educating the consumers, encouraging new and better fuels and propulsion systems, implementing a carbon-offsetting program amongst our dealers, attending and promoting environmental conferences — last year we were a partner in a Climate for Change conference which many experts and the Premier attended and participated in — and, most importantly, the renewing of the fleet.

The goal of the dealers is to promote the idea that we're all accountable for our carbon use. We're looking forward to a day when the government, consumers and even ourselves can view our business and car dealerships as good stewards in all aspects of the environment over which we have control and influence.

One program that achieves the renewal of the fleet is the B.C. Scrap-It program. This program was developed and introduced in British Columbia about a dozen years ago and has become an example — a poster child, if you will — around the world for turning an old, polluting fleet into a cleaner, more environmentally friendly fleet.

Because of the overwhelming demand of British Columbia consumers to scrap their old, polluting vehicles through the Scrap-It program, the program fund is nearly depleted. You may recall that a year and a half ago, the government provided a grant of $15 million, which has been very effective through the Scrap-It program to get upwards of 12,000 cars off the roads. Some of those vehicles have emissions 60 times the level of a new vehicle. So the program has worked very well.

We're calling on the government for an immediate contribution of $25 million this year to help maintain the program. Otherwise, it will have to significantly wind down its operations by the end of the year.

We see that the loss of this program would be a serious loss to our province. It's such a pivotal time both for our economy and the environment. We recognize, of course, that it's not the best time to be asking for additional funds. But given the double win that this provides,
[ Page 55 ]
both as an economic stimulus and as an environmental program, that the government would closely look at this….

Moreover, the interesting point to note is that out of the $15 million that was provided as a grant by government, $11 million — or 70 percent of that — has returned to government in provincial sales tax resulting from the sale of the new vehicles under the program. So in large part, the program is self-funding. For that reason, we strongly encourage government to have a look at that again.

There are a number of reasons outlined in my remarks on the Scrap-It program which I won't go into further detail on, but I'll be happy to answer any questions on there. I think I've covered the highlights.

It's very important to the dealers that we provide environmentally friendly incentives for consumers to have a look at when purchasing vehicles and to get older vehicles off the road. The New Car Dealers also believes that it's time for us to work together and look at all of what we call feebate programs that are offered and have been offered by the government — to look at them carefully to see if they're still achieving their original objectives or if they can be eliminated for a more efficient and effective program and used for something such as the Scrap-It program.

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Recently you may have seen that the Sauder school of business at UBC found that hybrid sales have come largely at the expense of small, relatively fuel-efficient conventional cars. The study found that the majority of consumers who purchased hybrids were not motivated to do so by government rebates, but that two-thirds of those individuals were going to buy them anyway. So we strongly encourage government to have a look at that.

One other area, before I wind up, that is of particular concern to dealers these days around the province is the issue of property tax assessments. We would also like the government to address what we perceive as some inequities that exist in the current B.C. Assessment Authority model. For the 2009 assessment year B.C. Assessment changed the way that they evaluate car dealerships, moving from an income approach to a cost approach.

The income approach has been the most common method of valuing commercial property. The cost approach is typically used for the valuation of special use properties. This usually generates the highest value and is used for churches, courthouses and ice arenas.

Car dealers are a unique property and a unique investment and the highest and best use, and those approaches don't necessarily fit well with the use of that particular land. Car dealerships, of course, use lots of space to house vehicles. When you compare that to building a condominium project, it can put the valuation of the land way out of whack.

For some of our dealers, I've had them come to me and say: "Blair, look, I don't know why I'm in this business anymore with the kind of property tax valuation and charges that I'm facing. I may not be able to stay in business." It may turn out to be the property tax situation is the straw that broke the camel's back for a number of dealers.

It's a significant issue, and we're working closely with the Assessment Authority. I encourage you to have a look at the issue as well. We'd be happy to provide any examples subsequent to our discussions here today of some of these. Car dealerships are facing a big challenge with assessments. We would appreciate that having been looked at.

Finally, as I mentioned, we're meeting with the Assessment Authority at the end of the month to talk about this and some other issues to see if we can help them understand the unique challenges of the automotive sector at the moment.

M. Mungall: Thanks for highlighting the Scrap-It program. That is an excellent program that has done a lot to reduce our impacts on climate change. My question, though, is about some of the things you said around the HST.

You noted that it would allow you to reduce costs. But rather than belabour how it will help you reduce your costs and so on and so forth, other than the administrative component that you mentioned, I'm quite interested in passing savings on to the consumer. In any other jurisdiction that's implemented the HST, can we say that because of the HST they have turned around and reduced prices on cars?

B. Qualey: All I can speak to is the discussions and what we expect from our members in British Columbia. As you may know, the automotive sector…. Being a car dealer is a very competitive business. And clearly, if there are savings that are available to a dealership, they're going to use those savings to try and get an edge over their competitor. That is going to mean that they're going to find a way to reduce the prices from the savings that they'll have from reduced costs from now only paying one tax instead of two.

J. Rustad: Just a quick question on property taxation. Local governments…. It's UBCM here this week. The B.C. Assessment is only one part of the overall taxation side of the equation. Have you had discussions with local governments about possible different zoning or some of those issues that may make a difference for a car dealership as opposed to lumping it in with other types of developments?

B. Qualey: There are a number of challenges at many levels. Dealers I know have had extensive discussions in their local communities with their city councils and others — anyone who will listen to them — around the rate of property taxes over and above the issue of the
[ Page 56 ]
actual valuation. It's an issue that they've talked about locally and will be speaking to their MLAs and others about.

J. Les (Chair): Thank you very much, Blair.

[1350]

B. Qualey: Thank you. If there are any further questions, let us know.

J. Les (Chair): Certainly, we'll do that.

The next presenter is Patti Bacchus on behalf of the Vancouver school board.

P. Bacchus: Good afternoon, Chairperson and committee members. Thank you for this opportunity to address you today.

In order to prepare for this presentation, I reviewed the Vancouver boards of education going back to 2002-03, the year that our district had a devastating funding shortfall of $25.5 million. The board of the day still had to balance its budget, so they took careful but painful steps to do so by trimming staffing, administration and services to students. Our schools haven't recovered from that blow, yet the shortfalls have continued.

When I refer to a shortfall, I'm referring to what we call the costs of just standing still or just doing what we're doing, which continue to rise at a much faster pace than the level of operating funding we receive from the Ministry of Education. And most of those standing-still costs are determined provincially, effectively downloading this responsibility to pay them onto school districts, often without the money to do so.

Since '02-03 we've had several more shortfall years. In 2003-04 it was $4.4 million. That's the gap between what we're funded and what our costs are before we add anything on, and that's factored in with enrolment decline. In 2004-05 it was $8.1 million.

In 2005-06 there was actually a funding increase, where we had an increase of $6.8 million over our standing-still costs. But in '06-07 we had another shortfall of $3.4 million, and in '07-08 it was $5.8 million.

Then again for this current budget year, for the present school year, we were short by $11 million, although we were able to somewhat mitigate that as we ended the previous year with a small operating surplus, which we carried over, and we also drew funding from our local capital reserve. However, we still ended up having to find $7.2 million in spending cuts in order to balance our budget for this school year.

Our costs that continue to rise primarily comprise funding for labour settlements, salary incremental increases for employees as they move up their salary grids as they gain experience, employee benefit increases, inflation on general goods and services and the non-variable costs related to enrolment decline.

As you know, we are funded on a per-student basis, and we have had a fairly steady but small decline in enrolment numbers. When we spread those students over 109 schools, however, we find that many of our costs are fixed and we can't find the savings nearly to compensate for the lost level of funding we receive.

For example, in the current school year we think we're down about 500 to 1,000. That's spread over 109 schools. Some have five grades; some have eight grades, so you might lose a child or two from each grade. It's very difficult to make up for what ends up being a few million dollars' gap in funding.

We also continue to invest significantly more in supporting our students with special needs than their supplementary funding provides. As we're experiencing increases in categories such as autism, the gap between what we're funded and what we must spend also grows, putting further pressure on our operating budget.

We currently spent more than double what we're actually funded for our special needs students. We just had to dip into our capital reserve, which is now at a much, much lower level than the accountants are happy with, in order to provide additional special ed support workers this year, because our numbers have increased relative to the amount that we're funded.

Last spring our board submitted a needs budget, along with our 2008-09 operating budget, to the Minister of Education. I have an error in this. I said 2009-10 in the written copy. That needs budget outlined that we would need an additional $40 million per year to restore service levels to where we were at the beginning of this decade. In effect, if you go back and look at the '90s, there were several years of cuts there as well.

What we got instead at the beginning of this school year was a series of further cuts and increased costs. First came the abrupt and complete cancellation of our $10.6 million annual facilities grant, along with the frankly bizarre explanation that, based on our March 31 balances, districts had surpluses that could be expected to carry them through this year for their facilities projects.

Well, it's true that with careful planning, districts had considerable balances in March. That's because the work on school maintenance largely takes place during the summer months, when schools are not in operation. A simple call or questions or some kind of consultation with boards would have clarified this for the Minister of Education before she signed off on such an ill-advised and badly timed cut that has led to dozens of British Columbians being put out of work and that will lead to further deterioration of our public school infrastructure — hardly a formula for economic recovery.

[1355]

In the same letter advising about the AFG cancellation, we were told that the $400,000 in enrolment funding we received in June was being clawed back immediately. That cut — a combined $11 million, which
[ Page 57 ]
came to our attention in a letter on August 27 — meant that instead of rolling out a well-planned and organized school year in a district where we see hundreds of new students arriving the first week of school, needing language assessments, special ed assessment, placement and all of the other challenges, including the class-size and composition process requirements….

We had our staff scrambling to triage critical work, figure out who might have to be laid off and come up with a plan to ask the minister to approve the release of restricted capital funds to complete our most critical projects. It was a terrible and chaotic way to open a new school year in a large and complex school district.

With the September 1 budget update, we discovered we would have to pay $100,000 more for MSP premiums during the current school year. That will rise to $200,000 in additional costs for the next school year. We discovered that we'll be expected to implement all-day kindergarten for half our students by next September, with no assurance that the costs of implementation will be funded.

We're complying with the provincial medical health officer's guidelines for the prevention of H1N1 transmission in schools. Just to do that, we're spending about $300,000 for which we didn't budget. Of course, the myriad other grant cuts are putting pressure on our budget, particularly the cutting in half of the PAC gaming grants, which will mean a loss of $500,000 for Vancouver schools this year.

Our operating costs for the 2010-11 school year will continue to rise. We were able to offset our shortfall for this year by drawing on previous reserves and operating surpluses, but those funds are depleted. So if funding stays exactly the same way it is for the current year, we'll already be $7 million short. We anticipate a continued enrolment decline, projected to be 578 fewer students next year, which translates to $1.3 million less funding, as we are funded, as I previously said, on a per-student basis.

Our salary and benefits to employees will increase by $4 million, plus an additional $4.8 million for the teacher salary increase which is negotiated at the provincial level. We expect general inflationary costs to go up by approximately $1 million, while increases in MSP, as already stated, and the possible costs of carbon offsets will push our total increased costs up to almost $20 million for the next school year.

We're counting on a restoration of our facilities funding of $10.6 million as we have work that must be done, such as asbestos abatement, building component upgrades, fire alarm testing and building envelope protection. If the AFG isn't restored, the funds to do that work will have to come straight out of classrooms.

The bottom line is that just to stay at this already lean and underfunded operating level, we need an increase of at least $20 million over this school year, in addition to the restoration of the AFG, just to keep doing what we're doing.

Why is this so important? Why can't school districts be quiet and tighten their belts like everybody else? I'll tell you why. We're school districts — and I say school districts, because Vancouver's funding problems are played out in pretty much every district in this province, although on a different scale…. Where we differ is that we've been under financial pressure and in restraint for many years. While this province was in a surplus position, school boards were actually cutting programs.

We've had cumulative years of cutting staff, resources and services to balance our inadequately funded budgets. So when we talk about belt-tightening, we've already tightened several notches. If we do any more, we're going to be cutting well into the function of the vital organs, effectively harming children and their access to an education that will equip them with what they need to successfully participate in our communities and workplaces, not to mention the ability to pay off the budget deficit.

I'll be frank in telling you that I shudder to think of the impact of a $50 million shortfall in this district, and thinking about $20 million or $30 million is horrifying for anyone who cares about children, public education and the social and economic health of this province.

While these are economically hard times, we believe there is no better economic stimulus than educating our children and youth. Study after study establishes that employment and earning levels correlate with levels of education and that the better educated you are, the more likely you are to be in good health. Not only are you more likely to pay more taxes and contribute into the economy. You will be less of a strain on taxpayer-funded services.

Education is not an expense. It's an incredibly effective investment. Looking at StatsCan information, we see unemployment rates for Canadians over 15 drop significantly with each level of education, with the largest gap being between those who have finished high school and those who have not.

[1400]

That represents not only lost potential for those individuals…. We have about 20 percent of our students in Vancouver who do not graduate, and over half of our aboriginal students do not.

Without a high school diploma, the economic and social costs of all of that are borne by all of us. The costs of not investing and the costs of failure are staggering. When we consider unemployment, homelessness, crime, substance abuse, health care and emergency services, we know that one of the most effective prevention measures is education. We've got the kids for a dozen or so years, so we need to get it right without having to cut corners or pass over some because their needs are different from others or they require additional support to succeed.
[ Page 58 ]

Despite the Education Minister's message box of more funding than ever for education, the government's own statistics show that as a percentage or portion of provincial government spending, public education has dropped significantly in recent years. In the 2001-02 school year the Ministry of Education represented over 19 percent of total government spending, but during the current school year that's down to just over 13 percent.

Why are we spending proportionately less of our provincial funding for something we have that is already world-class, sustainable but admittedly fraying at the edges and in need of improvement? Why are we accepting that 20 percent of our students are not graduating or the disgraceful fact that fewer than half of our aboriginal students are leaving school without a high school diploma?

How will we improve that when each year we have to put all of our effort into staying afloat? Why are we putting record levels of funding into private schools when our public schools are already among the best in the world but crying out for funding?

I'll end by telling you what we have to lose if we continue along the path we've been on. In international testing of math with mathematics literacy Canadian students' performance is outdone only by Hong Kong, China and Finland. In science our students rank third in the world, with Finland and Hong Kong ahead of us, but the other 54 countries who participate in the OECD testing trail behind us.

In international reading and literacy assessments Vancouver schools consistently rank in the top five jurisdictions, outperforming their counterparts in the U.K., Australia and most European countries, with the exception of the clever Finns.

With Canadian students being near the top, I can tell you that Vancouver students are at the front of the pack of the rest of the country. In the recently released annual Euclid Canadian Math Competition conducted by the University of Waterloo, math teams from our secondary schools ranked among the top 50 in the country out of a total of 1,176 enrolling schools.

Our teams outrank students from elite and expensive private schools, schools which screen and test their applicants and charge steep tuition. But our students still came out ahead, which I think is a real testament to the quality of teaching that goes on in our schools.

We have a local researcher at UBC, Dr. George Bluman, who has conducted 30 years of research showing that grads from Vancouver schools do better in UBC's calculus 100 course than students from private schools and other districts. These same results are borne out year after year.

We need to protect something that works well, and we need to improve the areas that aren't working well, such as aboriginal and special education. We must make our schools a public priority. We need to defend and support them, not stand by and watch them gradually eroded through chronic underfunding. We need to recognize that public schools don't just affect families with children but that they shape our society and this province and that if we neglect and underfund them, we will pay the cost later, and those costs will be high.

J. Les (Chair): Thank you very much.

The first question goes to Doug.

D. Donaldson (Deputy Chair): Thank you very much, Patti, for the presentation. There are many fine points that you made. I agree with you. I'm not from the area served by the Vancouver school board, but I know that the school boards up in my area in the northwest are facing the same kinds of considerations with the capital funding and the operating funding impacts that the MSP represents and some of the capital funding cuts represent.

I'm a firm believer that people within the system at the grass-roots level have, sometimes and oftentimes, the best ideas about how to make efficiencies and how to be more efficient and how the system can be tweaked to create those efficiencies. So I was wondering if you could describe how you were consulted by the Ministry of Education and by the government — you mention a letter of August 27 — how you were consulted and how the staff of the Vancouver school board were consulted about what their ideas and their creativity and their innovations around cost savings could be.

P. Bacchus: Well, we were not consulted at all by the government in terms of that cut. This is the consultation in terms of….

[1405]

In terms of working with our community, certainly our governance level of my level of government, when we make difficult decisions — as we often have to, obviously — we do a full consultation process. We have a standing committee process. Our budget process is public. We put out preliminary proposals. We seek feedback on those. We revise them, and we seek further feedback.

When we make a decision, we fully understand, to the best of our possible capacity, what the impact of that will be, as opposed to the situation we experienced with a letter that effectively cut $11 million out of our already set and approved budget a week before school opened. Clearly, in the discussion following with the minister, she didn't understand what the impact was going to be. She was back-pedalling and saying: "Well, we'll try to work with you. I see there are some problems."

We could have told her those problems upfront. In fact, they should have been aware of that, because our staff and the ministry staff are in constant contact about our capital projects.

In fact, we have been ordered to undertake a capital asset management system. It's long-term planning
[ Page 59 ]
for capital work and spreading some out over time — budgeting for it. This completely blows that up — that process. Significant time and effort and funding have been invested in that at the direction of the province, and then suddenly the money is pulled.

J. Les (Chair): I don't see any further questions. Thank you very much for your presentation.

Okay. Jeff McCarthy.

J. McCarthy: My name is Jeff McCarthy. I'd like to thank the committee for this opportunity to present my concerns and views. I certainly appreciate the work required to prepare a budget in difficult economic times.

While we all hope for and expect a turnaround in the next fiscal year, there remains a great deal of uncertainty over projected revenues, and we must be very cautious in our budget planning.

My viewpoint here is as an individual and a small business owner. Because I don't represent any particular cause or lobby group, my presentation is limited to my comments and questions without any real, extensive background info or specific proposals on behalf of an organized body.

My wife and I operate a scientific consulting company with a main focus on the biotech industry. We were fortunate to have been a small part of a successful biotech company, AnorMED Inc., that started up in 1997 and was bought out by a U.S.-based industry leader in 2006.

Unfortunately, the buyout did result in the closure of the Vancouver operation. But we are proud to point out that the result of producing an improved stem cell transplant cancer drug that saves lives and reduces treatment costs…. Plus the sale of the company at over a half-billion dollars represents true wealth created in and returned to B.C.

I'd like to point out that many innovations in the biotech pharma sector result in reduced health care costs in the long term, which can only help conserving projected increases in health care costs over the future.

The local biotech sector is in a bit of a lull right now due to a combination of normal life cycles of tech companies as well as international factors such as availability of investment capital. In the past the B.C. government has provided great support for this sector, and I would wholly encourage continued support, despite the severe budget constrictions, to help return the B.C. biotech sector back to full strength.

I don't have a specific recommendation as to what needs to be done to do that, but I would encourage government to continue to work with Life Sciences B.C. and other industry leaders to that end.

As both an individual and a small business operator, I fully support the planned implementation of HST. While we've all heard and acknowledged that some business sectors will be challenged by the implementation of HST, I believe that even the worst-hit sectors will only experience short-term negative impacts.

Experience in the past, including the introduction of the GST, has shown that prices and people's expectations will adjust over time.

Harmonizing the PST and GST will lead to a significant reduction in administrative costs for businesses and government. Increased government efficiency will free up dollars that can be better used elsewhere to provide a greater benefit to the population.

Economists suggest that HST will result in decreased cost to business in B.C. of an excess of $2 billion. This increase in efficiency allows businesses to expand and invest. As businesses do expand and invest, more people are hired, and the province will thrive going forward.

[1410]

Finally, I would point out that going backwards to the old PST system is not really an option. With the other larger provinces and other jurisdictions moving towards HST or similar taxation plans, if you try to stand pat, we will lose, because our businesses would be at a serious competitive disadvantage going forward.

The effect of HST on new-home development is also a concern. Ultimately, new homes compete on a price basis with resale of existing homes, which are not burdened with HST, which leads to either the buyer of a new home paying more for the privilege of a new home or the developer seeing a lower return on investment.

I realize the government and interested parties have been and are working to mitigate the negative impacts such as adjusting the threshold and rebates of the HST on new homes.

I would encourage further effort in this area, as we need to ensure that B.C. remains an attractive location for development to provide affordable housing as population increases. However, I would suggest an alternative option to reducing new-home HST collected may be to consider reduction or even elimination of the property transfer tax.

I understand that the proceeds of the property transfer tax applied to all homes sold in the province amount to well over a billion dollars, which we can't afford to lose in this time of reduced revenues, so we need to carefully balance any reduction in property transfer tax against other revenues, including HST. Any reduction in transfer tax would be received positively by the population and could further add to the overall simplification of the tax system.

The implementation of the HST does bring up some other detail concerns. The loss of specific PST-based funding initiatives, such as the tourism funding through PST hotel tax, should be addressed, especially considering the short-term negative impact of the HST on this industry.

Similarly, the loss of the clean energy levy, which was a primary funding source for the innovative clean
[ Page 60 ]
energy fund, needs to be addressed. I support the continuation of the ICE fund and any other clean energy support initiatives, so alternative funding does need to be found.

I would encourage new legislation that permits the province to implement levies, such as the clean energy levy, that are transparent and show the government is doing something about climate change and renewable energy. One possible source of clean energy funding could come from the implementation of a cap-and-trade system.

I fully support the carbon tax, which was and is a world-leading initiative by B.C. to refocus the tax burden from income to consumption. We do need to keep the carbon tax revenue-neutral and to continue to make sure that the public recognizes this fact.

I see cap-and-trade as a parallel system to the carbon tax, with the same ultimate goals but representing an additional increased revenue stream. Such revenues can be dedicated to green initiatives, including clean energy as well as public transportation funding.

However, as any new tax, a cap-and-trade system would have to be implemented carefully and at the right time. The next fiscal year may be too soon, considering the sensitive economy. Plus we may be better off waiting to see what other jurisdictions implement nationally and internationally. We led with the carbon tax, so maybe now it's better to follow up on cap-and-trade.

Finally, I commend government's past efforts and future plans to reduce personal and corporate income tax rates and to provide B.C. with a competitive edge. Considering the forecast deficits, additional income tax cuts are difficult to justify. We must pay our way and raise revenues by promoting job creation and the B.C. business environment overall.

We do need to protect health, education and social services, as these are key to the outstanding quality of life we all enjoy in B.C. The best way to do this is to take full advantage of the opportunity that the Olympics provide us to present B.C. to the world and to support a vibrant economy on the local, national and international stages.

I wish you all the best and thank you for your efforts in developing a budget and fiscal plan required to lead the nation in economic growth.

J. Les (Chair): Thank you very much.

N. Letnick: Mr. McCarthy, thank you for coming and presenting. The one that really hit me as you were saying it was to get rid of the property transfer tax. Obviously, that has a major implication for the finances of the government and providing services right now — health care, education and social services, amongst other things.

Would you suggest that we get rid of it and reduce services that we offer as a province or get the money from some other area? If so, where?

J. McCarthy: No, I wouldn't suggest that we can afford to reduce it or eliminate it if it requires we eliminate services, especially the big-ticket items that we have to deal with. I'm suggesting that if we can somehow simplify a tax system by…. If there is money from the HST, then the effect of HST on new-home construction could be compensated in part by some effort on the property transfer tax. Maybe something could be done.

[1415]

D. Donaldson (Deputy Chair): Thanks for the presentation, Jeff — making that individual presentation. That's very commendable. You seem like a thoughtful guy, so I'm going to ask you a couple of thoughtful questions.

As business expands and invests, more people are hired and the province will thrive. This is in your paragraph around HST. I think, in my area where I live, a large forest industry made significant capital investments in their plant — Canfor, that is, in Houston. And the day that they opened the doors after making those capital investments, they laid off 30 workers, so I think what we have to do is not take that as a given truth and do the analysis on a case-by-case basis so we know exactly what the outcomes of that will be.

But my question is on the carbon tax. Carbon tax revenues right now go into general revenue, and my question to you is…. You support the carbon tax. Would you support the revenues from the carbon tax being more targeted at initiatives that actually lead to a reduction in carbon emissions?

J. McCarthy: Well, the carbon tax itself helps to drive the overall reduction in carbon emissions. To try to support specific initiatives…. My understanding of the carbon tax is that it was brought in to sort of offset income tax versus consumption tax, and that would drive the people to behave accordingly.

I don't know if we need to be starting new programs to try to force that issue. Cap-and-trade would be a new program that's separate and parallel, and that would be an increased revenue that you could develop, divert to or focus on specific programs.

J. Les (Chair): Any further questions?

Thank you very much, Jeff. Thank you for being a little flexible in timing.

Mark, are you ready to go now?

M. von Schellwitz: I'm ready.

J. Les (Chair): Good. Away you go.

M. von Schellwitz: Thank you very much for the opportunity to speak with you today about harmonization in the food service industry and what you can do to help mitigate the negative impact of this policy on our industry.
[ Page 61 ]

We understand that the HST may be good for some capital-intensive industries, but it will be devastating for British Columbia's labour-intensive food service industry. Our key message for you here today is that you need to make the restaurant and tourism industries a top public policy priority for British Columbia. A healthy, vibrant, prosperous, growing restaurant industry is critical to B.C.'s future. It's critical to job creation in every community in this province.

The industry in B.C. generates about $10 billion in sales, representing close to 5 percent in GDP. Every dollar spent in a restaurant generates another $1.85 for the rest of the economy, which is well above the average for other industries. With 173,000 jobs, we employ 7½ percent of British Columbia's workforce and 22 percent of B.C.'s youth. We employ more people than forestry, fishing, mining and the oil and gas industries and more people than the construction industry.

More than two-thirds of B.C. restaurants are locally owned and operated, and franchisees, who represent the largest portion of chain operations, are also small business people who invest heavily in their communities.

The food service industry is a very competitive business that operates on razor-thin margins. Rising food and labour costs have reduced our pretax profitability for the average operator to only 4.4 percent of operating in 2007. That's about $29,000 per restaurant. In contrast, the average business in Canada enjoyed a pretax profit of more than 7 percent.

British Columbia enjoys Canada's second-highest per-capita expenditure on food service out of $1,733 per person last year. One of the biggest reasons for B.C.'s good performance relative to other provinces in Canada is because there is no provincial sales tax on restaurant meals in British Columbia. When GST was first contemplated in the late 1980s, the concept was to tax everything sold at the retail level without exemption.

[1420]

Closer to the final decision on the tax, however, the government reversed its commitment to implement a comprehensive and neutral GST and decided to exempt food bought in grocery stores. This allowed ready-to-heat, ready-to-eat meals that compete directly with restaurant meals to be exempt from the tax. As a result of this decision, GST is the federal policy that has had the single greatest impact on the food service industry in the past 20 years

In that year, when the tax was imposed, real food service sales dropped by 10.6 percent and per-unit volume dropped by more than 22 percent. An Ernst and Young report attributed three-quarters of that sales loss to the impact of the imposition of GST. By contrast, overall GDP that year fell by only 2 percent. And in that year the food service industry was forced to lay off 42,000 across Canada.

In B.C. sales also declined by 9½ percent but rebounded more quickly than in other provinces because there was no provincial sales tax added to restaurant meals as well. Every Finance Minister since I began working CRFA in 1997 has maintained that all food should be treated equally and has therefore maintained the PST exemption.

The problem with GST and the proposed HST is that it's not a neutral tax. Food services have been placed in a uniquely unfavourable position because the same food is taxed differently depending where it's purchased, encouraging customers to buy tax-free alternatives from the grocery store. A restaurant must charge GST and HST on a pizza, but the same unheated pizza purchased from a grocery store can be purchased tax-free despite the fact that the pizzeria around the corner employs Canadians in producing that food and generates more economic benefits.

The grocery industry has capitalized on its advantage by introducing thousands of new products that compete directly with restaurants. Grocery stores now sell heat-and-eat versions of virtually every item on a restaurant menu.

Comparing the food service industry's share of the food dollar in Canada with the U.S. provides evidence of the market-distorting tendency of GST and the long-term impact of this policy.

In 1989 Canada's food service industry rivalled its U.S. counterparts for market share, as approximately 42 percent of the food dollar went to food service establishments. After the introduction of the GST Canada's market share dropped to as low as 37 percent and has never fully covered. Today our industry's market share stands at 39 percent, and in the United States the food service industry share has grown to 48 percent.

So what's the impact of harmonization on our industry? CRFA's econometric model, built by the Conference Board of Canada, indicates that harmonizing GST with PST will lead to a 7½ percent drop in sales, resulting in an average annual loss of industry revenues of around $750,000. This represents a loss of roughly $50,000 for the average restaurant in the province, which is more than their annual profitability of $29,000. This drop in sales will have an immediate and ongoing impact on the jobs of 173,000 people employed in our industry.

That's why the majority of restaurant owners, 91 percent, say that a harmonized sales tax in British Columbia will have a negative impact on their business. According to an August survey of CRFA's 4,000 B.C. members, 85 percent of respondents said that the HST will have a significantly negative impact on their sales, 6 percent said it would have a slightly negative impact and only 9 percent responded that it will have no impact or a slightly positive impact.

When asked specifically how HST will impact their businesses, 90 percent responded that they would lose customers, and 71 percent said that they will have to cut back on staff and hours.
[ Page 62 ]

Within two weeks of the HST announcement my office received over 1,000 petitions from B.C. CRFA members opposing the tax, and we have delivered these to the B.C. Finance Minister.

So our question to you today is: is the food service industry important to the provincial government and to the provincial economy? If the industry is important, then we challenge you to help make the restaurant and food service industry a public policy priority. Our members would like the acknowledgment of the contribution that they make to their communities and to the province and to have the government recognize the impact this policy will have on them, their staff and their customers.

The bottom line for them is that they want governments to find a way to exempt all food from HST and treat all food equally. Failing that, they would like both the federal and provincial governments to work with CRFA on a coordinated federal-provincial response to help our industry.

It's very difficult. There are very angry members out there, and many of them would like us to pursue a policy that we had in Saskatchewan and other provinces, where they want to do a meal tax campaign.

We actually serve over a million customers a day in British Columbia. In Saskatchewan, just by way of contrast, in a 45-day period we received 132,000 signatures, representing 13.3 percent of the total population and 33 percent of the voters from the previous election.

[1425]

While some of our members have already begun anti-HST campaigns with their consumers, we've been able to hold back most of our members to implement such a campaign — for now, anyways, depending on what mitigation comes out of the provincial and federal governments. But they need to see evidence that the provincial government is serious with their offer to help mitigate the impact of HST on the industry.

Of course, the MOU that was signed doesn't help. Unfortunately, the MOU does not include anything to mitigate the HST for the food service industry. Nowhere is that $1.6 billion in transitional funding earmarked for our industry. Also, the food service industry was excluded from the 5 percent GST base as far as exemptions, which doesn't surprise anybody because our industry alone is 13 percent of the GST base. To add insult to injury, it's not gone unnoticed that the MOU also proposes to delay implementation of input tax credits for meals, beverages and entertainment.

So what do we want, as far as to mitigate HST harm and assist the food services industry? First of all: if an agreement cannot be reached, to exempt HST and treat all food equally. In the highly competitive restaurant industry with price-sensitive consumers, restaurants cannot raise prices by 7 percent without losing customers and sales. Typically, they increase menu prices incrementally, even when costs increase dramatically.

The industry is asking the provincial government to work with the federal government on a gradual phase-in of the HST on restaurant meals over a three-year period — i.e., 7 percent in 2010, 9 percent in 2011, 12 percent in 2012. The precedent has already been set for graduated implementation of harmonization with the phase-in period for input tax credits, so certainly the same should be done for a sector that is most uniquely, negatively impacted by this.

Another way to reduce the food tax inequity would be to make the first $5 of every restaurant meal tax-exempt.

CRFA is also seeking the establishment of a GST rebate that would give a small break to food service businesses who have collected both the HST and the GST on behalf of government, recognizing that our industry does not receive the same benefit from input tax credits as other industries do; and to finally implement previous pre-budget recommendations here — recommendations especially with respect to liquor. Wholesale pricing is a very important issue for our licensed members, and that's something that we want to see happen.

Finally, to develop a business lens for the restaurant industry to ensure that the industry is not sideswiped by future regulations as it has been in the past. For example, there's a trans fat regulation coming in September 30, this week, which is specifically focused on our industry, as a result, instead of the entire food industry.

Those are some of the examples, and we look forward to working with the government on some of these solutions. We look forward to answering any of your questions.

J. Rustad: Thank you very much for your presentation. It's going to be interesting. I forgot that the trans fat ban was coming in at the end of this week, and so I look forward to seeing how that will play out.

The question I've got for you — two questions, actually, but I'll wrap it into one. If you don't have the information, I'd be happy if you could submit it to us down the road.

The first is…. You state that one of the biggest reasons for B.C.'s good performance is the fact that the province does not apply PST to food services. Could you bring some statistical information to back that?

M. von Schellwitz: Yeah, I can certainly do that with the figure that I gave you today. That $1,773 is based on an average across the rest of Canada of about $1,400. There's one province that's ahead of us, and that's Alberta. I can get you the exact number, but it's around $1,900.

J. Rustad: I'm just wondering about correlation, the connection directly to PST, to that expenditure on food. The claim is that because we don't charge PST, you have a high amount, higher than other provinces and the national average.
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So the second question I have is…. I don't know the answer to this. The HST, when it was brought into the Atlantic provinces as well as into Quebec back in the mid-'90s…. Was there any impact to the restaurant business in those provinces at that time? I understand there was an impact, or the numbers suggest there was an impact, on the GST, but I'm also wondering when HST was brought into those provinces, what, if any, impact there was. If you can provide some information on that, it would be much appreciated.

M. von Schellwitz: Certainly. I think I can provide…. One of the great things that I've certainly seen since this announcement was made is that you're comparing apples to apples when HST was introduced.

[1430]

When HST was introduced in the Atlantic provinces, for example, (1) provincial sales tax was already included on provincial restaurant meals; and (2) the tax went down by 4 percent, so there was actually a great benefit to everybody, including the restaurant industry. When the price of something goes down, everybody benefits.

Other provinces as well. We've actually still got an exemption in Saskatchewan. Alberta doesn't have provincial sales tax. You look at Ontario, for example. They've still got a de minimis, so all food items under $4 are tax-free, taxed over $4. But there's been a different response in every single province that has done HST so far. We can't tell with Ontario, because they're not there yet.

Manitoba, for example. If you compare Manitoba sales with Saskatchewan sales…. Manitoba has a provincial sales tax on restaurant meals. Saskatchewan doesn't. Saskatchewan's performance has been much better than Manitoba's. So there is some evidence there, but you've got to be careful you're not comparing apples and oranges when you're comparing HST in other jurisdictions.

D. Donaldson (Deputy Chair): Yeah, some startling numbers there around when the GST was implemented. I have many friends, owners, operators in the food service industry as well as people who actually serve the food. Having come from there myself at one point, I really appreciate getting your perspective and your members' perspectives.

My question is…. A friend in the industry said: "If you're going to change the framework in which I operate, I think it's incumbent upon the government to consult with me first about how that framework's being changed." Was the CRFA membership — in B.C., anyway — consulted before the HST was implemented, and how?

M. von Schellwitz: No.

J. Les (Chair): Any other questions? Hearing none, thank you very much, Mark.

Our next presenter is the United Steelworkers.

K. Pollock: My name is Kim Pollock. I work for the United Steelworkers, District 3. I'm here on behalf of about 40,000 Steelworkers in British Columbia who work in a wide variety of industries but are largely concentrated in resource industries. In fact, brother Routley over there used to be one of our members. I used to work for him, and now he works for me.

My presentation today is entitled "What Kind of British Columbia Do We Want?" The proposition that I would like to put to you is that…. I'm going to put an argument to you. The statistics that support this are largely contained in the handout that I've given you, and they were also in a series of articles of mine that ran in the Tyee this summer. If you want the facts that back up these arguments, that's where you'll find them, or you can ask me, and I'm happy to provide them.

Essentially, the argument that I'm going to put to you is that we cannot have a sound economy and a sound society in British Columbia unless our economic fundamentals are sound. I would submit to you that the economic fundamentals of British Columbia are not sound. They were not sound before the economic crisis hit. That is what lies behind the growth in social problems and the mounting disparity in incomes and so on that we see in this province.

Essentially, even before the economic crisis hit, we had an eroding manufacturing base, particularly in the forest industry. We saw declining exports and rising imports, so that we're actually living beyond our means as a society. We see declining productivity, which means that we're less competitive internationally.

We have seen an absolutely dismal capital investment record in this province, particularly in the forest industry. We see falling real wages, declining disposable income, a rising cost of living and mounting consumer debt, which isn't a pretty picture from an economic point of view. It's also not a pretty picture from a social point of view that we have mounting homelessness, mounting poverty, declining human health and so on and so forth — right?

[1435]

Steve Hunt spent most of the spring travelling around the province, urging British Columbians to connect the dots between our declining industrial output, declining productivity, a shrinking forest industry and so on, on one hand, and the growth of acute social problems on the other. I fear to say that in Steelworkers' view these problems are, to a large degree, the result of government policy.

Certainly, the deterioration of the forest industry has been a direct result of several government policies. One is a decision to increase raw log exports. Another was the gutting of the Forest Act, which allowed dozens and dozens of mill closures and sustained disinvestment in the province. The Canada-U.S. softwood lumber agreement, which the current provincial government supported, meant more log exports and more disinvestment.
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In spite of pleas from workers, communities and our union, the government simply failed to act on a number of mill closures — some of the mills in Mackenzie, the Elk Falls sawmill, Canfor Panel and Fibre in New Westminster and others.

All of this loss of manufacturing base means sustained downward pressure on wages and purchasing power. We now have the lowest minimum wage in Canada, and the Premier was actually proud that he wouldn't raise it. We have mill closures and disinvestment, as I've said.

We have counterproductive tax changes which essentially redistribute income from the rich to the poor, and that includes the tax cuts that began in 2001 and have continued — the so-called carbon tax and now the HST. These policies are not good for an economy that depends on resource production and exports and where something in the neighbourhood of 70 percent of GDP is driven by consumer demand.

The situation is getting worse as a result of the economic crisis. We just saw Ms. Bacchus in here talking about cuts to school budgets. We have health districts being asked to cut their budgets. We see cuts in assistance to post-secondary students. We see education cuts and so on and so forth. We see declining health care, including services to seniors, and declining human health in general.

Mounting income inequality. We see an acute growth of poverty and homelessness. Just one of the items that I noted is that in April of 2008 there were 2,600 people counted living on Vancouver's streets.

As I say, the situation was dismal before the crisis. Things are now much worse. Capacity utilization has declined. There are 67,000 more British Columbians unemployed than in August a year ago. Employment in goods-producing industry is down by 13.1 percent and manufacturing by 12.3 percent. We see welfare caseloads rising. We see more people on welfare than in living memory. We see falling retail sales, and we see people going deeper into debt.

What's the alternative? Obviously, the strategy — in the forestry industry, for instance — of allowing market forces to simply dictate what happens in this province is an acute failure.

We need government intervention to encourage investment in manufacturing, particularly to resurrect the value-added sector, which has been virtually destroyed in this province. For instance, the government should not allow access to public timber rights without commitment to investment and job creation. We should stop raw log exports and use the wood to stimulate manufacturing domestically, and Steelworkers have presented a ten-point plan to the government on a number of occasions indicating how to do that.

[1440]

We should stimulate the economy. As far as I'm aware, there's been no B.C. government–originated stimulus spending whatsoever since the economic crisis. We're relying on the federal government, which seems to be relying on the Obama government.

We acutely need, as Ms. Bacchus noted a while ago, more educational opportunities, retraining and skills upgrading for the existing workforce and so on. And we need to spend more on social services during the recession, both as a stimulus to job creation and to keep the situation from getting worse.

I'll close with the observation that economic policy is a "pay now or pay later" endeavour. Either pay now in the form of a larger deficit, or pay later in the form of an even more dysfunctional economy and an even worse social situation.

So I'm saying: "Why not pay now in the form of job creation and infrastructure spending rather than paying later, and perhaps forever, in the form of an increasingly unpleasant society, deteriorating communities, increasingly acute poverty, declining opportunities and rising court, policing and incarceration costs?" I reiterate: what kind of B.C. do we want?

J. Les (Chair): Thank you very much.

We have a question from Norm and then Michelle.

N. Letnick: We just heard from Mark von Schellwitz of the Canadian Restaurant and Foodservices Association, mostly about the HST and the impact.

You mentioned our minimum wage in B.C. — that we should be raising it. I think that's what you're getting at. The restaurant association would say it would have a devastating impact on their business, even way more than the HST would. How do you reconcile those two arguments?

K. Pollock: The only evidence that the Premier produced during the election campaign against raising the minimum wage was a study that was essentially sponsored by the Fraser Institute. There are piles of research from various academics from the Economic Policy Institute in the U.S. and the Canadian Centre for Policy Alternatives that indicate, based both on theory and empirical evidence, that raising the minimum wage does not impact small businesses. In fact, because of the stimulative effect that it has on spending, it actually improves their business.

M. Mungall: Before I ask my question, I just want to remind fellow members to be very cautious of putting words in the mouths of presenters who have since left the room after they've presented. I just want to point that out.

My question. You brought up some really important points about the minimum wage, about exporting logs. That immediately made me think of the Trade, Investment and Labour Mobility Agreement, TILMA,
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and the increased move towards full implementation of TILMA and then further measures along that same vein.

In your opinion, do you think B.C.'s minimum wage, the lowest in Canada, as well as our current policies around exporting logs make us more competitive in a situation where we have TILMA?

K. Pollock: No, because…. I mean, let's talk about log exports. We don't compete with other provinces in Canada. We fundamentally compete with essentially the Americans. Both log exports and the Canada-U.S. softwood lumber agreement have disadvantaged Canadian manufacturers and made it easier and more advantageous for companies to export logs. So we get more log exports, and we get less manufacturing investment in British Columbia as a result of the Canada-U.S. softwood lumber agreement.

B. Routley: A very thoughtful presentation, I must say. I'm very impressed — over the top.

[1445]

The issue of investment in British Columbia. I think all parties are concerned about investment in British Columbia and how we can stimulate that. From what you've looked at over the last few years, there's been, of course, softwood lumber impacts. There's been the group of forest industry around the province talking about if they had relief from certain regulations, that was going to provide incentives and somehow there was going to be more investment.

What are your thoughts about the investment potential from the HST? We're hearing about all these savings that are going to come about, as a result, for major corporations. What are your thoughts about the potential of investment and the chance of getting that with the HST?

K. Pollock: If you want to stimulate the forest industry, there are way better ways to go about it than the HST, which applies pretty much simply to fuel costs. If you want to stimulate the forest industry, particularly manufacturing and value-added, you stop the log exports which drive down the domestic price that sawmills pay for logs.

At the same time, you move the collection of stumpage to the back door of the mill or to the export dock, rather than at the stump. You take the fund that's derived from the softwood deal and you apply it to a fund for manufacturing investments similar to the one they have in Alberta, for instance.

And you do a serious job of trying to stimulate manufacturing rather than trying to drive manufacturers out of business by allowing huge log exports and putting a 15 percent tax on the lumber that we do produce.

J. Rustad: Knowing that we're just about out of time, I'll be quite brief. Something you just said sparked an interest, and that is moving the stumpage from the point where the tree is logged to when the product kind of goes out the door. You'd be advocating for a value-added tax system for the forest industry. Is that what I hear you suggesting?

K. Pollock: Yeah. Essentially, it would be a progressive tax. It certainly wouldn't be the HST, but it would be a tax that was progressive in the sense that the more value you added to the product, the less your ad valorem tax rate would be.

We've actually presented this to the provincial government. They were interested, but they told us that they couldn't figure out how they would possibly apply it.

J. Les (Chair): It's always an important feature of taxation.

Thank you very much.

K. Pollock: I don't think they tried very hard but….

J. Les (Chair): Thanks again.

The next presenters are from the Coalition of Child Care Advocates of B.C.

Good afternoon. Whenever you're ready, we are.

S. Gregson: Good afternoon, Mr. Les. How are you?

J. Les (Chair): I am well. I trust you are too.

S. Gregson: I am trying.

Good afternoon. My name is Sharon Gregson. Among other things, I'm with the Coalition of Child Care Advocates of B.C., and my colleague Crystal Janes is here. We'll be both speaking to you this afternoon. We very much appreciate the opportunity as multi-year presenters to be here once again bringing child care to your attention.

I've got a couple of did-you-knows to spark your interest as we start. From 2001 to 2008 child care fees in this province have increased by an average of $852 per year for young children, for families who need child care services. There is no affordability of child care in this province.

Wages for qualified, certified early childhood educators have increased during that same time period from a whopping $13.28 an hour to a ginormous $13.50 an hour over that seven-year period.

The number of spaces. Despite claims to the opposite, child care spaces for children under the age of 12 have gone from 12 percent, in 2001, to now an availability of 15 percent. It's only a 3 percent increase over that time span. Certainly, we are suggesting that British Columbia can and should be doing much better.

[1450]

The Coalition of Child Care Advocates, as you may know, is a not-for-profit organization made up of parents,
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caregivers, people who work in the field, labour unions, businesses small and large. We are all advocating that there should be investment with standards for a not-for-profit, high quality, accessible, affordable child care system for families who need and want to use it.

In spite of very high levels of public support for government investment in this area, judging by the September 1 budget update — which I was sad to attend — it seems the provincial government is intent on moving away from providing B.C.'s children and families with the child care services that they desperately need.

Child care fees are still too high — as you saw from the stat I gave you — wages too low, and there are not enough programs to meet the needs of children and working families in this province. Key challenges include a government that underestimated the depth of the economic crisis, promised to keep the deficit at $495 million and now is desperately looking for savings on the back of child care programs, as we've seen with the cut of the miniscule $5,000 grant that child care programs can apply for to just $2,000 a year now. That is supposed to maintain quality.

As we saw in 2001 and 2007, the child care budget is always vulnerable. We have to fight to hold onto current spending levels, let alone keep government to their election promise of 8 million more child care dollars in each of the next three years.

While we are finally pleased to see some movement on the expansion of full-day kindergarten, full-school-day kindergarten for five-year-olds, it does seem that move forward is being funded by cuts to the current education system, certainly through the annual facilities grant, which was a massive cut to school districts across this province.

A government that continues to insist on a false divide between child care in one ministry and early learning in another ministry, whereas those of us in the field can tell you that they are exactly the same thing and that the needs of working parents need to be met….

The decision to eliminate a Minister of State for Childcare, Linda Reid's position over the last few years…. While we were certainly not a fan of Linda Reid, it is a disappointment to see that that position has been eliminated from the provincial government. We see this as an indication of the low priority that the government and the Premier place on children in this province.

C. Janes: But there are opportunities. We, as advocates, are often accused of being eternal optimists, and we get that support by such things as the results in survey polls. One of them was a mid-August 2009 poll — an Ipsos-Reid poll — that showed 76 percent of those surveyed supported creating new child care programs to help working families.

Also, an Angus Reid strategies poll released by the Vancouver Sun in August 2009 shows that only one out of ten British Columbians with kids were happy with the affordability of day care. I'd like to know who that one in ten is. That's not surprising, as the monthly fee a family pays for a two-year-old and a four-year-old in licensed child care can be as high as $1,700 a month in Vancouver. That would be the highest or second-highest monthly payment aside from mortgage or rent for a family.

Finally, a research poll in 2008 affirms that over 75 percent of Canadians, and higher in B.C., believe government has an important role to play in addressing the lack of affordable child care. So there's lots of public support for a publicly funded system.

Investment in early child care and learning has long-term benefits of ensuring that B.C.'s children will get the best possible start. The B.C. government now recognizes, at least in theory, the importance of quality, universal, publicly funded, democratically controlled services for young children. We expect that movement, if any, will come through the Ministry of Education's mandate for early learning and will be spurred by recent developments in Ontario that offer a vision of truly integrated early care and learning for four- and five-year-olds.

[1455]

In B.C. the government's own early childhood learning agency's 2009 report on the feasibility of all-day kindergarten has accepted evidence that "quality early learning programs have a range of benefits for children. Care and education are not separate concept. Quality matters. Programs should be play-based, holistic and developmentally appropriate. Before- and after-school child care needs need to be part of an integrated system." Finally: "Specialized, adequately paid educators are important to programs' success."

The B.C. report also highlights significant international developments, including a trend towards full coverage by the education system for children ages three to six. Many countries are working towards offering two years of free, publicly funded, early learning before grade 1.

From the start the coalition has said that if well done, the expansion of all-day kindergarten can help build a publicly funded, community controlled, high-quality, universal system that meets the needs of children and working families. But if done poorly, it can undermine childhood development and create more barriers for working families and further destabilize B.C.'s fragile child care services.

Our priority this fall is to develop, with partners, a vision for how B.C. can best build an integrated system for early care and learning and then to hold the government accountable for delivering on its unfulfilled promises.

A renewed understanding of the role public spending can play to stimulate the economy provides the opportunity to make the case that investment in early care and learning is the best infrastructure investment government can make.
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Even in difficult economic times B.C. has the capacity to build the child care system we need. In fact, our continued economic strength depends on a substantial investment in child care. Investing in child care creates local jobs, generates local spending and makes it possible for communities to attract and keep young families and build social cohesion. I truly believe that child care is the cornerstone of community.

A pivotal report on ECEC workforce strategies was released on September 25, 2009, by the Child Care Human Resources Sector Council, and the research conducted by the respected Centre for Spatial Economics clearly demonstrates the estimated net hourly benefit for ECEC children and mothers is $4.27. So for every dollar invested in ECEC, the estimated present value of benefits is $2.54.

Research makes it clear that B.C. requires a new public investment of $3 billion annually to support the time, resources and community service that fathers and mothers both need to create and earn in order to give children, the future workers, an optimal start. A well-funded system of early learning and child care is central to that optimal start, and we have research to support that there would be an immediate 40 percent return on that investment.

Politicians must move beyond their understanding of the current child care crisis to advance on a concrete and bold solution that puts building a high-quality system of early care and learning at the core of their economic and social policy. Our vision hasn't changed either.

One more thing that hasn't changed since the provincial election is our commitment to advocate for children and women's rights to access early care and learning services. But we are still calling on government to build a universal, high-quality system of early care and learning that meets the developmental needs of children and the needs of working families; to set targets and timelines for lowering parent fees and raising caregiver wages and creating more community services; and to invest adequate and stable public funds to achieve these goals.

J. Les (Chair): Thank you. Questions?

M. Mungall: Thanks very much for your presentation. My question is about future planning. In about five to ten years it's anticipated that B.C. is going to be facing a significant labour shortage. The lack of affordable, accessible child care — I imagine that that's going to exacerbate the situation. Can you comment on that?

C. Janes: Well, definitely. And this is what we need to do: plan ahead. We're already in the midst of a child care crisis where there aren't enough child care spaces for families. One statistic I am aware of is that there are enough spaces for 17 percent of the children who require child care right now. So there's a dramatic shortage of spaces.

Early childhood educators are leaving the field in droves at this point, because they can't afford to work for the wages that they're getting paid.

D. Donaldson (Deputy Chair): Thank you again for the presentation. It was very educational, and I know some of those exact issues you're talking about. I see them in my community, as well, as far as early child care services.

[1500]

My question is, Sharon…. You mentioned one aspect of the grants being cut from the $5,000 to the $2,000. Can you describe to me some of the examples of the impacts of that cut and some of the other cuts in communities?

S. Gregson: Sure. It's very easy to detail some of those cuts, because the field is just in shock that there could be such a mean-spirited, tiny grant that has such a large impact on the front lines.

Every year Vancouver Coastal Health, or whichever region a centre is operating in, sends out a community care licensing officer to walk through a program or a licensed family day home to see what could be done to make sure that the program is safe for children, so basic, safe and healthy requirements — making sure that playgrounds don't have holes in fences, making sure that carpets get replaced when they might be tatty or worn, making sure that equipment isn't broken or substandard.

The licensing officer will then write up a report that says: "These things must be done." That report is then used as the background for the application for the minor capital grant.

Interestingly enough, the province talks about supporting early childhood development hubs, and yet this cut penalizes those very hubs. So any facility that has more than one child care program sharing an address used to be able to apply for a $10,000 grant. That same multiservice hub now can only apply for that same $2,000 ceiling.

The reality is that the required upgrades — basic health and safety requirements — will not be funded with $2,000. With $5,000 barely meeting the need, certainly $2,000 is impossible. What it means, then, is that those same child care operators will be turning to parents, to immediately increase fees.

With the end of the funding that the provincial government transferred to the B.C. Council for Families in 2007-2008, we are already anticipating massive increases in child care fees April 1. So infant fees that are $1,500 or $1,700 a month will become the norm.

On top of that, we're looking at having to go to parents and having them increase pay for these quality upgrades. Can you imagine if we said to people who had a child in grade 4: "I'm sorry, but it's going to cost you $1,500 or $1,700 a month"?
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Why is it that we penalize working families who have young children when we recognize the need to provide publicly funded services for older children? There's no rationale for that difference.

J. Les (Chair): Thank you very much.

The next presenter will be the Business Council of British Columbia. Good afternoon.

K. Peacock: Good afternoon. This afternoon I just want to give you a brief overview of our take on the economic setting before turning to some more budget-specific items. In particular, I'm going to focus predominantly on taxation issues for the upcoming budget.

After a difficult year there's now mounting evidence that the global economy has turned the corner and is now emerging from its steepest and longest downturn since the Great Depression. Things have started to shift from bad to less bad, and more recently we would characterize them as further improved. Major industrial countries — including Germany, France, Great Britain, Japan, which were all very hard hit by the global recession — are now growing again and helping to spark the recovery process.

The key piece of the puzzle, of course, is the health of the financial system. Although it remains fragile, we believe things are much better than they were a year ago.

With clouds lifting on the global economy, the debate of course has now shifted to the strength and shape. Here you see letters bandied about. Is it a U-shaped recovery, a double-dip, a W- or V-shaped recovery? At this point most forecasters believe that we're going to be in store for a relatively weak recovery, because it will take time to work through the fallout of the 2008-2009 financial crisis and the first global recession in over 60 years.

However, some forecasters, albeit a minority, do anticipate a stronger recover. This optimism…. For this group, they look to history and note that deep recessions tend to be followed by sharp rebounds. I believe that, indeed, is what we're seeing.

[1505]

Now, these rebounds tend to catch forecasters by surprise. If you looked at what the global forecasters and some of the banks are doing now, they are currently revising their forecasts upwards. So in a sense, they're catching up to this sort of upward surprise that we're experiencing.

One reason for this optimism is that there's a fairly robust economic recovery taking shape in Asia. The Asian NICs — the so-called newly industrialized countries: Hong Kong, Singapore, Taiwan and South Korea — collectively grew at an annualized pace of 18.6 percent in the second quarter of this year. That's the second-fastest growth rate recorded in the past 25 years for that group of countries, so that could be definitely characterized as a more vigorous rebound.

China's also growing. Real GDP there is forecast to grow at least 8 percent this year, with stronger growth in store in 2010.

Turning Stateside a little bit, Canadian forecasters are rightly cautious about expecting a quick rebound or a more buoyant recovery Stateside. That's because if you look past the inventory rebuilding and stimulus from large federal deficits that's happening, a number of factors are likely to weigh on the U.S. economic recovery, in particular the wealth hit by U.S. consumers. You add it all up, $12.5 trillion of U.S. wealth has evaporated over the past 2½ or three years, and that amounts to about one-fifth of total household wealth. So consumers down there, south of the border, are feeling duress — no doubt about it.

Another worry, of course, is the U.S. labour market. Even though the recession has likely ended, the unemployment rate's probably going to continue to rise, pushing through the 10 percent mark.

Better news, fortunately, for B.C.: housing starts in the U.S. appear to have bottomed and are showing tentative signs of improvement. Still, in spite of that better news, there are stiff headwinds for that sector, and we believe it'll take a couple more years to get back to the one million mark for housing starts from our current level of about 580,000. If you look a little bit further out, we believe that you're going to gradually see housing starts in the U.S. climb to the demographically driven rate of around 1.4 million or 1.5 million housing starts in the States, which is good news for B.C. and B.C. lumber producers.

I would also highlight that one of the risks to this outlook is the Canadian dollar. It has emerged as a key risk, clouding the outlook for British Columbia. That's simply because as we're seeing commodity prices rebound, you're seeing the Canadian dollar start to rise once again, and that's going to impede the competitiveness of many Canadian exporters, including those here in British Columbia.

We'd also note that tourism is one area that's going to be potentially hard hit here. In addition to the recession, border security issues and passport requirements, the stronger Canadian dollar continues to chip away at the number of U.S. visitors coming to the province.

The B.C. tourism industry is nervous about the potential impact of the harmonized sales tax. I'll talk a little bit more about that in a moment. It must be understood against this backdrop of significant business challenges that the industry has been grappling with.

Turning to British Columbia, we believe better days are ahead. Based on recent data, it's pretty clear, we think, that the B.C. economy has now emerged from the recession. We tabulate a coincident economic index that has…. After five negative readings punctuated by a very, very sharp decline in the first quarter of 2009, we saw this index return to positive growth in the third quarter
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of this year. That's a very strong and clear indication that, indeed, the B.C. economy has emerged from recession.

A big piece of the puzzle and the critical issue, of course, lies or relates to exports and commodity prices. Here we believe the outlook is modestly positive for the next year or two as China and some of the other Asian economies start to recover.

On the domestic side, a sharp fall in housing starts in the province — not dissimilar to what happened in the United States but not as severe, I would say — has taken its toll on employment and output in the province. Similarly for non-residential construction and building, you've seen a sharp falloff in the number of people working in the construction industry.

Housing starts here have plummeted from a monthly rate of around 3,000 units per month to just 1,000. That's a very sharp downturn. Again, with housing sales picking up, you're seeing some recovery in home starts, and we think this is going to be positive for the provincial economy going forward.

In sum: two risks, and I haven't said this for a while. One is we believe that there's a fair amount of upside risk to the economic outlook. The provincial government just came out with its forecast of 1.9 percent for 2010, and we think you could see economic growth in the province easily be around 3 percent, maybe even slightly stronger. Upside risk — that's a nice thing to say after a couple of tough years.

The other one is the one I mentioned: currency appreciation. That, unfortunately, is a downside risk. If the currency gets ahead of itself and is stronger, that will curtail B.C.'s exports.

[1510]

Just a few comments on some of the priorities for Budget 2010. First of all, I'll start off by saying that we believe that the government deserves good marks for its prudent management of British Columbia's finances over the past seven or eight years. Thanks to significant debt repayment and sizeable tax cuts, both on the personal and corporate side, the province was in a very favourable position to weather the recent downturn and shock waves that the 2008 financial crisis brought about.

Taxpayer-supported debt, which is arguably the best measure for gauging long-term fiscal stability, steadily declined over that period from a peak of around 21.3 percent to 13.3 percent. This put B.C. in a very, very good position, as I said, to weather the downturn.

It is somewhat regrettable that the province was pushed back into a deficit due to the onset of what was a largely unanticipated global recession. According to the recent document produced by the government, we'll see a $2.8 billion deficit in 2009-2010. The council, however, believes that returning to operating deficits is the right decision given the extent and swiftness of the global economic downturn.

Turning to the harmonized sales tax. B.C. Business Council does support the harmonized sales tax. Amid the challenging economic times, the government opted to advance the agenda of tax reform by unveiling a proposal to replace the provincial sales tax with a harmonized sales tax to be integrated with the federal GST.

My comments will be focused mostly on macroeconomic issues relating to the GST. From a macroeconomic perspective, there are many reasons why shifting to a value-added sales tax such as the HST is beneficial. Most significantly, it will remove all PST from business inputs — intermediate inputs as well as capital purchases.

Many people don't recognize that although the PST is often viewed as a consumer tax, the reality is that it is actually a hybrid tax with approximately 40 percent of PST revenue actually paid by businesses, which amounts to some $2 billion annually. Under the HST this is all removed, and businesses will enjoy a significant cost savings.

A critical point to note is that economists…. You don't often get a lot of agreement among economists, but you do get a fair amount of agreement among economists on this issue. They've recognized that taxes on capital and other intermediate inputs have long-lasting negative effects, notably by raising the cost of private sector investment on machinery, equipment, technology, vehicles, construction materials and so on.

Indeed, a recent study from the OECD underscores this finding. Drawing on previous Canadian research, the organization there estimates that reducing consumption taxes on business inputs by 1 percent of GDP would yield a benefit of a 3.1 percent increase in the level of Canadian GDP. That's a sizeable gain for a 1 percent reduction in taxation.

For British Columbia, establishing a policy framework that stimulates investment is especially important, because if you examine the amount of investment per worker, what you find is that B.C. is notably lower than other jurisdictions. In fact, we have investment per worker at about 80 percent of the level that it is in the United States. It's below the Canadian level, and it's about 80 or 85 percent of the OECD average. So B.C. has some ground to make up here.

Just a side note. Another benefit of the harmonization process is reduced compliance costs for businesses.

A couple more points to make. The province also intends to provide partial rebates for the provincial portion of the HST paid by charities, eligible non-profit organizations, various public sector bodies — hospitals, universities, school boards, etc. The Business Council recommends that the province take steps to minimize any extra costs or additional costs for public sector bodies under the HST. In particular, we are concerned that the HST not lead to substantially higher costs for universities and colleges, because this is a time when
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enrolment is growing, and there is a growing need for a well-educated workforce.

Another point that might be worth noting here is that contrary to what many believe, the net result of the HST will not be to raise the final cost of items to the consumer by the full 7 percent. That's because we anticipate that by moving to the HST, the costs that businesses will realize will be passed on to the consumer. If you look to experience in other Canadian jurisdictions, that's indeed what you find — in the maritime provinces as well as Quebec.

[1515]

There are a few areas or industries that are rightly concerned about the implementation of the HST. One is home-building. The government has taken steps to help mitigate these issues, but we believe there are a few other measures that might be adopted to provide further relief for the home-building industry.

The government could consider additional measures to mitigate the impact of the HST by instituting a higher threshold beyond the $400,000 level that is currently in place or by basing this on housing price differentials in regional markets. Another possibility would be to exempt new homes from the property purchase tax, which would also ease the burden.

We also recommend that the government introduce a grandfathering provision for sales contracts reached prior to the implementation of the HST so that homebuyers are not faced with unanticipated costs for projects that are already underway.

We also recommend that the province continue to work with the Council of Tourism Associations to explore measures that can assist tourism operators by lowering government-imposed costs, fees and other regulatory requirements, because that industry is also an area that has voiced significant concern about the impact of the HST.

A couple of other key points just to touch upon. I don't want to take up any more time. One — we've talked about it before, the Business Council — is the ongoing issue of property tax reform. That should be reviewed in the upcoming budget — the onerous level of property taxes on heavy industry, in particular.

A final issue that warrants brief mention here is concern about fees imposed on businesses holding waste discharge permits from the B.C. Ministry of Environment. Research by the Business Council and several of our members indicates that such fees are significantly higher in B.C. than in other provinces. Particularly worrisome is the fact that in B.C. the fees are based on the maximum limits prescribed in the permit, not the actual amounts discharged.

By reviewing this and making some changes…. If the Ministry of Environment would modify this permit fee system so that fees are based on actual volumes discharged, this regulatory change would produce a cost savings for many of these permitted facilities but would also — perhaps, more importantly — provide a stronger incentive to minimize emissions.

With that point, I will wrap up and ask if you have any questions.

J. Les (Chair): Thank you.

N. Letnick: Thank you for a great presentation, and to your members for creating all the jobs that you do in British Columbia. It's much appreciated.

Some of the areas that you represent — hospitality, tourism, retail, agrifood — are all impacted by minimum-wage policies across the country and in British Columbia. Does your organization have a position on the minimum wage or any research that you've done that you can provide the committee?

K. Peacock: We actually don't have a formal position on minimum wage, and in part that's because our membership is a little bit schizophrenic on that. There are different interests and different concerns around the minimum wage.

In the past, though, the Business Council has said that it does make sense to look at increasing the minimum wage and thereafter to consider indexing it to some sort of CPI or a consistent measure so that the province doesn't fall behind and you end up getting these…. The need to catch up — right? You fall behind if you don't continually address and update the minimum wage. So in terms of any policy, our primary recommendation was to make necessary adjustments when appropriate and then look to some sort of indexing in the future.

D. Donaldson (Deputy Chair): Thanks for the presentation — lots of food for thought. A couple of quick questions. Some economists that I've been reading have predicted a recovery, in that GDP will rise but the jobless…. They're calling it a "jobless recovery," in that GDP is rising, but we don't see the corresponding bump in employment.

Given that — the fact you refer to here about the OECD and business inputs increasing GDP potentially…. If you could just supply any independent, peer-reviewed studies about how the HST would lead to increases in jobs, that would be great for the committee.

The second question would be on the policy framework regarding the investment in workers, how we seem to be falling behind other jurisdictions in investment in workers and the idea that the savings that large companies and industry will accrue through the HST could potentially be applied to this. Would the Business Council of B.C., then, be in favour of compelling that this tax break for large businesses therefore be used for investment in employees?

[1520]
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K. Peacock: We would likely stop short of compelling businesses to invest their savings in hiring new workers and rather opt to let the market forces and the channels of those savings work their natural mechanism. That's predominantly via higher investment levels, so you have the savings….

If it costs less to purchase machinery and equipment and invest in new technology, what you typically see on an economy-wide basis is that that has a positive lift to the employment numbers and job numbers. That's because a more productive and competitive economy hires more people and does create more jobs. And there are spinoff benefits. Where there's more wealth in the economy, there are more service jobs and so on. So there's a cascading effect.

I think we would support allowing that to take its natural course rather than mandating, because the risk of mandating is, again, that you're back to this misallocation of resources, which is a concern and actually dampens productivity growth and wealth creation.

B. Ralston: In 2001 the PST on production machinery came off. It was a tax measure that cost about $110 million a year, so nine years later, I guess, we're at close to a billion dollars. Do you have any studies that show that there was any increased investment as a result of that tax coming off?

K. Peacock: I don't have any specific studies, and I'm not aware of anything being done on the B.C. situation, probably because it's rather specific and rather small for academics to grapple with. But I would note, having watched the investment numbers rather closely over the years, that there was an uplift in machinery and equipment investment over the 2004-2008 period. It was rather significant. Now, disentangling that, with the economic upswing that was taking place and the impact of the removal of the PST, is difficult.

I would further note that in speaking to a number of members, and particularly people in the oil and gas industry, they have indicated that the removal of that was instrumental in a lot of their business decisions to put more investment into the northeast part of this province. They did cite that as a key issue and factor supporting their decision.

J. Les (Chair): Okay, thank you very much, Ken. We must move on, unfortunately. Thank you for coming today.

Next is Rick Jeffery from the Coast Forest Products Association.

Go ahead, Rick.

R. Jeffery: Okay. Good afternoon, ladies and gentlemen — and, I guess, brothers.

A Voice: Here we go again.

R. Jeffery: Well, Mr. Routley and I go back a few movies, anyways.

Thanks for the invitation here today. You're somewhat confusing me because when I'm looking at you, you guys are on the left, and you're all on the right, and I'm wondering if something has happened here. But I'm sure you already had that pointed out today.

Interjections.

R. Jeffery: Is it "Go in and put yourself in somebody else's place" day or something?

Anyways, I'll spend a little bit of time looking at the short-term outlook for our industry from a coastal perspective. I'll talk a little bit about opportunities and then have some recommendations for your committee.

The short-term market outlook. I should start with this. It's all about the markets. There are none. There are a number of reasons for that. I look at the U.S. in lumber. We're the poster child for the sub-prime mortgage. We started feeling things in 2006, much before the rest of the world did.

Today we find ourselves…. Our market in the U.S. is driven by housing starts, whether it's the cedar market here on the coast or the SPF-dimension market in the Interior. It's all driven by housing starts. So in August we see housing starts increase to 579,000. That's off of the two million high that you would have seen in 2004-05. But most disturbingly, there was a 3 percent drop in single-family housing, down to 479K, and it's the single-family business that drives our industry.

Existing home inventories are dropping down to 9.4 months. They should be about six months. That would be what's normal.

Notwithstanding President Obama's $275 billion…. Billion — we throw that word around a lot lately. I guess I'm getting old or something. His home affordability and stability plan was designed to forestall foreclosures. We see in the States today that foreclosures are running at a 30-year high. I don't know what would happen without that.

[1525]

The good news is that underlying demographics in the States say that we should be building about 1.2 million to 1.4 million houses annually. So there is a business there.

So 650,000 this year and a million next year is the projection from the analysts we follow. What I want to say about the States is that the pace of recovery there will be excruciatingly slow because consumer confidence is still low, and unemployment is rising.

Japan is the second-biggest market for our products. It is the biggest market for hemlock or hem-fir on the coast, so it's a very important market for us. They've dropped
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from about 1.2 million housing starts to about 915,000 as of August. Of those, about 458,000 are wooden, which is the business we're in.

What you should know about the Japan market for us is that our average market value for our coastal products that go in there is about $700 per thousand board feet. The price of 2-by-4s today is under $200. So it's a very valuable market for us, although the volume is a little bit constrained.

China. You've heard a lot about China. In July, for the first time ever, volume imports to China exceeded those going into Japan. But that's on volume, not value. We're selling very low-grade products into China.

We have a really good joint government-industry strategy in there. It's funded by both parties. It's focused on six-floor walk-ups, landscaping, rural housing. So the B.C. building code revisions you saw this year, which were somewhat controversial in some places, to allow for six-floor highrises here was a very necessary thing for us to do. We can't very well go into China and tell them to build their six-floor buildings out of wood if we're not doing it here, and 74 percent of the ten million housing starts in China are six-floor walk-ups.

China is all about price, so the value of those shipments remains low. Our big challenge is to move up the value chain there.

On the pulp and paper side, again, China dominates this story. Their demand has driven pulp above $750 per metric ton. That's allowed us on the coast to restart some idle capacity — at Harmac and at Catalyst mill in Crofton. But in the near term, we see Chinese banks starting to crack down on what is relatively easy credit there. Inventories in China will rebuild. Import prices will then start to exceed domestic prices, and those imports will slow.

On the North American side, pulp is highly dependent on the economic recovery and advertising and publishing. We're not seeing a lot there. It's a pretty fragile place.

On the paper and newsprint side, we've seen a little bit of price increase there. But demand is very significantly impaired. The only reason we got any kind of price bump is because the industry, which is not really known for its discipline in managing supply and demand, has been managing supply and demand. That's meant permanent and temporary curtailments and, most problematic for us, the disruptive costs that come with that for our employees, the communities we work in and to our own bottom lines.

Pulp guys tell me that 2010 will be a very difficult year for pulp and paper. We will continue to see mill closures, curtailments, capacity reduction, financial losses and sector discipline.

To relate that a little bit to your immediate business, when I looked at the current budget and looked at the prices that Treasury and Ministry of Finance were using to base their projections on, they were very realistic projections. We didn't have any problems with what they were looking at.

On the financial side, we're not making return on capital and haven't for a couple of years. We've had negative earnings, and those negative earnings have crossed all sectors of the business, from sawmilling to reman to pulp and paper.

In my organization we have a lot of private capital — privately owned companies. When I talk to those guys, they're losing money just as much as the public corporations are.

[1530]

You should know that the Crown harvest is at 4.1 million as of the end of August. That's compared to 7.1 million last year and should really be, probably, more like 12 million. So we're not logging. We're not logging, because there are no markets to sell our products in.

I was in front of a select committee in Ottawa a little while ago and basically suggested to them that, you know, if people really wanted to stimulate it, the government could just start buying all our production, and we'd ramp up. We have nowhere to sell it, so it doesn't make any sense to make it. We'd like to see that kind of rationale creep into the public policy debate.

Lumber production. Coast is running at about a billion board feet. We should be running at about 2.2 billion or 2.5 billion. As of August our production had dropped year over year by 38 percent, and 2008 was no screaming good year.

We're in survival mode. We're running for cash. We're doing everything we can do to reduce our cash costs or per-unit losses. We're trying to maintain customers. We're trying to maintain our workers. We're trying to produce some cash flow. And that's a balance that sees us losing a lot of money.

Okay. I've finished whining. The future — it's great. It is, actually. I mean, I'm quite bullish on this industry. We've got new markets. Non-residential market opportunities are good. It's a $250 billion market in the States, a $9 billion market in Canada. We currently capture about $3 billion of that. Our estimates are that we could probably capture about $15 billion, so there's a $12 billion market opportunity there. That just happens to equal about the value of exports out of the forest industry in British Columbia in a normal year, so that's a pretty significant number.

The wood-first legislation is a very good thing for us because it allows us to use wood here, demonstrate to other people in the non-residential sector that there is an opportunity to do this. Six-floor walk-ups, as I said, were good. So the more that you folks can make sure that our public buildings are built out of wood, the more likely we are to capture that $250 billion market.

I'll bring just one example to your attention, and that's the BCIT health sciences centre. It's on the books right
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now. If it can get funded, it's a great opportunity for us to utilize wood-based technologies and showcase those across the world.

As I said earlier, China, with its ten million housing starts, is all about six-storey walk-ups, so our building systems and products can be used there.

In terms of next-generation new products, we're broke. We need to look at R-and-D funding or R-and-D tax credits to drive the generation of new, innovative products — things like cross-laminated beams, engineered wood products, new building systems. Nowhere is that more important than on the coast of British Columbia. Our second-growth forests don't have a natural home, and we need to find a home. Engineered wood products is a good place to try and find a home for that inventory.

The province announced the wood innovation and design centre. Again, this is a global centre of excellence that we can drive innovative building technologies, design, construction and use that throughout the world to promote our products.

We are also spending a lot of money on new biomass-based energy products. I'll tell you that for the coast — it's not like the Interior — there are no readily apparent quick winners on the bioenergy side for the pulp and paper sector.

There are lots of things going on in the world that make me as rosy as I am. There's a bunch of supply shocks out there: Russian log tax, climate change–induced damage to forests — the pine beetle being one of the biggest examples. The world is increasingly not going to source from illegal logging sources.

Demand for sustainability, which British Columbia is a leader in, will be demanded in other parts of the world. So as they go through their sustainability exercise, they'll see what happened to us. On the coast, for instance, our cuts come down significantly because we now do logging and forest management differently. We would expect that to happen in other jurisdictions.

Increased demand for forest conservation, especially around climate change, will have an impact on log supply, timber supply. There's a permanent closure of capacity. Then on the demand side we see emerging carbon credits; expansion of bioenergy; the supply-and-demand imbalance in Asia; and the demand for green construction, which wood fits into very well. Those things will all reduce supply and increase demand, and B.C. can be a player and will be a player as those things sort themselves out.

[1535]

The question is: what can you do to help us get there?

First, I'd like to talk about the HST for a second. I couldn't help but hear Mr. Donaldson's question, I believe it was, about what we were going to do with all those savings. I might just remind you that they're not really savings. You've been taxing us to the tune of $140 million a year, a tax that we can't recoup anywhere in our marketplace. It's really hard for us to tell the Chinese, when we sell them a thousand board feet of lumber: "By the way, here's your 7 percent sales tax. We're just going to tack it on so we can recoup it."

The HST is probably the single biggest thing you could have done for us, so I guess the first recommendation I'll have for this committee is to make sure that you put your politics aside, look at good tax policy, understand that this is a good tax policy and make sure you implement it and pass the legislation.

It brings our marginal effective tax rate in B.C. down from 29 percent to 14 percent. We in the forest industry have a real hard time getting a return on capital. As long as we have a hard time getting a return on capital, finance institutions and lenders don't want to provide us money. One of the ways that you can make it more attractive to invest is to make sure that the marginal effective tax rate is in a place that's competitive. This helps us get there.

The other thing I'll say, just from a forest industry point of view, is that under the softwood lumber agreement, there are very few things we can do that don't run the risk of breaching the agreement. This is one of those things you can do that has impact for us that is compliant with the softwood lumber agreement.

We can't quantify it for you now, but we know that this will lead to lower operating costs. It will preserve cash flow at this time. It will help preserve the existing jobs and the incomes that go with those jobs. It will assist us, when the recovery comes, in being able to take advantage of that, and it will lead to investment, productivity, competitiveness and longer-term jobs.

The HST for the forest industry is a very good thing, and we commend the Liberal government for bringing it in and request all parties to support it, because it is good public policy.

Other than that, the next-biggest thing…. I don't have a very long list for you, which tells you something.

Municipal taxes. Look, our companies are having to go to court to sue municipalities for overtaxation. That shouldn't happen, so we're asking that you guys, again — and this one's on my list every time — to bring in legislation to maximize ratios and do a full-scale review. Let's get this thing figured out and put to bed once and for all.

There are some other tax measures you can do around the edges to help us capture the opportunities and meet the challenges of the new green economy: a refundable plant modernization tax credit, working with the federal government around capital cost allowance. I've mentioned research-and-development grants, refundable tax credits to drive R and D.

On the program-spending side, you spend about $24 million a year — that's been reduced over the last couple of years — to Forest Innovation Investment. This is the provincial funding for market access and market
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development. We leverage that money with 50 cents from the federal government and about 20 cents from the industry. The three parties get together, and we end up having about $60 million to spend on ensuring that our products can get into the markets and be used properly.

You should also think about sending some money towards innovation of new products.

On the policy side we call for a Premier's productivity council to look at informing provincial budgets on measures that could be used to improve productivity, because our productivity lags the world.

The rest of it you've got there. Energy plans have got a little bit of a problem in them for us.

[1540]

Last, we've been asking for a regulatory impact statement on new legislative, regulatory and policy initiatives so that when government moves on these things, we all have a very clear understanding of what the costs and benefits of them are. They do that somewhat, but there's a lot of room for improvement in that.

J. Les (Chair): Thanks, Rick. We have time for only one quick question.

D. Donaldson (Deputy Chair): I admire your gung-ho attitude, although I don't, obviously, share all your observations. But I do share your positive outlook around the industry.

One thing I'm hoping you can clear up for me and shed some light on is: you started the presentation saying that the association is driven by housing starts. Yet the HST…. Realtors tell us it'll have a major impact — the HST being implemented — on houses that are worth more than $400,000. That's going to have an impact on those people who buy houses and on the new houses.

How does your association — and how do you — reconcile that you're driven by housing starts, that the HST is actually going to have a negative impact on housing starts over $400,000?

R. Jeffery: First of all, it's driven by U.S. housing starts. Our housing starts here in Canada are about 150,000 across the country. The American market is 1.2 million steady state, so there's a big difference in the size of the markets. We're not really driven by the housing market here.

However, I would say that our homebuilders can look forward to having cheaper lumber and cheaper cabinets and cheaper tiles and cheaper faucets and all those kinds of things that go into a house, because all those things attract the PST now. You have to ship them there, so they can get charged PST on transportation to get them delivered. Homebuilders in this province will see a drop in the price of the input goods into building a house.

J. Les (Chair): Thank you very much, Rick. Appreciate you coming today.

The B.C. Government and Service Employees Union is next. Good afternoon.

D. Walker: Good afternoon. Thank you for the opportunity of speaking with you today. My name is Darryl Walker, I'm the president of BCGEU, and Chris Kincaid is one of our research officers. We have a presentation here, but the final product will be a longer letter, which I believe will be sent to everybody prior to the deadline.

We represent about 65,000 men and women throughout the province of British Columbia, both in the public sector, the broader public sector, and then we have a number of private services. Our members play a key role in the economy around this province. Again, I want to thank you for the opportunity to speak with you today.

We believe the context of this budget is the economic recession and the attempt to manage a recovery. At the same time, we think that we need to have a look at a few years down the road. We're not just necessarily looking at this year. There are a number of things, including poverty reduction and the reduction of our carbon footprint, which is something that I think has been very much on the agenda in the past of this government.

We believe the deficits need to be reasonable. We believe that this year's deficit will be $2.8 billion, with $5 billion over the next four years. Other provinces have boldly stepped out and gone beyond that, and we believe it is possible for British Columbia to do that as well.

If B.C. were to follow the lead of Alberta and/or Ontario, we could have a look at a deficit of perhaps $7 billion or $8 billion. We think that it would help us see the province not through the rebuilding of the infrastructure — that is the fiscal infrastructure. We also want to talk about the social infrastructure — the needs of human beings in this province.

With that in mind, we have a number of recommendations. First off, we would recommend that B.C. invest in a universally public-funded child care system. That child care system is something I'll speak of.

One of the biggest economic and social hurdles for working families in B.C. is finding affordable child care spaces. This is a market issue, and it's needed by working families in B.C. It's also a poverty reduction issue. Child care is second only to housing when families face the need to put out whatever they have as an income.

Even in the most recent economic turndown, we see that 76 percent of British Columbians support the child care initiative. The move to all-day kindergarten is definitely a positive step. It provides some integration for the overall child care system. But we hope it doesn't draw on the existing funding that would be seen through the education system — rather, there's separate funding there.

[1545]
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Despite the step forward, child care needs are still unmet for after school care — so, beyond three o'clock — children under five years of age and, of course, parents of working families. There comes a certain time when that child care need is there, and it's just not necessarily being made available. So we recommend a universal child care system in British Columbia.

When it comes to health care, British Columbians want a publicly funded system so that the health authorities are not financially squeezed and forced to cut patient care. Equality and access should be a priority for this province.

We'd like you to have a look at things such as home support services, increased funding to allow seniors to stay independent, to stay in their own homes, while creating long-term savings by reducing the pressures on the acute care system. Access to services ought to be 24-7, not just for eight or ten hours during the main part of the day. Money should go to direct care expanded services as recommended by the 2006 Premier's Council on Aging and Seniors Issues.

With regards to long-term care, we would ask for funding to be increased to care levels so that 3.5 hours of care per resident are available. Those are residents, obviously, that require that particular care. The creation of 5,000 new not-for-profit residential care beds, separate from those in the new assisted care living beds, are a recommendation.

We would also like to see the cuts changed — undo the cuts — to services for survivors of abuse and for those with mental illnesses and those with addiction issues.

With regards to training and education, the government should take advantage of the economic downturn to bolster trades training and post-secondary access for British Columbians. This would allow those out of work to move forward, not backwards, and would better situate us once we come out of the recovery.

My personal belief is that young people need an opportunity for education and training. During the difficult times when they may not be able to find jobs, education would be a good place for them. And then, again, once we come into the recovery, they will be there to help this economy. So increase funding for post-secondary institutions and trades training, restore $2 million in cuts to literacy programs and restore $4 million in cuts to library budgets.

We need to pursue a poverty reduction strategy that includes not only targets and time lines but that commits more resources to welfare benefits and to social housing. On the poverty reduction, we remain deeply — economically and socially — divided when it comes to income. Inequities are on the rise, and the economic turndown has really only sharpened that divide. We recommend that the government put in place a comprehensive poverty reduction strategy with legislated targets and with time frames.

We recommend that the minimum wage be increased to $10 an hour. We would like to see an increase in welfare rates, and we would like to see more social housing. That's not to give credit to where credit is due to the work has been done in the past, but there seems to be a lot more that needs to be done.

With regards to the green economy, institute a hard cap on carbon emissions and dedicate the revenues generated from carbon pricing to green programs. Restore funding for environmental protection, environmental assessment compliance on Crown lands remediation and on public health and parks.

Increase access to real climate change solutions for British Columbians, with attention to low-income British Columbians. This means increasing the low-income climate action credit. Increase access to solutions by enhancing public transit. Restore home energy efficiency retrofitting programs, and provide just transition supports, including training opportunities to workers who are displaced through the move to a greener economy.

[1550]

With regards to the public services or public sector, the direct public service has been in turmoil since the budget in February with its low deficit and hard targets of almost $2 billion in cuts. It has really, I think, set back the effort to rebuild the B.C. public service and address recruitment and retention challenges after the damages from the 2002 to 2005 period.

Together, we were making progress to improve the image of the public sector as a stable, rewarding workplace and an attractive career choice for young workers to consider.

September's revised budget confirms several hundred public servants will be directly affected by layoff. For our union, it's about 100 people and 1,500 more over the next three years. This worsens the recruitment and retention crisis that is already taking shape in the public service.

Instead, we need this government to work with us in protecting public service jobs and making it a welcome place for young people with aspirations to find work, find mentors and have a real way of becoming part of tomorrow's public sector. So we urge that action is needed to develop a comprehensive recruitment strategy backed up by the commitment of financial stability, and for the public service, in order to foster an environment in which young workers will choose to make their career in the public sector.

We'd like to talk about a couple of ways that we see expanding of revenues. We think the government can look at a number of areas including, number one, our public liquor stores. Government maximizes revenues when purchases are made through our public stores. The numbers of public stores around the province should and could be increased. The hours of operation could and should be increased, including Sunday openings.
[ Page 76 ]
And there are ways of enhancing customer service, such as providing, perhaps, cold beer sales.

With regards to the forest, another measure that would meet the revenues would be tougher enforcement of stumpage payments and timber theft. Hiring more compliance and enforcement staff for the forests would be a way to achieve this. Unfortunately, there are very few staff that are actually targeted to be able to work in the forests and see to compliance and enforcement, and some of these are facing cuts. Raw log exports is something that we have find a way of taxing, so that some of the money actually stays here, or we end the practice.

The provincial scales in many parts of the province, on major routes, are charged with collecting permits and other fees on commercial vehicles, but they are frequently closed. The number of people working them have been downsized. In many cases the folks that work there are actually on the roads themselves. Expanding staff and operating hours at weigh scales would be another way of collecting government revenues.

Of course, we believe that keeping people working is a way of making sure that the province continues to see revenues at a higher level as we go forward.

Thank you very much for your time.

J. Les (Chair): Thank you. Questions, anyone?

D. Donaldson (Deputy Chair): Surprising. Thanks again, Darryl. I appreciate the work you're doing and your staff are doing.

I just had a question, as you were speaking. I had the opportunity to speak to an SFU community extension class — people who were actually working and coming in to SFU to upgrade their skills. This one person worked in one of the areas that's been really hard hit by government cutbacks, and I was interested in how employees were being solicited for their advice on how to make the cuts and how to make cuts in a more efficient manner and with less impact.

Her comment to me was that she began down that road and then was told: "Well, that's a hire-or-fire question. Don't be asking those kinds of questions." I'm wondering if you're hearing back from your members around those kinds of incidents and how they are actually being consulted around how to be better and more efficient within their ministries.

D. Walker: Yeah, I think they are being asked those questions, but a number of them are, quite simply, kind of keeping their heads down with hope that nobody necessarily notices them. There was, I think, an on-linetype of a system that came through the provincial government literally out of the office of the deputy to the Premier. We know there was a lot of chatter back and forth, and so what we had asked was: "Could we have a look at some of the suggestions that our members are putting in out there?" We had a very, very difficult time obtaining any information whatsoever.

When it comes to being willing to step up and have an idea of where the savings can be…. More often than not, our members, through our stewards network, will come back to us and talk to us about it and then ask if we can find a safer way of taking it forward.

M. Mungall: So you mentioned that the current layoffs in the public service are really negatively impacting our recruitment and retention strategy for the long term — right? And we also are facing a few other pressures going into the next five to ten years, which is a labour skills shortage in British Columbia.

[1555]

You brought up child care, and I asked an earlier question how the lack of affordable, accessible child care might also exacerbate that labour skills shortage in terms of recruitment and retention. Presently, in this year's budget, there is a freeze on the public service sector. So if you could maybe comment on that and how it might impact us down the road on what you brought up with the recruitment and retention strategy.

D. Walker: May I ask what you mean by freeze?

M. Mungall: My understanding is that we're looking at a freeze on wages — right? — in the public sector.

D. Walker: We have a collective agreement that runs through till March of 2010. We've been told that beyond that there are probably two zeroes for the next two years.

M. Mungall: That's right.

D. Walker: The impact on recruitment and retention is, I think, the most serious of all the issues. If we look at the demographics of our society, never mind of our public sector, we are getting older. We've got great experience, but we don't have people coming up behind that we can give our experience to.

When you start to cut into the number of people you have working, more often it's the younger ones that are laid off — they're the more junior ones — and the senior ones stay around. Eventually, I believe, you have to balance it off so that you have young people coming in. Then, when you have a look at some process of holding wages down, the tendency is to go where you actually can get a wage for the skills that you would bring to that particular profession.

It's another issue, and it's an issue that we will deal with at the bargaining table. I don't really think it has any place here, to be very honest. But recruitment and retention — I think in any sector it's very, very serious. When you can't keep the most competent people that
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are working for you, you don't really have the ability to grow as an organization. I think we would say about the public sector that that is, indeed, the fact.

B. Ralston: The business council and the early learning centre out at UBC recently released a joint paper which spoke of the importance — not only for, I suppose, the moral and emotional development of children but also for the economic benefit — of an investment in early learning. I wonder if you have had a chance to review that and have any comments that might assist the committee.

D. Walker: To be honest, I personally have not necessarily had a chance to review that. But certainly, my understanding, in all the working and the years that I've been involved in trying to identify the needs of early childhood educators in the child care system, is again that money up front is often returned seven- or eightfold.

If you spent a couple of dollars in the very early years, you'd probably end up getting happier, better-adjusted children, and the money may come back as $7, $8 or $10 down the road. That's my understanding of the breakdown. It's a bit of a generalization, I'm sure, but I think that there's something to be gleaned from it.

The other thing is that we have a society where there's quite often a demand within the workforce. It may not be so much right now, but we've come through some economic booms, if you will, over the last few years where workers just weren't available.

Children need to be protected. They are our future, so we need to find a way of representing their needs as we go through this. Early childhood education, from my perspective, is as important as kindergarten and then the K-through-12 system. It's absolutely essential that we continue to build our society on healthy young people.

J. Les (Chair): Okay. Thank you both very much. I appreciate you coming.

The next presenter is First Call B.C. Child and Youth Advocacy Coalition.

C. Evans: Good afternoon, Mr. Chairman and members of the committee. My name is Catherine Evans. I am a board member of the B.C. Society for Public Education, which is one of the 90 partner organizations that are in the First Call Child and Youth Advocacy Coalition.

As a coalition we are united in our commitment to the well-being of children and youth in this province and to making their well-being a first priority for all British Columbians, including your committee.

The advice that we offer you rests on a large body of research, both Canadian and international, that is related to human brain development, the cause and consequences of health inequities, the lifelong harmful effects of growing up in poverty, the importance of public education in a democratic society, children's rights and the cost-effectiveness of prevention.

[1600]

You will know that the Conference Board of Canada's most recent report card identifies poverty as the main social challenge that we must all address. This is particularly urgent for British Columbia because for six years in a row, even through the so-called golden years, we have had the highest child poverty rate of all provinces.

In addition, the paper that you just mentioned, Mr. Ralston — the paper prepared for the B.C. Business Council by the human early learning partnership of British Columbia — calculated a $400 billion loss in GDP growth over the next 60 years, looking long term, if we don't reverse the rising trend of young children's vulnerability upon school entry. This vulnerability currently stands at about 30 percent. This unnecessarily high rate of early childhood vulnerability is costing the B.C. economy a sum of money ten times the provincial debt load.

As research by many of our health partners has pointed out, the burden of preventable health inequities costs us in health care costs and in lost productivity. Reducing poverty is a key recommendation in addressing this issue. It's time for B.C.'s fiscal policy to act on this evidence if we are serious about improving outcomes for children and building a healthier, more prosperous society for us all.

As was recommended last year, First Call urges the B.C. government to adopt a comprehensive poverty reduction strategy with targets and timelines for the reduction of child and family poverty. We propose a target of cutting child poverty in half by 2017. Our detailed recommendations to help achieve this goal include a higher minimum wage, reasonable rates of social assistance, high-quality and accessible child care, and more social housing.

Additionally, we ask the government to assign a cabinet minister with authority and responsibility to ensure that the strategy is being implemented and that the province is on track to achieve these targets.

Given that the majority of B.C.'s poor children have parents in the labour force, we urge government to look at its contracts with service providers, both for-profit and not-for-profit, to ask if living wages are being paid to all contractors' employees. Leadership on this issue is crucial to avoid the problem of government on the one hand indirectly paying poverty-level wages and contributing to the rise in children's vulnerability levels, while on the other hand paying for services to reduce vulnerability.

This is especially important for aboriginal families, lone-mother families, immigrant and refugee families, and families with children with disabilities. All of these
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groups are overrepresented in the poverty and vulnerability statistics.

In these tough economic times, it is more important than ever to pay attention to the supports needed by families raising children and to the services needed by children to enable them to reach their potentials. As jobs are lost, family stress increases. This is definitely not the time to save money by cutting services. Any attempt to do so is penny-wise and pound-foolish.

Government's promise to expand the entitlement for all-day kindergarten for all five-year-olds is a welcome announcement. It is just the kind of forward thinking that is needed. We recommend that a similar investment follow without delay in comprehensive early learning and child care for children under five. We urgently need to start building a universal, affordable and high-quality child care system to replace the largely parent-funded and inadequate patchwork that we have now.

We must also protect our public school system. Over the past eight years the portion of the provincial budget that is spent on the K-to-12 system has shrunk from 18 percent to 13 percent. All the talk about per-pupil funding is misleading. Very few school expenses are costed on a per-pupil basis. Do we heat a school building more or less because of the number of children attending?

These important measures, budget share and percentage of GDP spent on K-to-12 schooling, are all down. We are truly not investing in one of the most important benefits we can give our future — the education of our children.

[1605]

The myth that tax cuts provide broad benefits needs to stop. Top-income earners benefit most, while low-income families lose a great deal in being able to access needed supports and services for children and youth.

In 2010 we are looking for enhancements in the budget of the ministries that provide child and youth services. Funds are needed to reduce wait-lists for assessments and for therapies; to reduce caseloads and class sizes so social workers and teachers can be more effective; to restore the services in schools that are essential to the success of vulnerable students; to expand special services for at-risk youth; and to provide for sustainable, community-based child, youth and family support services.

We are looking to the 2010 budget to demonstrate the wisdom of long-term thinking, which judges every tax and program from the view of its effect on the well-being of B.C.'s children and places children at the top of the priority list.

First Call will be submitting a written brief to the committee by the October deadline that will contain additional data and links for more information. I thank you very much for your attention.

N. Letnick: Thank you for your presentation. I believe that everyone around the table in this room and probably in this province agrees that we have to continue working on attacking poverty, helping with child care, public education and all the other goals that you mentioned. They're all excellent goals.

My question is: how do we pay for all of it? You said that there's a myth that tax reductions actually help, so are you suggesting that we raise taxes for high-income earners and for businesses to pay for the initiatives that you're talking about?

C. Evans: There is a variety of ways the government raises revenue, and government makes choices about how it spends it. You have chosen to spend tax money by providing tax cuts. I would not make that choice.

N. Letnick: So you would not reduce taxes any further. Is that….?

C. Evans: I would not choose tax cuts over service cuts.

D. McRae: Child poverty is obviously a hugely important issue, both today and in the past. It's been an issue in British Columbia, I would argue, for two decades, 20 years. In the '90s it wasn't acceptable, and today people are charging that it's not good enough either.

If we deal with an issue that's been around for 20 years — through multiple governments and multiple leaders with multiple ideologies — is it bigger than government in this province? Are there social elements that we need to address that are beyond the scope of government?

C. Evans: I'd remind you that certainly within the last 20 to 30 years there was a very great concern in our country about the low income of seniors and the difficulty that many seniors were having living in poverty. People became very alarmed by that, and a great deal was done to change that situation.

I believe the same thing can happen with children. If we care enough, we can certainly change the situation for children in this province.

J. Les (Chair): Anybody else?

If not, thank you very much.

The next presenters will be with the Building Owners and Managers Association.

P. LaBranche: Good afternoon, Mr. Chair and members of the committee. Thank you for this opportunity to present our comments and recommendations on the 2010 provincial budget.

I'm Paul LaBranche, executive vice-president for BOMA. With me are Paul Sullivan, who is our tax expert with Sullivan, Bridges, Cawley and Associates, and our energy expert, Peter Laforest.

I want to tell you a little bit about BOMA and some of the programs we're doing with regards to greening
[ Page 79 ]
and some recommendations on tax incentives. The Building Owners and Managers Association is the principal voice of the commercial building industry in B.C. BOMA has over 300 corporate real estate and business member firms that own or manage more than $7 billion in commercial real estate throughout the province. This includes over 17,000 buildings and about 300 million square feet of floor space.

[1610]

We're here today to show how BOMA B.C. is working to support the B.C. energy plan and also to make recommendations for the budget that will help spur action in our industry to meet government energy and carbon goals.

Commercial buildings in Canada have a significant impact on energy use and the environment. They account for approximately 14 percent of end-use energy consumption and 13 percent of the country's carbon emissions.

It is BOMA's goal to transform the commercial buildings industry towards energy efficiency and environmental responsibility in a voluntary, pragmatic and affordable approach. We have programs, tools, branding and infrastructure in place to help achieve this goal.

Our industry launched the BOMA BESt environmental certification program about five years ago to recognize buildings that have achieved industry-accepted energy and environmental standards. BOMA BESt, and that's an acronym for building environmental standards, is a comprehensive national program for all existing buildings.

The standard includes such mandatory requirements as energy and water audits for each building. These audits, as an example, provide inventory and planning as well as measurement tracking and provide analysis for energy reduction action.

Every building applicant must go through a third-party verification and is subject to continuous and progressive achievement. Improved building performance results in higher levels of BOMA BESt certification. The strength of the BOMA BESt is anchored in a simple concept: concentrate environmental improvements on the existing place and the people who use it.

There are now over 1,000 buildings across Canada that currently hold a BOMA BESt certification. In B.C. over 200 buildings in every region are BOMA BESt certified.

We've had some very good success with getting, I guess you could call it, the low-hanging fruit. To reach out to all building owners, we need government support. The B.C. government can help with the transformation, while meeting the B.C. energy plan targets and stimulating a green economy through proper incentives.

We're suggesting tax credits as the best way to provide incentives for these reasons. The business class, as you may know, has a heavy tax burden from all levels of governments. For example, in most municipalities in the province the business property tax rate is significantly higher than a residential property tax rate. In the city of Vancouver, for instance, the business class pays almost 50 percent of the total tax levy but only accounts for 24 percent of the services consumed.

The new carbon tax revenue — another example — is revenue-neutral by legislation, but applied unequally. Currently about two-thirds of the $1.8 billion tax will be collected from business use and one-third from residential use. Meanwhile, the tax credit is reversed, with one-third back to businesses and the remainder to individuals.

The school tax is another area. It is the second major component of the property tax rate, and the school tax rate is set by the province. Though residential rates vary by municipality, when averaged, businesses in B.C. pay about $3 to $4 in school tax for every $1 paid by residential properties.

To ensure continued success in achieving energy and greenhouse gas reductions for commercial real estate, BOMA has the following two recommendations. The first recommendation, the general one, is that the provincial government explore opportunities to introduce tax incentives to commercial buildings so that building owners are financially motivated to implement energy and environmental standards.

The second recommendation is a bit more specific. We're asking the provincial government to introduce a tax credit of 50 percent of all school taxes for those commercial buildings that meet the requirements for and achieve BOMA BESt or equivalent building certification.

The school tax is easy to implement and would be consistent with the tax credit program provided to industrial businesses in B.C. last year. If adopted, our recommendation would result in long-term policy certainty for commercial businesses, which is crucial for making investment decisions.

This tax would benefit our province with energy savings, translated into lower greenhouse gas emissions, slower peak power demand growth, enhanced grid reliability and improved environmental protection.

Building managers would benefit by reducing their costs, spurring investment in energy-efficient and carbon-reducing technologies. Tenants, comprised mostly of small businesses, would benefit as the working environment will improve. Increased investment in energy-efficient buildings would contribute to creating a healthier and more productive workplace.

[1615]

Our goals are consistent and support the government's B.C. energy plan. We've worked very closely with them over the past five years. We believe the B.C. government can play a vital role in advancing energy efficiency within our industry.

A school tax credit would send a strong signal that government supports the private sector leadership for greening buildings. The public who work in and visit our buildings are demanding green space. We hope you agree.
[ Page 80 ]

We have provided you with an appendix of some of the number crunching. That is there for yourself, and I would recommend that you visit our website, which is www.boma.bc.ca, for a lot of the detailed information about our programs and other initiatives that we're doing to help the industry transform itself. It includes education, training, recognition programs and, of course, benchmarking.

Thank you, Mr. Chair. I'm happy to answer any questions.

B. Ralston: Thank you for the presentation. I'm somewhat familiar with what you do. Obviously, given the number of buildings that have got BOMA certification, you've been very successful.

I suppose the question does arise, then. Given that so many building owners have sought BOMA certification and benefit from the reduction in operating costs as well as the general welfare of the population in terms of green initiatives, why should a tax credit be introduced — given that you've been so successful without one?

P. LaBranche: That is a good question. We have certified 200 buildings, and we estimate about 17,000 in the province. We've been doing this for five years, and 200 buildings…. It's quite successful because it's voluntary.

We've got the high-hanging fruit. We've got the ones who are really the leading-edge leaders in our industry who want to do this. Where we need your help is getting that other 90 percent who need an incentive to make them make that commitment to help us transform them.

It's not easy to achieve BOMA BESt certification. It comes with some work. It comes with some investment. We believe we can do more. We're having some success in reducing energy. The Power Smart programs have helped. But it's not enough. There's a lot more we can do. If we're really trying to achieve the province's ambitious targets — and we've set our own targets with the province — we need the help.

J. Thornthwaite: Can you explain more specifically as to what you mean by 50 percent of all school taxes? And who is going to be negatively affected by that 50 percent?

P. Sullivan: As you know, the tax rates are built up of each of the taxing authorities, and the school tax rate on commercial properties right now is seven mills. Our proposition is that like the class 5 sector last year, where the province reduced their school tax rate by 50 percent to stimulate economic prosperity, the same principle could be applied to BOMA BESt certified buildings.

To go back to your question, because I believe it is somewhat related, it's that economic stimulus, which we are trying to provoke owners of properties to invest in capital to renew their operating systems, that will produce more sustainable and environmental outputs.

Without a financial incentive, it's difficult to bring a lot of owners to the point of making that transition.

D. Donaldson (Deputy Chair): Thanks for your presentation. It is a very interesting association you have. The question I have would be around your partnerships with B.C. Hydro and the protecting the environment and energy conservation investments.

My question is around…. Have you entered into discussions with B.C. Hydro about retrofitting commercial buildings for energy production purposes, not just conservation? I'm alluding to solar power.

I'd be interested, Paul, if you have any comments around the B.C. Hydro rates that you would have to pay for that kind of power for it to be affordable and, also, any kind of schemes, for lack of a better word, that you've seen around providing incentives for the investment in that capital at the front of the system that is recouped as the energy is fed into the grid.

P. Sullivan: I'm going to defer the question on the current programs to Paul, because he has been more involved with that. But I would like to answer your question with regard to the capital requirements to put in these systems.

[1620]

What happens in real estate is that you have CAM charges, which are your common area charges, which are passed on to the tenants. It's ironic that buildings that are more efficient can lower their CAM charges. What happens as a result of that is the net rents go up, which results in larger values, bigger values, on these buildings which are more green.

Effectively, you're penalized for creating an energy-efficient building vis-à-vis a higher assessment, so the province gets more school tax out of those buildings.

What we're trying to do is create an incentive for those buildings through a lower school tax. That means they can amortize into their operating cost the replacement of these capital projects, these systems, and not result in these assessments being greater but rather that money being invested into operating systems. So that answers your question.

P. LaBranche: With regards to B.C. Hydro, we've just signed off a memorandum of understanding with B.C. Hydro. It includes the Ministry of Energy, Mines and Petroleum Resources to set targets for our industry and to work together collaboratively on a number of programs that range from providing demonstration projects and things to help educate the public on the greening and importance of greening buildings.

We're doing green leases. We're doing database energy tracking. There are a number of things that we've identified in this agreement that we're working together with. Peter Laforest, who has extensive experience implementing
[ Page 81 ]
energy initiatives into buildings, is now helping BOMA, as our energy manager, to implement these MOU deliverables.

Peter, do you have anything to add to that?

P. Laforest: I’ve been on the job for about two weeks, guys, so….

J. Les (Chair): We'll give you more time.

B. Ralston: I just wanted to clarify what your explanation is. Are you saying that as a result of the retrofit, the common-area charges fall, and then rents go up, so the savings isn't passed on?

P. Sullivan: No. The first instance is if an owner that does invest their own capital can bring down common-area charges, their net rents do typically go up, which results in higher values. So that owner is penalized.

We're talking about the owners that either can't afford or don't have the reasons to invest in retrofitting their systems. So rather than have those situations result in higher assessments by creating larger values, you amortize the cost of the retrofit into the CAMs. Rents don't change, values don't change, you get a more environmentally sensitive building, and you're not penalized on valuation.

At the minute, when an owner is investing and may or may not be amortizing that cost, it's been shown that those buildings are being assessed at higher values vis-à-vis the higher rents.

J. Les (Chair): All right. I think we're out of questions. On behalf of all of us, thank you for coming this afternoon.

The next presenter is Bob D'Eith.

B. D’Eith: Hi, everyone. My name is Bob D'Eith. I'm the executive director of Music B.C. We're a non-profit provincial music industry association with 800 paid members and 4,000 registered e-news subscribers. We're dedicated to the development and growth of the B.C. music industry.

Right now Music B.C. has received funds through the B.C. cultural services branch — $100,000 in travel assistance for touring and showcasing for artists, $45,000 in operating funds and a $20,000-per-annum contribution to the multiprovincial partnership called the Western Canadian Music Awards.

I'd just like to start my presentation by giving you a quote from Winston Churchill. During the Second World War Winston Churchill, a Conservative minister, was told by his Finance Minister that they should cut funding to the arts to support the war effort. His response was at that time: "Then what are we fighting for?"

[1625]

On September 1, 2009, the B.C. government proposed cuts to the arts, from $19.5 million in 2008-2009 to $3.6 million in 2009-2010, which is an 82 percent cut in funding. Overall funding for the arts and culture through all sources, including gaming, was cut from $47.8 million in 2008-2009 to $23 million in 2009-2010. By 2011-12, arts funding will be cut to $3.67 million — a total cut of between 85 and 92 percent. These cuts are dramatic, and given that the cultural sector has had no time to adjust, the cuts have created instability and uncertainty in the sector.

Even prior to the cuts, arts funding represented ¹⁄₂₀ of 1 percent of the total $40 billion budget. In a recent letter by Minister Krueger, the rationale for the cuts was that the government had to devote scarce financial resources primarily to health care, education, social services and the most vulnerable British Columbians.

With due respect to the Finance Committee, even these cuts are insignificant compared to the overall budget. Cutting arts and culture will have no visible effect on the overall budget and will have a catastrophic effect on the community and our society.

On the other hand, investing in arts through public funding results in a net gain to the economy. There have been many studies on point that show that for every dollar of public money spent, $7 or more in economic impact is generated. I can give you a specific example of that.

Last year your government kindly gave us $650,000 towards the Juno Awards. The Juno Awards had to raise a million dollars from the province and the city of Vancouver, which it did. We were able, through an economic impact study, to show that over $9 million in economic impact was generated. That's a 9-to-1 return on investment. We won't have that with your cuts.

By the province's own study on the socioeconomic impacts of arts and culture, the return of public investment in forms of tax revenue is that for every dollar given in public funding, $1.36 returns in tax revenue. In other words, while funding to other sectors is a drain on the public coffers, investment in arts and culture has a net benefit to the economy and to the taxpayers of British Columbia.

Another point is that no other government in Canada, including the Conservative federal government, has cut to the arts — not one. They realize that arts stimulate the economy, and that's what we need right now. The B.C. government is standing alone in the entire country right now.

Most non-profits operate on very tight budgets, with staff working at overcapacity and with less than adequate funding. We survive on what we do, and we leverage. We leverage every dollar that we get.

For example, Music B.C. for years has received $100,000 in travel assistance for artists, called the MITAP program. It's a wonderful program that your government has had,
[ Page 82 ]
and we see that being cut. What we are able to do is go to Jim Pattison Broadcast and leverage that money and get another $50,000 per annum for seven years.

Now of course, when you cut our funding, Jim Pattison's money is going to go away too. You've got to realize that when you make these cuts, you're taking away the ability of the non-profits to leverage your money, and that's a big problem.

The other impact is on partnerships. There are many partnerships that exist throughout the province and throughout the country. For example, we're part of the Western Canadian Music Alliance, which is a wonderful alliance of all the western Canadian provinces and the Yukon. All of the provincial governments and the territorial government have been putting in $20,000 a year towards this incredible event that tours around western Canada.

B.C. is the only province that has, well, actually reneged on its promise last year and didn't fund this year for Manitoba. Now we're coming to Kelowna, and the other provincial stakeholders are saying: "Why should B.C. artists and B.C. benefit when we're subsidizing all the other artists and the other companies that are coming here?" They may pull their funding, which will cause a cascading effect and will actually make our organization lose $150,000 in funding.

That's something to consider. Pulling $20,000 from us may result in a $150,000 loss to the organization. That's happening in many different organizations across British Columbia.

Another thing to keep in mind is that corporate sponsorships are way down. This is the absolute worst possible time to cut our funding. I mean, we have a hard time raising money as it is, with the global economic uncertainties the way they are. As I said before, investing in the arts and culture is a stimulus to the economy, not a drain, so we don't quite understand why that's happening right now.

[1630]

Another issue is just the nature of the arts. It's not something like forestry or mining or other heavy research and development businesses. It needs a lot of seed money as we go along.

We look at groups like Nickelback, for example, a group that was just another Vancouver band ten years ago. They just signed a deal for $75 million with Live Nation. Now, if we don't nurture these bands, if we don't nurture these artists and these musicians, there won't be another Nickelback. There won't be another Sarah McLachlan. There won't be another Diana Krall. There won't be another Michael Bublé. That's what you guys are taking away from us.

We have to also look at the size of the cultural economy. Studies in Canada show that it's an $84.6 billion industry and 7.4 percent of the Canadians' real GDP. In fact, Vancouver, Toronto and Montreal have over 64 percent of the cultural workers. In B.C. arts and culture generate $5.2 billion annually and generate 80,000 jobs. That is what's at risk right now.

Music B.C. has done a study with the Department of Canadian Heritage and the department of culture in B.C., and we have shown that, in fact, the music industry alone in B.C. is a $500-million-a-year business. While Music B.C. is strong, if we lose our $45,000-a-year operating money, we may not be able to continue the way we are.

That's a shame, because we are the ones who brought the Junos to Vancouver. We are the ones that just recently were able to secure $5.2 million from Jim Pattison Group through their new station, the PEAK, to develop B.C. artists. We really, really need the provincial support to keep our operations.

In conclusion, Music B.C. and the artists' community urge you strongly to reconsider the cuts to arts and culture. It creates instability and uncertainty in the sector. The cultural sector is vibrant and a necessary part of the economy, and it needs the provincial support to continue to thrive and grow.

Public investment in the arts will stimulate the economy in this tough economic time. No other government in Canada has cut funding to the arts in an economic downtime. I urge the Finance Committee to please reconsider reinstating funding to the arts.

J. Les (Chair): Any questions from the committee?

M. Mungall: Thank you very much for your presentation today. I'm glad that you are able to do this, especially with the people who were outside with their concerns earlier. So it's good to be able to come in.

B. D'Eith: I didn't know. Were there people outside?

M. Mungall: There were at lunchtime.

I don't know if you have the answer to this. I just thought I'd toss it out there in case you do. With the current level of proposed cuts to the arts and culture sector, do you know how many jobs that will affect?

B. D'Eith: It's hard to tell. As I said, right now we have about 80,000 people working in the arts and culture community in B.C. It's really hard to say. If the indicators that we're getting are any indication about all the non-profits kind of disappearing and the number of organizations not being able to function, I would imagine that a great number of those would be lost.

J. Thornthwaite: Just a quick question. Thank you for your presentation.

Can you explain why any cuts that the government has to do with regards to the arts funding would affect private funding? Why would that…?
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B. D'Eith: Well, because often with any of these types of programs, it's a question of critical mass. The Junos is a great example of public-private investment. We had to raise $1 million in public funding, but without that, we couldn't raise the other $4 million in private funding that was required to put the event on. That was the starting point. So often the government has a role in the arts to form as a catalyst, and that's exactly what it does with these types of partnerships.

We wouldn't have got the Junos if it wasn't for the provincial government — bottom line. It would not have happened. I've been told that if we had brought the Junos to the department right now, there is no money for it. So we wouldn't have had it. We would have lost that $9 million or $10 million impact, plus the incredible spotlight it put on Vancouver during that time. That's just one example of many, but it's a good one.

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J. Rustad: I just want to thank you for your presentation as well. Coming from somewhat of an arts background myself, I do understand the importance and the role of arts in the community. That's basically what I wanted to say. Just thank you for your presentation and for bringing your thoughts and also recognizing some of the challenges that the industry will be facing.

B. Routley: Has your organization had any opportunity to study the impact of the HST on your organization and the various groups, as well as the impact of the tripling of MSP premiums over the next few years?

B. D'Eith: We would love to have, but all our funding was frozen this year, so we couldn't do anything.

J. Les (Chair): I see no further questions, therefore I thank you for your presentation this afternoon. Thanks for coming.

Our next presenter is the Canadian Taxpayers Federation, Maureen Bader.

M. Bader: Actually, the HST is going to be good for artists. I can tell you about that one later.

My name is Maureen Bader. I'm the B.C. director of the Canadian Taxpayers Federation. I'd like to thank you very much for taking the time out to listen to the concerns of our supporters. We're a non-profit, non-partisan organization. We advocate for lower taxes, less waste and accountable government. Incidentally, our fundraising is doing much better this year than it has in British Columbia since I started working here, and I just want to thank you very much for that.

Massive spending hikes and falling revenues have driven B.C. back into deficit. This has increased the risk of leaving future generations with a legacy of debt and higher taxes. It also jeopardizes the retirement security of the boomer generation.

The CTF budget 2010 recommendations are key to protecting vital services and will help achieve a better, stronger British Columbia. They include deficit elimination through spending reductions; mandatory debt retirement; a lower, simpler, flatter tax system; spending reform; and greater consumer choice.

The Canadian Taxpayers Federation recommends eliminating the deficit by spending reductions, not tax hikes. Out-of-control spending has eliminated the surplus and sent B.C.'s deficit to new heights. The deficit must be reduced by a commitment to smaller, accountable government and overall lower spending, not personal tax increases of any kind. People here are taxed to death. Taxes can go no higher, but neither should they be off-loaded to future generations through higher debt today.

The Canadian Taxpayers Federation recommends the government adopt a legislated debt-elimination plan, applying 2.5 percent of own-source revenue to the provincial debt annually. The Alberta example shows the benefits of a legislated debt-reduction-and-elimination plan. The Alberta example also shows what happens when governments start to behave like Father Christmas whenever revenues rise.

Alberta put legislation into place to eliminate the debt, and they were successful. Unfortunately, they didn't restrain their spending and are now back into deficit. The lesson is clear. Without the tools of spending restraint such as low tax revenue and a commitment to zero debt, the lure to take on the role of Father Christmas is just beyond the means of mere mortals to resist.

It is true we have seen a reduction in business taxes, which no doubt will make British Columbia a more competitive place for business investment. But what we need to see now is a real commitment to the reduction in taxes that hit individuals and families.

The Canadian Taxpayers Federation recommends the establishment of a public tax review committee to examine personal income taxes. The goal of the tax review committee is to achieve a lower, simpler and flatter personal income tax system. In the interest of tax competitiveness, it is time for the B.C. government to give the same breaks to individuals as it has given to business.

When the HST was announced, the CTF strongly advocated for a break for families by reducing personal income taxes. We called for an increase in the basic personal exemption. On September 1 the B.C. government announced an increase in the basic personal exemption. We want to thank you for that. That was a very good step in increasing the incentive to work, save and invest. But to continue, the government must further increase the basic personal exemption and flatten the personal income tax brackets.

More importantly, to ensure government not reduce one tax to great fanfare while increasing other taxes, the
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Canadian Taxpayers Federation recommends the elimination of the carbon tax, the MSP tax — the medical services premium tax — and the property transfer tax. The government must not give with one hand and take with another.

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Carbon taxes are going up, and so is the medical services premium. The medical services premium, or health tax, is a poll tax — a per-person charge, which is a fixed amount per individual. It does not fund health care. It does not go into funding health care any more than it goes into funding education, roads or anything else. It goes directly into general revenue.

Without a doubt, this tax would have been eliminated long ago if it had been called the "bureaucratic salary enhancement levy." Marketing is important.

When Alberta eliminated its health tax on January 1, 2009, Alberta's Finance Minister said: "These tax changes mean Albertans will have extra money in their pockets at a time when they need it the most. They'll have more money to spend, which in turn will benefit and stimulate the economy."

The property transfer tax has no known economic benefits, taxes mobility and is a job killer that discourages companies from locating in British Columbia. Now new homes are subject to the HST. It is imperative that the government eliminate the property transfer tax. And you know this is a bad tax. A motion at the B.C. Liberal convention in 2006 moved that the government abolish the property transfer tax. The resolution was passed overwhelmingly and is part of the B.C. Liberal Party policy. It's time you follow through.

You ask: "Should the government continue to protect core services such as health and education, and if so, how should the government increase revenues to pay for these services?" That's the wrong question. You should be asking: "Where can we find savings to ensure that these services are sustainable?"

The Canadian Taxpayers Federation recommends the adoption of zero-base budgeting to focus government on essential services and squeeze out waste. We can no longer ride the debt-fuelled gravy train. To protect core services such as health and education now and in the future, the only option the government has is to make real reductions in spending. To do that, the government must reduce spending across the board and then reinforce that with zero-base budgeting.

Zero-base budgeting means the budget starts at zero, and every program is reviewed for costs and benefits. This would go a long way in ensuring that public money is spent efficiently, would ensure greater accountability and provide better value for taxpayers.

The government has made one important step in health care reform. It's time for it to go further. The Canadian Taxpayers Federation recommends the province expand its activity-based funding initiative.

The throne speech in 2008 committed B.C. to activity-based funding in the health care sector. B.C.'s activity-based funding experiment so far has shown good results, but activity-based funding will only take B.C. part way to sustainable health care.

The CTF recommends the repeal of section 45.1 of the Medicare Protection Act that prohibits the purchase and sale of private medical insurance. B.C. currently faces a legal challenge before the courts. I know you won't be able to comment. The question is being asked: "Should B.C.'s citizens, suffering an unacceptable delay in access to care, have the same legal rights as citizens in Quebec?" The 2005 Supreme Court ruling in the Chaoulli case determined that the Quebec government cannot forbid private health insurance from covering medically necessary services. Shouldn't those principles apply to the rest of us?

The government of B.C. must follow the example set by the Supreme Court of Canada and empower individuals to take control over their own health care outcomes. All spending, including health care spending, must be brought under control. Government must live within the means of taxpayers.

The Canadian Taxpayers Federation recommends discontinuing corporate welfare creep by eliminating all green subsidies, starting with the innovative clean energy fund. It is not the responsibility of government to create an environmental industry. Channelling funds into select industries slows the flow of resources to their most valued use. Governments have proven again and again that they cannot pick winners, and some companies spend resources looking to pick the low-hanging fruit offered by government instead of investing in productive activities.

The Canadian Taxpayers Federation applauds the elimination of Crown corporations such as Tourism B.C. The challenge now is to slim further and stay slim once the economy picks up again.

The Canadian Taxpayers Federation recommends greater consumer choice and lower cost to taxpayers by allowing competition in the provision of auto insurance and lottery products. Competition across sectors dominated by Crown corporations will reduce costs, improve management oversight and reduce the likelihood of more costly taxpayer-funded pay hikes, severances and litigation in the future.

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The Taxpayers Federation further recommends the sale of B.C. Liquor Stores. Partial liberalization of liquor sales now means private retailers account for about 60 percent of B.C. liquor sales. The Liquor Distribution Branch generates about $900 million in revenue per year, primarily through markup on wholesale prices. But it costs $300 million per year to run the Liquor Distribution Branch, and those costs rise every year, even though the amount of products sold through the branch is declining. Government would reduce costs
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and increase choice by selling the remaining government retail outlets.

These are but three examples of how both consumers and taxpayers are poorly served by government when it gets involved in the supply of services. And they are but three examples of how lower spending will renew our commitment to future generations.

J. Les (Chair): Thanks, Maureen.

The first question goes to Norm.

N. Letnick: Thank you for your presentation. I'm familiar with the Chaoulli case, applying only to the province of Quebec and not to the rest of the country. I'm intrigued by your suggestion that we allow for — I don't want to put words in your mouth — what looks like a duplicate private system, competing with our public system. Is that where you're headed?

M. Bader: They don't have to compete necessarily. They can be complementary. I mean, there are all kinds of countries all over the world that have a system where you've got universal health care to a certain level, and then you've got private provision of other services.

Look, a universal health care system cannot provide every single service. It just is unaffordable. We have to face the facts. We have to face reality. Taxpayers can only fund so much. With the demographic situation, unless there's some kind of change, the system will just eventually become bankrupt.

N. Letnick: I guess my question is: how would you put that in relation to the Canada Health Act or the laws in the country, which prohibit British Columbia from offering that kind of service?

M. Bader: Well, it would be a matter of changing your own legislation.

N. Letnick: I don't know how much time we have.

J. Les (Chair): We might get back to you if we have time.

M. Mungall: Thank you very much, Maureen. You mentioned the reduction of personal income tax — right? — which this year equates to about $72 per individual, $147 or so for a family.

Now, you can appreciate that as politicians we all go out and talk to a lot of people. The people that I've been talking to say: "You know, that's chump change." They'd rather see that money go back into taxes so that they can see services come out, like education, child care, health care, social housing and so on.

I guess I was wondering if you could comment on that and comment when you say about personal tax reduction…. Obviously a lot of people look at $72 and go: "Oh, big deal." I'm guessing you'd advocate for much more than that to make it significant.

M. Bader: Yeah, absolutely. I mean, the best kind of stimulus for the economy is leaving more money in the hands of people who actually earn it. They can invest it better. When government takes money out of people's pockets to spend on public provision of services, it's a reduction in the total amount that you have available, because of course that all has to flow through the bureaucracy, and a lot gets wasted.

This is the problem. People look to government to provide certain services, and there is no reason why, if the service is not being provided effectively, the default should be: "Throw more money at it." Especially now and especially in the health care sector, the default should be: "Where can we find savings, and how can we become more efficient?" These systems are just not sustainable.

It's true. Even when I go out and talk about what I consider to be a big win for the Taxpayers Federation, people say: "Well, you know, $72 — that's chump change." You're absolutely right.

But the fact is that we're not paying 50 percent of our income today because government at all three levels came to us one day and said: "We're taking 50 percent of your income right now." It came in bits and pieces over time, and it was not very noticeable. Then all of a sudden people turn around, and half their income is going into tax. In the same way, we're only going to get government out of our pockets by small reductions and small wins like this over time.

M. Mungall: Just to follow up. Do you have any data that shows the evidence that if you leave people with more money and take less from taxes, they'll stimulate the economy, they'll spend more, and so on and so forth, and that it would be an economic benefit? If you do, can you just provide that in a written submission, in your written component?

M. Bader: I can send something to you, yeah.

B. Ralston: You mentioned the innovative clean energy fund, and you gave the example, I think, in your written material here of Nexterra, which received a number of grants from different agencies. What I understand is that a number of the B.C. clean energy companies are being increasingly attracted to the United States, where there's…

M. Bader: Bigger subsidies.

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B. Ralston: …I don't know, $85 billion, supported by both sides of Congress, to incent that sector. Aren't you,
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by the policy that you advocate, just giving up and inviting all those companies to move to the United States?

M. Bader: Corporate welfare has got to be one of the most wasteful policies that a government has. If the United States, which has now got a trillion-dollar deficit, has got massive debts, is probably going to have huge inflation and consequently very high increases in interest rates…. If that's what they want to do, that's their business. But there's no reason why we should do the same kind of thing.

J. Thornthwaite: Just a quick question. So what suggestions, if any, would you have for a government that wants to give people incentives to be environmentally conscious or to save money driving — to replace something like the carbon tax?

M. Bader: The issue is…. The federal government's — and I think even the provincial government's — own evidence shows that when you put incentives out to be more green, people who were going to do it anyway take advantage of those programs. There is no net increase in the number of energy-efficient fridges that get sold.

All you're doing is giving a break to people who were going to engage in that kind of behaviour anyway. There's no reason why money from the pockets of families should go to make it cheaper for people, who are going to behave in a certain way anyway, by subsidizing their so-called green or energy-efficient purchases. That's just absolutely wrong.

J. Thornthwaite: But what about, say, gas? What's happening in European countries is the higher the gas is, the less you drive — right? What's your comment on that?

M. Bader: Yeah. To a certain point that's true. I mean, you can hardly think that a soccer mom or a hockey mom who is going to be driving her kid to hockey practice is going to stop driving her kid to hockey practice at five in the morning and somehow or another take the bus. It's just not going to happen.

There is not a one-to-one correspondence. If there's a dollar increase in the price of gasoline, that doesn't mean people are going to reduce by some equivalent amount.

What will tend to happen, up to a certain point, is that people will stop spending on other things so they have more money to spend on gasoline to drive their kids and engage in the kinds of activities that, just a few years ago, were considered to be pretty normal — like going to soccer practices and driving to work.

All you're doing by having these carbon taxes, these MSP taxes and property transfer taxes is taking money out of the pockets of families to then funnel into subsidy programs that are just a big waste of money over time.

Look, you've got these health authorities. You've got the top five executives in the six health authorities taking home about $10 million each year in salaries and bonuses. That's money that's not going to cancer patients.

By cutting back on the amount of revenue that government takes in, they and the bureaucracy are forced then to find savings and stop engaging in activities that are wasteful.

N. Letnick: As I was saying, the Chaoulli example is great in Quebec, but across the country the federal government has legislation which doesn't prohibit the province of B.C. from allowing people to pay for their own health care. However, when we are found to allow that as a government, we are then penalized by the federal government, dollar for dollar, for any amount that we've allowed to go ahead.

My question to you is: how do we as a single province meet your needs, which would be to have — you say complementary, but I would say maybe competitive — private versus public health care systems?

M. Bader: From what I understand, the federal government provides about 25 percent of the health care budget.

N. Letnick: Okay, let's assume that's right.

M. Bader: I mean, it's not the vast majority of the budget.

If that were in fact true — that you could actually stop being coerced by the federal government to behave in a certain way — wouldn't that actually be better if in fact what happens at the end of the day is there's a big cost saving, and we're also able now to not only get the kind of health care that we want when we want it and pay for it ourselves but develop, essentially, a hospitals and private clinics sector that then could take advantage of the health tourism that we see coming out of the U.S.?

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Let's not forget. We talk about the U.S. all the time and the myth of the 45 million uninsured, but there are a lot of people in the U.S. who travel to Mexico for medical services. They'll even travel to India. Why can't we here in British Columbia take advantage of that by having a health care sector that's free and able to provide those kinds of services to people who are looking for them at a lower cost?

J. Les (Chair): Thanks, Maureen. There are a few people today who presented who pulled no punches. You fit in that category too.

M. Bader: I'm glad. Thank you.
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J. Les (Chair): Our final presenter that's registered today is the Insurance Bureau of Canada — Serge Corbeil and Lindsay Olson.

L. Olson: Good afternoon. I understand we are the last group of the day, so I'm sure you're all anxious to call it a day.

First of all, let me start off by congratulating you all on either your election or re-election on May 12. It's good to see you all here today. I'd also like to take the time at the beginning to thank you for giving Insurance Bureau of Canada the opportunity to say a few words and contribute to the work that you do in terms of identifying priorities for the budget year 2010-2011.

Insurance Bureau of Canada. For those of you who are not familiar with us, we are the national trade association representing the national property and casualty insurers. That's a fancy way of saying insurers who insure cars, homes and businesses across Canada. Our members count for approximately 90 percent of the private property and casualty insurance sold in Canada.

I think it's fair to say that since we last met with you a year ago, we can now say that things changed quickly. Things have changed dramatically from a year ago, and that is an understatement. A year ago we were looking at a positive financial outlook and a healthy budget surplus, and we've learned very recently that we can now expect a budget shortfall in the area of $2.8 billion this year.

Evidently, we as British Columbians are faced with some hard choices, and your work as committee members here will be all the more challenging this year. Perhaps now more than ever our call to maintain fiscal prudence needs to be repeated. What's important when looking ahead is to ensure that the government's actions be focused on creating the economic conditions that will continue to make our province attractive to investors and businesses and to retain our workforce.

Before we highlight some of our specific recommendations, I'd like to take a moment to offer you a little bit of information about the state of our industry. As you know, it plays a vital role in maintaining and supporting our economic system.

Our industry employs in excess of 13,000 people in British Columbia. Its impact in helping Canadians is wide and deep. Insurance companies paid out in excess of $25 billion in claims in Canada in the year 2008, and British Columbians received $1.69 billion for things such as replacement of stolen goods, compensation for commercial losses and repairs to homes and damaged vehicles.

Property and casualty insurers are also significant contributors to government revenues. The data for 2007 show that that year the government of British Columbia collected a total of $277 million in tax revenues from private sector home, business and auto insurers. At the same time, those insurers invested close to $9 billion in the province, nearly 20 percent of those investments in provincial bonds.

I'd like to touch briefly on some of the economic challenges that we see. Our industry has not been immune to the weakening economy. In 2008 profits declined significantly. Returns on equity dropped from the previous year's 15 percent to 6 percent. More recent information on the industry's financial performance indicates that this key metric has continued to fall through 2009.

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That's a reflection of negative underwriting results — in other words, higher claims — with the combined ratio climbing from 93.8 percent in 2007 to 101 percent last year. In addition to that, we of course see declining investment returns.

I'd like to move now to policy priorities, as we see them, for British Columbia. There are four key areas that our submission focuses on. Neither of us will be able to get to all in great detail because of the time constraints, but our written submissions, which you will have, will give you more detail.

The first area that I would like to talk about is adaptation to climate change. Our industry has seen and felt firsthand the effects of climate change. We've seen steady and significant increases in property damage losses associated with more frequent and more severe weather events across the country. As I'm sure you are all very aware, British Columbia has not been immune to this worrisome trend.

It seems that every year now we see these severe weather events that impact our communities and the lives of British Columbians. The property and casualty insurance industry is a leader in disaster recovery and a major financial contributor to those affected by natural disasters. As such, we've been at the forefront of the discussion regarding climate change adaptation. This is because we believe that careful attention has to be given to adapting to climate change.

We welcome the government's efforts in developing a governmentwide strategy for climate change adaptation. We'd like to stress that any such strategy must, in our view, address the issue of our aging sewer and surface water systems.

IBC applauds the government's focus on infrastructure investment. Many projects have been announced in the past few months, often in partnership with the federal and municipal governments. However, a renewed focus must be put on invisible infrastructure, so IBC is encouraging the government of British Columbia to provide, in its 2010 budget funding, help for municipalities to upgrade their water and surface water infrastructure.

I'm going to pass the baton over to my colleague Serge Corbeil to pick up on the remaining three priority items.
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S. Corbeil: Thank you, Lindsay, and good afternoon to all.

I will touch now on the province's tax policy. We strongly support the government's commitment that was stated in the budget 2010 consultation paper to make B.C. one of the most competitive jurisdictions in the world. Of course, the taxation system will have a major impact on the ability to achieve this goal, as an attractive tax environment is key to encouraging new investments and bringing new businesses into the province.

The recent government announcement of its plan to harmonize its sales tax with the federal GST will considerably improve B.C.'s standing in terms of tax competitiveness. The P-and-C insurance industry welcomes this decision as good for the economy.

At the same time, we strongly urge the government to ensure that the new tax is implemented in such a way as to be cost-neutral to all industries. This will not happen automatically, because the financial services sector — including the insurance industry, whose activities are not entitled to claim input tax credits — is currently slated to see a significant increase in respect to many of their costs when the HST is implemented.

IBC has commissioned Deloitte Touche and Baron Insurance Services to undertake an industry-specific study to estimate the implications of sales tax harmonization for B.C. P-and-C insurers and their customers. We are still awaiting the final results of this study, and we'll share them with the government when they become available.

We commissioned a similar study for Ontario, who, as you know, recently announced that they were introducing an HST. It concluded there that harmonization will bring additional tax cost on P-and-C insurers, in general operations and claims, estimated at $84 million for 2010, for the half-year impact, and then $173 million in 2011, which represents the first full year of harmonization. In addition to that, there will be a very sizeable one-time impact on claims reserves, most of which will have to be recognized on companies' books this year.

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Although the impact is not expected to be as severe as in Ontario, due to province specifics here in B.C., insurers and consumers of insurance products in B.C. will still feel the impact unless the government acts to prevent these unintended consequences of sales tax harmonization.

So IBC would like to recommend that the provincial government consider measures to mitigate the adverse effects on the costs of delivering insurance products of the harmonization of the provincial sales tax with the federal GST.

One specific way to alleviate the effect of the HST is to eliminate the insurance premium tax. Currently, B.C.'s IPT is the highest in the country at 4.4 percent. It is an unfair and unique levy charged to insurance consumers. This tax is applied to insurance premiums that are already subject to non-refundable GST and PST on the inputs for P-and-C insurance business, as well as the costs of delivering insurance to the marketplace. The result is a double and triple taxation regime wherein consumers pay tax on top of tax.

This is an unfair and inefficient method of taxation. Removing the insurance premium tax from the purchase of insurance policies is consistent with the principles of sales tax harmonization because under a true value-added tax system, products are taxed only once. Maintaining additional taxes on the final sale of insurance products will dilute the economic benefits that harmonization promises to bring to B.C.

Premium taxes are inconsistent with the principles of harmonization. The insurance premium tax, again, as I said earlier, should be eliminated.

We also would like to make a recommendation to create a healthy insurance environment in B.C. As we've mentioned before, the insurance industry does play a pivotal role in the sustaining of a strong economic system. By creating a more efficient and effective regulatory environment, the government will create a more competitive environment to recover from the weakening economy.

One way of doing so is through the proposed changes to the Insurance Act. We are supportive of the government's effort to amend the Insurance Act and are hopeful that Bill 6, recently introduced, will be passed during the current sitting.

We have a few comments regarding the bill. Section 28.4 of the Insurance Amendment Act provides that where a contract insures against the peril of fire or other prescribed peril, an exclusion relating to the cause of the fire or the cause of the other prescribed peril is invalid unless the exclusion is prescribed through regulation.

As the government embarks on a process to amend the Insurance Act regulations, we would like to strongly caution against limiting the ability of insurers to exclude fire following terrorism and earthquake on the basis that it would have profoundly negative implications for claimants and the public in general.

Lastly, I'd like to briefly touch on the automobile insurance market in this province. Obviously, promoting competitiveness and supporting business growth are important preconditions for the economy to prosper. Competition promotes higher productivity, more choice of products and lower costs. Yet the reality is that B.C. consumers have no choice when it gets to buying auto insurance, as ICBC's monopoly on mandatory coverage remains unchanged.

Moreover, the playing field for competition between the government insurer and private insurance companies is not fair. Private sector insurers operating in B.C. are subjected to the same corporate income taxes as any other business in the province. However, the largest
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insurer in B.C., government-owned ICBC, does not pay corporate income taxes.

In light of this, and of the fact that the government is facing a situation where new revenue sources should be identified, and also in the context of the government's review of Crown corporations, we recommend that the government review the tax-free status of the competitive products sold by ICBC.

This concludes our presentation.

J. Les (Chair): Thank you very much.

B. Ralston: Two quick questions, if I might. You mentioned the impact of HST on your industry, and you recommended the elimination of the insurance premium tax. Are you currently in discussion with the government about any other mitigation measures, and if so, what are they?

L. Olson: No, we are not as yet in any dialogue with government about other mitigation measures, partly because the study by Deloitte is still underway, so we have not actually firmly identified the impact of HST for British Columbia. The numbers that we talked about earlier are the Ontario numbers.

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So until such time as we have firm numbers, we're really not in the position to have further dialogue.

B. Ralston: With the indulgence of the Chair, if I might have one further question.

Obviously, the Insurance Act amendments are now finally before the Legislature, so I think the expectation is that they will go through and be discussed this session. Can you explain briefly — this is an issue that I know has been an ongoing concern; you have a number of pages here in your brief — why you want to urge the government to include fire following terrorism and earthquake in the list of permitted exclusions.

L. Olson: I think it's evident that terrorism in its multitude of forms has devastating, wide-ranging effects when they occur. The dollar figures that are attached to those losses are virtually unlimited, and we saw that in New York. The impact for the insurance industry is profound.

The insurance industry requires having a solid understanding of what the maximum losses can be and being able to price accordingly for that. So terrorism is very problematical. The actual peril of terrorism is usually excluded in policies. But the fire following terrorism, which can have the same kind of dollar impact, would not be excluded unless it is proscribed as described earlier.

When you look around the world where terrorism and fire following terrorism coverage is part of the policy, that is provided in jurisdictions where there is government backstop behind the insurer.

In Canada there is no such government backstop, and so what happens is if you are forcing the primary insurer to provide that coverage, and yet there is no government backstop and little if any reinsurance available, then the dollar magnitude of those dollars could easily wipe out those insurance companies. So what we don't want to see is no reinsurance and no government backstop and still having insurers forced to provide that coverage.

B. Ralston: And the same arguments apply to fire following earthquake as well.

S. Corbeil: Not in the same ways. There are arguments to be made for fire following earthquake in terms of maximum loss that has to be identified, but the reinsurance is fairly widely available for earthquake.

The arguments for allowing the exclusion of fire in earthquake that we have made with the government before is one of consumer clarity, in terms of what is covered under what policy outcomes.

N. Letnick: M. Corbeil, on page 14 you talk about ICBC, and the document actually says something that I wasn't aware of. It says in here that "auto policy premiums posted by private insurers in other provinces are generally lower than those provided by ICBC."

Do you have any reports, comparative examples, you can provide the committee? Because I always thought we had the lowest rates in the country, so if you wouldn't mind providing that to the committee, that would be great.

S. Corbeil: We will.

D. Donaldson (Deputy Chair): A brief question. First of all, thank you for coming, and thank you for coming so late in the day as well.

You've mentioned frequent and severe weather events, and we know that those are linked to enhanced climate change through greenhouse gas emissions, so I'm looking at that and thinking about ways we can give incentives to people who have homes that are constructed out of materials that reduce the greenhouse gas emissions. I think of a friend, and many people in my area, who build out of log materials — whole log homes.

They are paying an awfully much higher insurance rate than I am paying in my dimensional lumber home. We know that logs represent a renewable resource, and new trees being planted is a greenhouse gas sink, a carbon sink.

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So what would it take? I am speaking as a representative of the government here or of the province. What would it take for your bureau to be encouraged to give
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insurance breaks to homeowners who have materials and use construction materials that are much more friendly as far as greenhouse gas emissions?

L. Olson: First of all, our organization is a trade association, so we have no impact or influence in terms of pricing. That's an individual decision for every insurance company, and it's based on results in terms of tendency of a certain risk to have a loss.

The example you give is actually an excellent one in terms of log home construction, because log homes have a tendency to take a long time to come to a burning point as opposed to a standard construction home. The problem is once they burn, they tend to be a total loss — so a much, much higher average loss. Even a partial loss, from that example…. They're much more expensive to repair, just because of the way that the logs are put together.

Those are some of the impacts that insurers have to look at. While I'm sure many insurers do take into account incentivizing many types of behaviour on the part of their customers, it's hard to overcome those kinds of significant influences on the average loss and the severity of loss.

J. Les (Chair): Okay. Thank you both very much.

We've come to the end of the registered presenters today. I see one or two people sitting in the audience who have been very patient. Does anybody want to take an opportunity to give us a couple of minutes' worth? You don't have to, but you will have to state your name and be very brief.

D. Reis: Definitely. My name is Debby Reis. I think I've written to every single one of you now about the arts cuts.

Michelle asked earlier about job losses because of the cuts. I can say that I have been affected immediately. My contract was for a year, and now it's been cut in half because of the cuts, because of the fear that my organization won't be able afford to keep me on.

I'm not sure about how that has affected other people, but it has certainly affected me personally, so I just want to say that.

J. Les (Chair): Thank you very much.

Did you wish to say something as well?

W. Stephenson: I did phone in, but I was told I probably wouldn't be able to present, so I thought: "Okay, we'll present in written."

J. Les (Chair): So this is a pleasant surprise.

W. Stephenson: So just a couple of things.

I'm from St. Andrew's-Wesley United Church's Homelessness and Mental Health Action Group.

J. Les (Chair): Could you give us your name as well?

W. Stephenson: Oh, I'm sorry. Wendy Stephenson.

I'm just here to say, I guess, could you go ahead with making finances available to those housing situations that, indeed, have been approved in the past — specifically, Little Mountain?

Could we make sure that we never get into that situation again of having evictions happen before the plans are in place? The time period, therefore, is very short in terms of dislocation for the people and the plans of the people — not knowing when they might get back in, if they're going to get back in at all.

Affordable housing. If we could get back to things like co-op support that we had in the '70s. I think it was B.C. Housing that was located in B.C. Central Credit Union, worked with…. There were services available to help people get co-op housing organized and funded, so if we could have some consideration going back to that kind of housing.

Also, mental health. If we could have people in the system whereby people who have mental health issues that need housing going to any kind of service, that there's someone that can take them by the hand and make sure that…. They're just back out on the street with no direction on where to go for help when housing is, indeed, one of the first things that they need to get their lives back on track.

National housing policy. Also anything that the B.C. government can do to set aside timing for people to make connections with the Canadian government to get us a national housing policy in Canada — one of the few countries that is without one in the G8, I believe.

Do you want to ask some questions, Anne?

J. Les (Chair): I think we're probably all tapped out.

W. Stephenson: I know. And some of these issues, I think — from not coming until 3:30 — will have probably been addressed in other ways.

J. Les (Chair): Sure, sure. But thank you for taking the time. You've been very patient.

All right. We're done for today. We'll reconvene next week — Wednesday, I believe — in Victoria. Have a nice week in the meantime. We're adjourned for now.

The committee adjourned at 5:20 p.m.

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