1998/99 Legislative Session: 3rd Session, 36th Parliament
HANSARD

The following electronic version is for informational purposes only.
The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, JUNE 15, 1999

Volume 16, Number 3

[ Page 13631 ]

The House met at 2:07 p.m.

G. Bowbrick: Joining us in the gallery today are as many as 65 grades 4 and 5 students from Herbert Spencer Elementary School in the Queens Park area, New Westminster. Joining them is their teacher, Mr. O'Brien, and five adults. I'd ask that all members of this House join me in making them welcome.

J. Cashore: In the gallery today is Mary Billick. She's a constituent in Coquitlam-Maillardville who has served the people of the lower mainland for more than 20 years through her volunteerism. She operates the non-profit Lower Mainland Community Housing Registry, which assists tenants to find accommodation and works with landlords to create a base of available housing. She's also an active advocate on a wide variety of social issues, especially in the housing area, and she demonstrates every day the kind of service to community that we all need in a caring society. Would the House please make Mary Billick welcome.

C. Clark: Joining us today we have three of the executive of the Malaspina Young Liberals Club, led by Brian Millward, who started up the club there for the first time in Malaspina's history. I hope the House will make them welcome.

L. Reid: We're joined in the gallery today by a dear friend, Karen Legeer, who resides in White Rock. I would ask the House to please make her welcome.

W. Hartley: Joining us today are some 25 grade 6 students, some adults and a teacher, Mrs. Sarah White, from Fernwood Elementary School in Bothell, Washington. Would members please welcome them.

[1410]

Hon. J. MacPhail: It gives me great pleasure to introduce my Member of Parliament, Vancouver East MP Libby Davies, who is joining us today. She was actually on the front steps of the Legislature advising our government on certain issues. She is a tireless champion of the most vulnerable. She is a committed social democrat and a committed British Columbian working in Ottawa on behalf of all of us. I would ask the House to please make her most welcome.

B. Penner: Seated in the gallery is the mayor of Chilliwack, John Les. He is a gentleman who is no stranger to this place as he makes regular pilgrimages to Victoria.

Introduction of Bills

PRIVATE POST-SECONDARY EDUCATION AMENDMENT ACT, 1999

Hon. A. Petter: I move that Bill 73 be introduced and read for a first time.

Motion approved.

Hon. A. Petter: The amendments to the Private Post-Secondary Education Act will establish an industry-funded tuition assurance fund and provide the framework for its administration. The tuition assurance fund will be administered by the Private Post-Secondary Education Commission, which is responsible for regulating private post-secondary institutions in British Columbia.

On registration with the commission, private post-secondary institutions will be required to make payments into the tuition assurance fund. This fund will replace the current bonding and security requirements which have been problematic for institutions and have provided inadequate protection for students. The tuition assurance fund will improve consumer protection for students by ensuring they receive a 100 percent refund of tuition fees they are owed, should an institution close or cease to provide a program.

In addition to improving consumer protection for students, these amendments will also implement the recommendation of a task force, which included representatives of the private post-secondary education industry, and address industry concerns about current security requirements. Industry, including the British Columbia Career Colleges Association, has urged government to put a tuition assurance fund in place. I'm pleased that we have taken the step, in introducing this legislation today, to do so. A regulatory impact statement has been prepared for the establishment of the tuition assurance fund, consistent with the recommendations made to government by the Business Task Force. I move that Bill 73 be placed on orders of the day for second reading at the next sitting of the House after today.

Bill 73 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

AGRIFOOD CHOICE AND QUALITY ACT

Hon. C. Evans: I move that the bill be introduced and read a first time now.

Motion approved.

Hon. C. Evans: This bill enables the agrifood industry to establish programs to certify that quality and production practice standards relating to any agriculture or food product are being met. It incorporates provisions of three existing statutes -- the Agricultural Produce Grading Act, the Food Choice and Disclosure Act and the Food Products Standards Act -- and it repeals the Food Choice and Disclosure Act.

Currently, mandatory quality and grading standards are set for eggs, poultry, beef, hogs, honey, fruit and vegetables. There are also reporting and licensing requirements which impose a considerable administrative burden on the industry and, unfortunately, add to production costs. This bill enables

[ Page 13632 ]

[1415]

Growing consumer interest in environmental sustainability, environmental best practices, and more natural food products have created niche market opportunities for producers and processors willing to meet those demands. Certifying for these characteristics can give B.C. food products a competitive advantage in the marketplace. This bill will enable certification of these characteristics. I move that the bill be placed on orders of the day for second reading at the next sitting of the House after today.

Bill 77 read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Oral Questions

EFFECT OF GOVERNMENT TAXATION POLICY ON HIGH-TECH INDUSTRY

My question to the minister responsible for technology is: will he explain why his government continues an onerous taxation policy which is clearly stifling the potential growth and future prosperity of this province?

Interjections.

The Speaker: Order, members. Come to order.

Hon. A. Petter: Only the Leader of the Opposition could characterize a report card survey which projects 16 percent employment growth in the coming year within British Columbia as some kind of a failure.

The fact is that this government has been very aggressively pursuing a strategy in conjunction with the high-tech sector. This sector is growing at twice the rate in British Columbia as it is for the Canadian average. It's a sector which feeds off of and grows in relationship to the investment that is made in education in this province and the very high calibre of students we turn out and are increasingly going to turn out because of our commitment to continue to invest in education, contrary to the desires of the Leader of the Opposition.

While I agree that it has criticisms in respect of taxation rates for individuals, the survey was done last fall, prior to some of the most recent reductions in those taxation rates -- in particular, prior to the announced reduction in the small business tax rate to 5.5 percent, bringing that rate below Alberta's, the second-lowest in the country, for a sector that is dominated over 90 percent by small business.

Interjections.

The Speaker: Order, members. Come to order, members.

First supplementary, Leader of the Official Opposition.

Interjections.

The Speaker: Order, members, order.

G. Campbell: I think the problem for the minister is that he simply doesn't listen to the people in the industry. Eighty percent of the industry leaders who are involved in this survey have said that this government is "ineffective in creating a supportive environment for the technology industry" -- ineffective, hon. Speaker. The NDP's high taxation policies are driving some of B.C.'s brightest and best people out of the province -- for good, hon. Speaker. The most critical. . . .

Interjections.

The Speaker: Order, members.

G. Campbell: We know that the most critical component of a technology industry is brainpower; it's people. Industry leaders are telling this minister time and time again, in meeting after meeting -- and this government, if they would just listen -- that right now the NDP's onerous taxation policy is driving their best employees out, and it's prohibiting them from attracting the right kinds of people to the province of British Columbia.

Interjections.

The Speaker: Order, members, order.

G. Campbell: My question to the minister is: why doesn't he stand up for the technology industry, the workers there and the people who want to invest in this province's future, and have a dramatic cut in personal income tax so we can move forward with this industry?

[1420]

The factual data that were released yesterday and confirmed today in this report indicate that since 1991, industry revenues in this sector have grown by 95 percent, employment has increased by 61 percent, and exports last year alone

[ Page 13633 ]

The Speaker: Thank you, minister.

Hon. A. Petter: . . .and continue to help it to grow by supporting it in every way, not in the one single-minded way that the Leader of the Opposition would like to help -- and undermine all the other efforts that we have made in this regard.

The Speaker: Second supplementary, Leader of the Official Opposition.

Interjections.

The Speaker: Order, members.

G. Campbell: I want the minister to listen to this carefully. I'd like the entire government to listen to this: a cut in personal taxes means more revenue for government, not less revenue for government.

Interjections.

The Speaker: Order!

G. Campbell: Dozens and dozens and dozens of industry leaders have told this minister. . . .

Interjections.

The Speaker: Members, come to order. The member has been recognized and has the floor.

G. Campbell: Day in and day out, week in and week out, this minister is told by industry leaders -- by people who are trying to build the industry -- that you have to cut personal income taxes to keep the most important resource for the technology industry: people. One out of every two employees who leaves a B.C. company leaves British Columbia altogether. Today B.C.-based companies are creating 40 percent of their jobs outside of this province because of this NDP government's policies. Why doesn't the minister listen to the people from the industry, listen to the workers in the industry, who are demanding and pleading for a personal income tax cut so they can build the industry in British Columbia?

Interjections.

The Speaker: Order, members.

Hon. A. Petter: I know that the Leader of the Opposition and his colleagues over there engage in a new form of alchemy, in which they believe that increasing tuition fees is good in terms of promoting access to education, that cutting funding for health care will increase access to health care services and that cutting taxes will increase tax revenues. I guess, if one believes in Alice in Wonderland voodoo economics, it all kind of makes sense. The fact of the matter is. . . .

Interjections.

The Speaker: Members, come to order. Members, come to order.

Interjections.

The Speaker: Members, come to order. Members, come to order.

G. Farrell-Collins: We want to listen to the Mad Hatter.

The Speaker: Member for Vancouver-Little Mountain, come to order.

Hon. A. Petter: The fact is that the high-tech sector in this province has been growing at an incredible rate -- much faster than the national average -- with comparable rates of growth to those in Oregon, which is often held up as an exemplary high-tech jurisdiction. We've seen organizations like Ericsson move their offices from Calgary to Burnaby. We've seen Telus decide to put its head office in Vancouver, not Edmonton. In the last year we've seen high-tech companies like ISM-BC open the largest data-processing centre west of Toronto, right here in greater Victoria.

Yes, there's a survey of 200 CEOs who said they would like their taxes to be cut, and the Leader of the Opposition jumps up and down and says: "Oh, my goodness. That's the solution to everything." Well, if that's what the Leader of the Opposition believes is the solution to everything, that's fine. But British Columbians know that it's investing in education, working to improve our quality of life and partnering with the sector that will help it to grow -- including addressing taxation issues.

[1425]

The Speaker: Members, enough. Order, members.

J. Weisbeck: The fact of the matter is that we have the slowest growth rate in four years, and we have only half the growth rate of Oregon and Washington. The people on the front lines of creating jobs in the high-tech sector say that the NDP government is putting all of their effort and ingenuity at risk. Again and again they say that our taxes are too high and that they "fear for their ability to compete for key talent." Will the minister tell us how he thinks we can win this race to create a thriving high-tech sector in B.C., when his government is preventing high-tech companies from attracting and keeping skilled workers here in B.C.?

Interjections.

The Speaker: Order.

Hon. A. Petter: Hon. Speaker, I don't know what the member is talking about. In 1997. . . .

Interjections.

Hon. A. Petter: Okay, I'll correct that. He doesn't know what he's talking about.

[ Page 13634 ]

We're making changes in employment standards. We're reducing small business taxes. We're lowering the high marginal and general income tax rate, as well, in a balanced approach -- not an extreme approach that is fixated on one issue and one issue alone, but an approach that will guarantee a high quality of life for all British Columbians, not a select few.

Interjections.

The Speaker: Order, order!

J. Weisbeck: We're losing the race to attain that critical mass. But here's what one B.C. company had to say about the NDP's commitment to high-tech: "Resign and call an election." The quote continues. . . .

Interjections.

The Speaker: Order, members. Order, members. Member for Okanagan East, please take your seat for a moment.

I appreciate the interest in this topic. I ask all members to come to order. One person is recognized and one person only -- no other voices, please. Member for Okanagan East, continue.

J. Weisbeck: Here's what one B.C. company has to say about the NDP's. . .

Interjections.

The Speaker: Members. . . .

J. Weisbeck: . . .commitment to high-tech: "Resign and call an election." The quote continues: "The current government isn't able to conceive. . .

Interjections.

The Speaker: Members. . . .

J. Weisbeck: . . .of the kinds of changes necessary to turn this province around. Their mind-set doesn't allow it." Will the minister tell us how he thinks he can convince any high-tech innovators and entrepreneurs to stay in B.C. when they believe you don't have the mind-set to turn this province around?

Interjections.

The Speaker: Order!

Hon. A. Petter: What is particularly sad is that this opposition does not seem to understand that the way you build a high-tech sector is through investments in education, through investments in quality of life and, yes, by dealing with cost issues as well. B.C. has a much lower business cost than most of our American competitors.

Interjections.

The Speaker: Members. . . .

Hon. A. Petter: B.C. has a much better educational infrastructure. As a result of an announcement today. . .

Interjections.

The Speaker: Order, order!

Hon. A. Petter: . . .which the opposition should be celebrating, we introduced, in conjunction with the federal government, an expansion of our student grant policy, which means that more B.C. students will get to attend post-secondary institutions. Their average debt level will be reduced by over $7,000, to the lowest level in the country. That's how you build. . .

The Speaker: Minister, finish up, please.

Hon. A. Petter: . . .a high-tech industry: by supporting education, by supporting students.

If you want quotes from companies, I'll leave you with a quote from Trillium, an American high-tech company that announced today that 50 jobs are to be introduced here into B.C. and said that B.C. was second to none in terms of other jurisdictions. They believe that they could attract employees here better than they could anywhere else around the world.

[1430]

The Speaker: Order, members, order.

C. Clark: The Technology Industries Association surveyed their members and asked them for the three top pieces of advice they'd give to the government if they could. The responses, surprisingly, were remarkably similar. They said things like this: "The current government should get lost. The current government should go away. The current government should resign, call an election and let a real government take over." Can the minister tell us, if that is the response he is getting from the CEOs who've decided to stick around, tough it out and stay in British Columbia, what does that say about the hundreds of high-tech companies who've left B.C. and abandoned this province altogether?

Hon. A. Petter: In fact, what the CEOs of many companies are saying to me is that they're here not only to stay but to grow in British Columbia, despite the negativity of the opposition and the fearmongering that goes on. That's why Trillium has announced 50 jobs today. That's why Ericsson has moved its head office here. That's why EDS Systemshouse has opened its regional office here. That's why Agresso, a European company, has made B.C. its North American headquarters. That's why IBM has located a software development centre here. That's why MacDonald Dettwiler has expanded its operation and taken over the B.C. OnLine operation.

[ Page 13635 ]

Interjections.

The Speaker: Members, come to order.

Petitions

Orders of the Day

PENSION BENEFITS STANDARDS AMENDMENT ACT, 1999
(continued)

On section 48 as amended (continued).

[1435]

Leave granted.

J. Wilson: Today in the House we have 52 grade 7 students from Bouchie Lake Elementary accompanied by their teacher, Mr. Winthrope, and several parents. I would ask that the House make them welcome.

C. Hansen: Just before we adjourned last night at 9 o'clock, I gave the minister an example of an individual who came to see me. In response to that, he talked about how there were two sides to the story. There were the anecdotal sides, and then there was the integrity of the plan. Again, I tried to pick up on that theme just before we broke for lunch. I'm now going to take my third try at completing that approach.

I gave the example last night of this individual who was in his mid-to-late sixties. He took early retirement based on his understanding of what he would need to continue to put food on his table. Part of that was this pension that he would be entitled to of less than $450 a month, knowing at the time -- and he factored this in -- that he would be able to find other work to supplement that very small pension.

Last night, in response to that, the minister talked about how there are two sides to this story. On one side, there are the individual anecdotes. The minister was rather dismissive, I felt, of the story that I told. I can't remember his exact words, but certainly he talked about this as if it were some kind of an isolated incident, and I contend that it's not an isolated incident. But the minister then went on to talk about how there is another side to this story, and that's the integrity of the plans: that the reason for this rather draconian measure that's contained in section 48 is to preserve the integrity of the plans.

Well, this morning, just before we broke for lunch, I was asking the minister about the options and choices that the plan trustees have to make when they're trying to protect the integrity of a plan. One of the obligations of a trustee is to look at the benefits that are paid out and at how the fund remains viable, based on the funds that are paid out. For example, if a plan were to move to a scheme of early retirement, there's an obligation on the part of the trustees to ensure that the plan is still viable, given the early retirement benefits that are going to be paid out. The minister assured me that when those kinds of changes are made to plans, they have to come to the government and get the government's concurrence that those changes to a plan are appropriate.

The question that I'd like to put to the minister is: given that trustees have the choice of balancing the benefits from a plan in order to ensure the ongoing viability of a plan versus the very radical move -- which is the one that's contained in section 48 -- of going in and cutting off and suspending the pension benefits of those who are receiving early retirement benefits as a way to protect the viability of the plan, why did this government make that choice? Why did this government choose to go in and take the route of suspending pension benefits from those who opted for early retirement, rather than going back to the trustees of the plan and asking them to structure their plan in a way that ensures the continued viability of the plan?

[1440]

Mr. Chairman, the member is making substantially the same speech -- if I can put it that way -- that we heard last night. The subject at that time was an amendment that was on the floor. We dealt with the amendment. We have indeed passed second reading debate of this bill. We, by the rules of this chamber, ought to be beyond the speech-making. The larger questions about why we are doing this. . . . We've already voted on the principle of the bill. The committee stage of the debate, it would seem to me, suggests that we ought to be focusing much more precisely on specific questions. As I say, I'm just asking for a little guidance, Mr. Chairman.

I have already spelled out why this particular approach was taken, why it was deemed to be necessary. The entire argument in terms of protecting the integrity of the plan, as I have said on numerous occasions already, isn't so much for the immediate present or for the short term; rather, it's for the longer-term future. We were given advice by one of the fore-

[ Page 13636 ]

I've explained that. I can't think of explaining it any more. It seems to me that the member is really asking me for just the same explanation over again, and it seems to me that we've already covered that ground. I apologize if I've missed something else in the question, but it seems to me that we have indeed covered this already. I will listen again and see if there is a new question or a different question. Otherwise, as I say, I think I've answered it.

The Chair: The Chair just reminds members that under standing order 61, we are dealing with the section that is before us, and all input should be relevant to that section.

C. Hansen: I will certainly heed that advice, and I apologize to the minister, because perhaps I didn't phrase my question clearly enough. This is ground that has not been covered. What we've talked about up until now is the rationale behind this particular move of allowing this suspension to be put in place. My question to the minister -- and maybe I'll word it more specifically -- is: was there consideration given. . . ? Given that the viability of the plan was being questioned, did they consider amending the benefits of the plan rather than giving the power to the trustees to suspend benefits? I guess that's probably a more specific way of wording my question.

Hon. D. Lovick: The pronoun reference "they" -- I assume the member means by that the trustees of the plan. Obviously they're the ones who make that adjudication and judgment. The answer to the question is yes indeed. They considered: what do we need to do to protect the integrity of the plan and to serve the members to the best of our abilities? The conclusion they came up with -- based largely on the advice of their actuarial expert, Mr. Allan Brown -- was that this is the measure we need to take. That's the argument they present. As I say, I and my colleagues are persuaded by that argument. We think it's a valid one.

[1445]

Hon. D. Lovick: I don't think an honest appraisal and evaluation of this matter could lead one to the conclusion that other plans might be affected as well. We're talking about a very unique collection of plans -- multi-employer pension plans -- particularly dealing with the construction industry. That's what the case presented by Mr. Brown was ultimately about. He argued the case very persuasively. I've quoted only a small piece of it thus far -- what I've referred to as the quintessential argument. I'm prepared to quote more if that's helpful to the member. But the argument. . . .

If the member is asking in his question about multi-employer plans in the construction industry today -- who knows what's on the horizon tomorrow? -- I can give him assurances that the nature of these plans is indeed unique. These plans are unique; that industry is unique. I can't conceptualize or conceive of another set of plans or another industry that is in any way analogous and that would present similar problems and perceived difficulties in the future. That's why, again, I stressed the fact that this is unique; it's very specific to these particular kinds of plans. Indeed, that is the essential argument presented by Mr. Brown and the argument that obviously persuaded the pension council.

C. Hansen: I'll wrap up. I don't have a further question, but I did want to put a comment on the floor. Given the questions that we've asked and the answers that we've had about whether or not this has to do with the viability of plans of that nature and why this particular route was chosen, I must say that I am not persuaded by the minister's arguments. The only thing I see that is unique about the situation that the building trades find themselves in today is a battle that is going on between a unionized sector that has diminishing work available to it and a non-unionized sector that has diminishing work available to it. We've wound up with a major confrontation between those two sectors, the unionized and non-unionized sectors.

The only conclusion that I can come to, given the minister's answers to our various questions so far, is that this is all about punishing workers who go from the union sector into the non-union sector to work and really has very little to do with the viability of the plans in the future. I believe there are other ways that government could have addressed the issues of the viability of the plans, without going to this very draconian measure of trying to take away -- suspending -- the pensions of individuals in this province, which I think is something that is truly unfortunate. With that, I will turn it over to my colleague.

B. Penner: This is my first opportunity to participate in debate on section 48 of the Pension Benefits Standards Amendment Act, 1999. I share some of the concerns expressed by my colleague the member for Vancouver-Quilchena. However, I want to begin by addressing an issue that was raised by another colleague of mine, the member for Richmond-Steveston, shortly before lunch. He made the point very effectively that section 48 gives the government broader powers than what the minister says the government intends to use. I think that even the minister will have to agree with my colleague's legal assessment and legal interpretation of the section that is before us, section 48.

[1450]

[ Page 13637 ]

I also recall that there were other people closely associated with this government. . . . Maureen Maloney, who is now a deputy minister in this government, was the dean of that law school. As well, the member for Saanich South was a professor in constitutional law. Although I did not have him as a professor in constitutional law, I would be very surprised if he at no time made a reference to and criticism of governments seeking to put more and more authority in regulations and regulation-making power, as opposed to the statute books of British Columbia.

Here's the argument: it is only through debate in this Legislature that the public has a chance to participate in the formation of the laws that govern us. If it's left to cabinet -- that is, the Lieutenant-Governor-in-Council -- to make regulations, that takes place with far less scrutiny and public debate than what takes place here in the Legislature. I think we could make the case that there's far too little public scrutiny of what actually happens here in the Legislature, notwithstanding the press gallery and Hansard television, as well as the written Hansard.

I say all of this by way of a preamble to my next comment, which is that I recall meeting with the Minister of Labour back in 1987 at Simon Fraser University in the student union building. I recall that he was good enough to meet with a number of students; I think he had come to a political science class and met with some students afterwards at the student union building. I was there. It seems to me that the NDP, when they were in opposition, had one view of governments putting a lot of authority into regulation-making power and has since changed that view after winning the election of 1991. I wonder if the minister can try to rationalize the difference in approach between what we're hearing today and what I recall hearing from that member back in 1987 at Simon Fraser University. I hope it's something more than simply: "That was then, when we were in opposition, and this is now, when we're in government, and we don't like it." I invite the minister to enlighten us.

The Chair: Minister, insofar as we're strictly relevant to this section.

Hon. D. Lovick: Thank you for that cautionary note, Mr. Chairman. As an ex-academic, of course, I am more than eager to offer my wisdom in terms of a theoretical construct about legislative versus regulatory authority. It's been a debate that has gone on in constitutional, legal and political science curricula for a number of years.

But as the Chair correctly points out, my job here is to deal with the specific. I did talk about the question that the member posed; I did answer the question at some length -- the similar question posed by his colleague the member for Richmond-Steveston. Let me summarize very briefly what I have said and just point out that I'm not going to talk about what I am alleged to have said or not said in '87. I won't bite on that particular forbidden fruit. Rather, I will just say that I read into the record the existing regulations. If he takes a look at that, the member will discover that those powers already reside with the Lieutenant-Governor-in-Council. There is nothing new here; there is nothing different. There isn't a shift in course or a shift in emphasis. Rather, that's a basic power that resides with the L-G-in-C.

Second, I would make the point that we have done something a little unusual here in response to the legitimate questions of the opposition. What we have done is say that the principles that will govern the development of regulations will be shared. People will have an opportunity to look at those, and they will have an opportunity to pose questions. Moreover, we will do the same thing with the draft regulations so that people can indeed see what those are about and have an opportunity to comment.

So it isn't the case that something is going to happen in secret and all these unheard-of powers are going to be arrogated into the hands of a group of conspirators sitting around the table or something and that nobody will know about them -- or anything like that. Far from it. Rather, it is the intention -- and indeed to our interest, I think, in legislation such as this, which is ostensibly controversial -- to make it as open as we possibly can. That is certainly our intention. Mr. Chairman, I think I have now answered that question, and I ask your forgiveness if I have indeed pushed the envelope of going beyond what committee allows me.

[1455]

If the minister is truly sincere in his commitment to making sure that the public is consulted prior to any new regulations going forward, the minister could contemplate an amendment to this section requiring public consultation before any regulations are enacted by the Lieutenant-Governor-in-Council and effectively imposed on the people of British Columbia.

I know that regulations eventually become public knowledge, because they have to be published in the Gazette, but it's not until they become law that British Columbians have a right to know about them. That's what's wrong and that's what's dangerous about allowing so many powers to be contained within the L-G-in-C formula -- the Lieutenant-Governor-in-Council. That is why academics in university, as well as the NDP when they were in opposition, criticized the former government for trying to shift as much power as possible away from the Legislature to the Lieutenant-Governor-in-Council, which is the cabinet of the day.

If the minister really wanted to give us some assurance, he could do that by writing an explicit amendment to this section and requiring the government to consult with the public before imposing new regulations or changing the regulations pertaining to people's pensions. I understand why

[ Page 13638 ]

Before I conclude my participation on section 48, I'd like to speak on behalf of someone in Chilliwack and just read into the record a letter I received in my office yesterday from a constituent. It's actually a letter addressed to both the Premier and the Ministry of Labour, but it was copied to me. I'll do everyone here the benefit of reading it into the record:

"Dear Sirs:

"I'm writing this letter to you to voice my objection to Bill 58. I object to this proposed law as both a citizen of British Columbia and a unionized worker in this province. I cannot believe that a political party that prides itself on being the representatives of the working people would dare to interfere with a person's right to collect a pension that he or she has rightfully earned.

"I understand that there are some MLAs that currently collect pensions while they are collecting salaries as MLAs. Would your government find it fair to prevent those MLAs from collecting their pensions? I doubt it!

"My understanding is that this legislation is about some retired, unionized construction workers that have decided for one reason or another to go back to work for non-unionized contractors that are competing for the same work as unionized workers. The mere fact that the unionized companies admit that they cannot compete with these non-unionized companies should be your first clue that there lies the problem.

"I see this is forcing out the cheaper and equally qualified worker from the ability of competing for work. No wonder businesses are shy to invest in this province. Your policies force them to accept higher-priced workers instead of allowing free enterprise and competition to rule their choice. I and many like me see this legislation as pure pandering to those unions that have continuously supported your backward policies. Have you forgotten that the union represents all of its members and not just the ones in power that have been greasing your palms?

"As a member of a union, I resent what this legislation proposes to do, and I personally hold each of you responsible for the damage that you have caused to this province.

"By way of copying this correspondence to the Leader of the Official Opposition and to my MLA, the member for Chilliwack, I am requesting them to do everything in their power to shut down the debate on Bill 58, and I further request them to go on the record publicly and commit to cancelling the law retroactive to its date of impending passage once they win the next provincial election.

"Give back some peace of mind for our futures to the regular working people!"

[1500]

"If you proceed with this legislation, it will be but another shining example of the hypocrisy that plagues your government. Have you not been paying attention to what's been happening lately? The regular people of this province are sick to death of your policies and how invasive you have become in our lives. Go ahead, pass Bill 58 and give me another reason to not vote for your party."

It's interesting to note that the person whose letter I just read is a member of the unionized construction industry, and that person is very concerned.

Hon. J. MacPhail: Read the name.

B. Penner: I know that the Minister of Labour wants me to read the name, probably so somebody in the union movement can go and punish this person. I'm not going to afford them that opportunity.

I've also heard from other people in the electrical industry who are concerned that when it comes to their retirement years and their plans to set up perhaps a private contracting business in the electrical field, they too will be caught by this legislation.

That's why it's important to narrow the effect of this section as much as possible or, better yet, scrap it all together. Clearly, for the record, that is what I support doing. If the B.C. Liberals form the next government, we will immediately scrap the retroactive and the punitive provisions of Bill 58.

The Chair: Oh, the minister wants to respond?

Hon. D. Lovick: Actually, I wasn't going to answer. Let's deal with the section.

The Chair: The member for Oak Bay-Gordon Head -- on this section, please.

I. Chong: I do have some questions on section 48. As the minister will recall, I was concerned about section 48, and I stated so in my comments in second reading debate. I do want to clarify, and I apologize to the minister, that when I made reference to the pension plans that would be affected, I erroneously stated why this would not cover -- and I had at that time said -- private sector plans. I meant to say public sector funds. I know from later Hansards that I did in fact clarify that. But I didn't realize it at the time, so I understand why the minister was confused at the time.

During second reading debate I did make about comments about the issue of someone who restarts work or service in a trade or industry covered by a plan with an employer who's not a participant in the plan, which is what this section 48(c)(g)(ii) refers to. What I would like clarification on at this time is the definition, if possible, of an employer. There have been many comments made about the ability to go to work, to be self-employed. I think, for the benefit of all of us, that if we can get an understanding or clarification as to what is referred to here as an employer, that may help us understand what the intent is.

Hon. D. Lovick: I would just draw the member's attention to two points. First, in (g)(ii) the member will note that it refers to "in a trade." We originally said "trade or industry"; we accepted the amendment, after some discussion with her colleagues, because we think that by saying "trade and industry" it solves some of the problem that she perhaps refers to. The key point is: ". . .with an employer who is not. . . ." That does not refer to an individual who starts his or her own company; that's not the issue we're talking about. So in other words, somebody who decides, after having been a tradesperson, to carry on doing similar work by starting his or her own company is not prohibited by this in any way.

I. Chong: I suppose the difficulty is in one's interpretation of what self-employment is and what an employer is. The difficulty perhaps rests more with those who would be looking at this as a legal definition. I think the minister is aware that if they check their statutes -- whether they're federal or

[ Page 13639 ]

[1505]

I've even seen people register their business names with land titles as a proprietorship and try to treat it as a separate entity for the purpose of letting the business community know that it's not just John Doe, self-employed. It could be John Doe operating as ABC Electric, or XYZ Carpentry, or whatever. The point is that that self-employed proprietorship, that entity, would be considered an employer because they could employ other people; they could be a non-union shop. That is part of the difficulty.

I would like a clear, definitive, specific clarification, if at all possible, before I proceed to my additional questions.

Hon. D. Lovick: We have no intention whatsoever -- and I have said so on a number of occasions -- of capturing the kinds of persons and circumstances the member refers to.

However, I know she wants something specific and by the letter of the law, as it were. I'd refer her to two things. I would refer her to the whole of subsection (g)(ii), where it's made very clear that we're talking about an individual who goes to work for an employer who is not a participant. The relationship is spelled out very clearly. Nobody could stretch that to say: "You went to work for yourself, and because you happen to be a single proprietorship, you're still an employer and therefore that would be allowed." It's very clear there is a very specific other relationship there. That's point one.

Point two is within the definitions. Employer is a defined term, and indeed it is elaborately defined. I think this is probably fairly standard in other legislation as well. " 'Employer' means a person or organization, whether incorporated or not, from whom an employee receives or received remuneration, and includes any participating employers of a multi-employer plan who have employed that employee." I think that captures it about as clearly as one could possibly do. I don't think there is any other better assurance one could give to deal with the member's question than what I've just read into the record.

I. Chong: Unfortunately, I would have to disagree with the minister. It is not as clear and not as specific, as I listened to him reading that out. Understandably, if the minister wants to agree that any person who accepts an early retirement pension and restarts work through their own partnership or proprietorship would be excluded from having their pension plan suspended, then that I would accept, and that I can understand. That is fine.

[1510]

What I would like to do, hon. Chair, is seek some assurance, if at all possible, from the minister. If those who would return to work -- now that we've established that proprietorships or partnerships are excluded from this suspension -- start up their own corporations, for financial or legal ramifications, and they do so for their own personal circumstances -- protection of assets or whatever it may be -- they too would be excluded. And in so setting up their incorporated businesses, there would be no restriction to the extent of their share ownership.

The reason why I think that is that it could be possible that the individual might like to work for a cousin or another relative who has a non-union firm and who is not a participant in the plan. To go to work for that firm, he or she would be offside, so the only way to ensure that that does not happen is to then seek legal counsel, to become a minority shareholder -- in whatever fashion -- to ensure that they would not be captured in that particular scenario. I hope the minister can understand, from the example that I'm giving, that it is to ensure that we are not extending this and discriminating between those who can work for those non-union firms who are. . .or work as a self-employed individuals in a non-incorporated fashion versus an incorporated fashion. I hope I've made myself clear for the minister, so that he can provide some clarification.

Hon. D. Lovick: I think I can give this assurance: namely, the intention here -- and the regulations will certainly mirror that -- is to exclude the bona fide independent owner who may go into that kind of business. That is the intention. If the member is saying to me, however, that the individual proposes to start a company and then ten years from now the company may have 20 former building trades early retirees working for him or her and will be forever exempted from the provision of this, then no, I couldn't give that assurance. As long as it is somebody starting or carrying out his or her own small business -- and I imagine, given that they've taken early retirement, we're not talking about becoming a brand-new Farmer Construction or something; but rather, something very small-scale -- the individual, it seems to me, has nothing whatsoever to fear in the requirement. We're not, as I say, attempting to in any way deal with individuals who become self-employed and are carrying out their trade and using their old skills from that trade.

I. Chong: The minister makes an interesting comment about the individual having no reason to fear this legislation, which would imply that there is or could be fear from this legislation, in the sense that he's indicated that there has to be a bona fide situation. I suppose that those who would challenge the bona fide situation that existed would be. . . . If in fact the individual is, I guess, caught in this situation, they then have to appear before an appeal board to determine whether this is a bona fide situation.

[1515]

[ Page 13640 ]

As I stated in second reading debate, I feel that whatever the reasons are that a person chooses to take early retirement -- and certainly there are personal circumstances that dictate that -- the factors they have are their own. We should not be challenging that. Those who decide to exercise their right to an early retirement pension and then need to supplement their income and can continue to supplement it by the choice of self-employment or other opportunities -- they have the initiative to do so -- will be treated as distinct and separate from those who don't have that same drive, that same initiative, and who do go out and work for a non-union shop that is not a participant in the plan. I do feel that there is that difficulty.

That is why I was disappointed that our amendment to grandfather those who have already sought early retirement was not accepted by this government. Clearly this is meant to be future legislation and to let everyone else be aware of what's happening from this point onwards -- fine. But those who are now in those situations are going to have to re-evaluate and leave their employment in these non-union shops -- if there are some, as was in the case of the individual. . . .

Hon. D. Lovick: They can stay there.

I. Chong: The minister says that they can stay if they want. But then they'll have their early retirement pension plans suspended.

So what the minister is suggesting is that the individual who. . . . Perhaps this was the individual who took this particular legislation to task by going to the Supreme Court -- through the Sheet Metal Workers Union, Local 280, as I understand. Perhaps the particular individual for whom the fight was fought and won would now, if he is working in a non-union shop, have to terminate his employment and then somehow come back into the system as a self-employed contractor, which sets up another set of scenarios and regulations to take place.

I am trying to make the point to the minister. . . . He is trying to provide an answer, I would hope, as to why this section. . . . When dealing with those who have the ability to be self-employed versus those who do not, why would we be so discriminatory in that way? Why would we not allow for some flexibility, and why would we suggest that people have to find an approach that would allow them to remain offside and excluded, shall we say? I would appreciate it if the minister could provide a little further clarification.

[1520]

The only other point I would make for the member's benefit is that, ironically enough, the individual whose case went to court is protected by this plan. This individual was not technically an early retirement person. Indeed, he went back to work past the age of normal retirement and therefore would have been protected. His pension couldn't have been touched, because he was in fact protected. Today that individual is 62 or 63 and therefore is, of course, automatically excluded as well.

We're talking about early retirement people; we're talking about individuals whose pensions are subsidized by those who are still participating. In other words, they're getting more out of the plan than they put in because the people still paying into the plan wanted to encourage those people who are maybe getting a little old for the trade -- in some cases, it's heavy and demanding work -- to take early retirement and also, and probably as important, to encourage new people to enter the trade and the industry. The problem with the industry is that alas, we have fewer and fewer young people learning these skilled trades, which, as we know, have so much to do with building this province.

I hope I've answered the member's questions, and I appreciate the tone in which they were offered.

I. Chong: I would still have to state to the minister. . . . I know from our debates to this point that certainly we're going to agree to disagree in terms of the interpretation of those who would be protected and those who would not.

I would like to read into the record a very brief letter that I received. This is from a constituent -- not mine but, I think, from one of the other MLAs here in Victoria -- regarding Bill 58. He wrote this on June 10. I know the minister has this letter, because it was faxed or sent to him originally. It states:

"Dear Sir:

"I opted to receive a reduced union pension at age 57. As a union member for almost 40 years, my employment terminated at about the time my employer of 25 years went into receivership. I started my own business three years ago as an independent contractor. There are no union firms engaged in commercial mechanical insulation on southern Vancouver Island. Implementation of Bill 58 will leave me but three choices: (1) certify with my union -- I have not got a prayer to compete and am virtually prohibited to work the tools; (2) shut down my company and live on an income of $1,200 per month until age 65; (3) sell vacuum cleaners.

"I cannot afford to forfeit my union pension, as it is essential for our golden years. You are effectively forcing my retirement at age 60, preventing me to work my trade and leaving me in a precarious financial situation. I had naïvely thought that pensions were as sacred as motherhood. Your pension, sir, is cast in stone. What a democratic and brilliant piece of legislation."

[ Page 13641 ]

That leaves me, on this section, in terms of the definition of an employer. . . . I do have a further question on section 48.

I just want to acknowledge for the record that I did see the minister nodding, which I would assume means he is prepared to have a staff member look into that letter. It was a very recent letter. I would appreciate that, on behalf of Mr. Luetzen. That would be good. The minister would like to respond, so I will yield.

[1525]

The member wanted this on the record, so let me put it on the record as well. For the record, please note that the ability to suspend benefits will not apply to those who work in a supervisory capacity or go to work for themselves or start their own business or work in employment not specifically covered by the plan. That's as clear as I can be, and I hope that's helpful to the member opposite, as well as to the individual whose letter she quotes.

I. Chong: I appreciate the minister making those comments, because as I read this letter. . . . I don't believe that Mr. Luetzen was inappropriately alarmed. The difficulty being, of course, that not yet having had the opportunity to canvass fully what the definition of employer is would have made it difficult for this individual to know. As I read this section, certainly that jumped out at me. What are we referring to as an employer? As I say, there are those three forms of legal entities that are established. As a person who has come from a financial background, we often advise people as to what their best forms are of determining how to structure their self-employment.

I don't think -- and I want to say this for the record -- that Mr. Luetzen was trying to not bring this to the attention of the minister. That's why he wrote, and that's why he sent copies to members on this side of the House. That's why I think that it is important that this clarification was made at this time in canvassing the word "employer." The minister, having felt satisfied that from what I read to him -- and it would appear that Mr. Luetzen would be excluded from section 48 -- can comfortably write a personal letter back to Mr. Luetzen expressing that to him.

So on that section, I thank the minister for his help and indulgence. I would also like to look at section 48(c), subsection (g)(iii), where it mentions "the reinstatement of benefits of a former member referred to in subparagraph (ii)." Can the minister advise on this reinstatement? I would presume that the reinstatement is as a result, perhaps, of an appeal process that the minister has indicated would take place. How soon would the reinstatement occur? Would it be immediately and retroactive to the date that the appeal began, or would it be after the conclusion of a determination to allow a reinstatement? Can the minister provide some clarification in that area?

Hon. D. Lovick: We anticipate that most of those reinstatements will be as a result of the individual no longer doing the same work for an employer who isn't a contributor to the plan: in other words, going back to work, ceasing to work and then having their pension benefits restored, rather than as a result of an appeal. The member said "appeal." We think it is, rather, a return to work, essentially -- or ceasing to work, as it happens. I'm sorry; it gets confusing. Ceasing to work is the explanation. The regulation will specify that the period of time that we're talking about will be 30 days.

I. Chong: I appreciate the minister's efforts in trying to clarify that.

Yes, there are two circumstances. One is where it's very clear that an individual, immediately upon notification that his benefits could be suspended, could in fact cease work to ensure that there would be no suspension. If he had to, he could conclude his term of work, and if he does have his benefits suspended for a short time -- for a month or so -- upon cessation of that, he would have reinstatement of benefits.

[1530]

If it were to take six months for that individual to establish his or her bona fide situation to allow the exclusion of the suspension of benefits, then I would expect that the moneys from the period of the suspension would be retroactively reimbursed to the individual. If the minister can provide that confirmation, that would be most helpful.

Hon. D. Lovick: I was about to give a long answer, and then the member wrapped up her question in a nice succinct way. So let me simply say that I am pleased to provide her with that confirmation.

K. Krueger: One of the reasons that many people find section 48 offensive is that as drafted, it will prevent former union members, pensioners, from collecting their pension entitlement if they're employed in a trade and industry -- as it's worded now -- covered by the pension with an employer outside the pension. In this province people have been free to join the trade unions of their choice. This section is seen to represent an unnecessary impediment to the exercise of that legal right and, accordingly, seems totally contrary to a central

[ Page 13642 ]

Hon. D. Lovick: I think the member's question takes us more to the thrust, the philosophy, the purpose of the bill, rather than the specifics of the section. But let me offer a brief response as a courtesy.

The individual can go and work for a non-union company and can go and join another union outside the building trades -- or outside the house of labour for that matter. They are free to do all of that. What's at issue is simply whether the individual is going to be able, in doing those sorts of things, to continue to collect the union pension. Let's call it a union pension, because that's what it is. The assumption made, above all, is simply that to protect that union pension, the trustees need to have the power, as they perceive the necessity, to suspend benefits. But in terms of interfering with a member's right to go and do other work, to join another union, to work both union and non-union, that isn't what's at issue. It's, rather, only the fact that to protect the pension, one will not be able to go and be subsidized by the union pension plan while one is working for a competitor non-union company. That's the thrust of it. I don't think that, by any stretch, could be seen as somehow antipathetic to or inconsonant with the Labour Code. I appreciate the member's question, but I say that with some confidence. I see nothing that would lead me to believe otherwise.

[1535]

Hon. D. Lovick: I don't think it's a case of joining another union. I suspect, rather, that most of the plans of non-contributory employees, in competing with those contributory employees -- in particular, building trades -- are for the most part, I think, non-union rather than another union. So I don't think that is an issue, frankly, at least in the majority of cases.

K. Krueger: Well, I'll offer the minister an example, which I expect would be an example that's already in his mind. That is the Christian Labour Association of Canada, which does have a very large membership in British Columbia and is certainly a union. I ask the minister if he wouldn't agree that this provision will be a pressure against current members of the building trades unions taking their pension and joining CLAC.

Hon. D. Lovick: No, I'm not sure I do agree with the member, because members could certainly decide to join CLAC. They certainly have every right to do that, and indeed I suspect some do. The prohibition, such as it is, is simply against doing the same work in that same trade and industry. CLAC contracts, as the member knows, are frequently an industrial model rather than, you know, a building trades model or a craft model. Therefore, frankly, I wouldn't necessarily see that that would be very much of a problem in that particular case.

K. Krueger: I think that'll probably be welcome news to CLAC and other unions of its type -- wall-to-wall unions, as they're frequently referred to. Will the minister confirm, then, that in his view, section 48(c) will not come to bear on workers who move to a wall-to-wall union? Is that what the minister just said?

Hon. D. Lovick: No, the minister didn't say that, nor would he say that. The member's asking me, frankly, to speculate about the nature of one's affiliation with one kind of union versus another and whether that's good for one group or good for another group, and so forth. I think that takes me rather beyond the bounds of the discussion at this point. So no, I won't speculate. I can't.

K. Krueger: The trouble with that argument about the bounds of the discussion, of course, is that this bill is very limited in what it spells out as far as the application of this section that we and many people in British Columbia find so offensive. We do have the one-page draft of what has been referred to as regulations, but it is more points of principle rather than actual regulations. It should be perfectly in order for the opposition to try and flesh out some of the effects that the minister foresees of this very controversial provision of Bill 58.

I want to go back briefly to a discussion that the Leader of the Official Opposition raised with the minister with regard to restrictive covenants in employment contracts. The Leader of the Official Opposition had referred to the case of Maguire v. Northland Drug Co., which was a 1935 case. There was a 1971 case along the same lines, and the style of cause was Cameron v. Canadian Factors Corp. Ltd. in the Supreme Court of Canada. This is a very brief segment of what the Supreme Court ruled:

"It is the case both under the Civil Code and under the common law that employee restraint covenants may be held invalid because of their unreasonable duration or because of their unreasonable territorial ambit, having regard in each respect to the range of businesses or activities covered by the restraining covenants. . . . The present case. . .raises simply the principle on which courts act against contractual undertakings by an employee not to compete. . . . That principle. . .is the application of a rule of reason to a balancing of the interests of the employer and the erstwhile employee in respect of the need of the former for protection. . .and of the latter for economic mobility, in the light of a policy that discourages limitations on personal freedom, and, specifically, on freedom of economic or employment opportunity."

[1540]

Hon. D. Lovick: Was it 1935 or '71?

K. Krueger: This was 1971, in answer to the minister's question.

As I understand it, many of the people who will be captured by this regulation didn't sign any covenant that they

[ Page 13643 ]

Can the minister confirm whether that's the case?

Hon. D. Lovick: Mr. Chairman, The member is asking me to comment on something about which I frankly don't have any particular knowledge. But I would point out this. The Leader of the Opposition did indeed raise this question about conspiracy and restraint of trade -- or whatever the old language used to be that prohibited trade unions from forming in the first place. I answered his question. Then the member for Richmond-Steveston -- the trained lawyer on the other side -- spent about 20 minutes or so on this question as well. I dealt with those questions at some length, and it seems to me that we have canvassed that particular area.

Now, if there is something more particular and more specific, rather than the jurisprudence of 1971 that the member has to raise, I'd be happy to deal with it. It seems to me that we're rather far afield -- given, as I say, that I've already covered this area.

K. Krueger: The question specifically is: this section acts in restraint of trade as I see it, in that it discourages the exercise of -- or at least limits -- personal freedom of economic and employment opportunity without reasonable explanation, other than, apparently, protection of building trades unions pension funds and preservation of the numbers on their membership rolls. Would the minister comment on that?

Hon. D. Lovick: I don't believe that this is an unreasonable restraint, and indeed, any court of law would probably agree with that. I would remind the member again of what I've already quoted into the record from the B.C. Supreme Court judgment in terms of the sheet metal workers. The judgment spelled out very, very clearly at that time that there is a fiduciary obligation on the part of the trustees that remains to ensure that suspension of any kind is in the interests of all the members as well as the interests of the individual member.

That's much more contemporary jurisprudence and case law on this matter than anything from 1935 or 1971. I think it's a very good statement made in the court decision, reminding the trustees that they do indeed have an obligation to look out for the collective interests of the pension plan as well as the individual interests of the individual members who are in the plan. Our conclusion is essentially that section 48 of this bill does indeed meet that test -- that it satisfies both requirements.

K. Krueger: In an interview with Kamloops This Week newspaper, my colleague the member for Kamloops, the Environment minister, is quoted directly as having said this -- apparently her synopsis of the thrust of section 48: "You can either choose to work for a wage or take your retirement." Would the minister confirm whether that is a valid, succinct statement of the thrust of this government in bringing in section 48(c): you can either choose to work for a wage or take your retirement?

[1545]

K. Krueger: I was actually asking the minister whether or not he agreed with that as a nugget of information that summarizes this government's point of view and the reason that 48(c) is before us: you can either choose to work for a wage or take your retirement. Yes or no? And I'm not asking the minister to comment on another minister's point of view, but on his government's.

Hon. D. Lovick: I don't see this as committee stage of this particular bill. I don't see this as having anything to do with the particular sections we are looking at in section 48 of the measure. The member's asking me to offer my belief of why we are doing this, and he's going to give me, apparently, 20 questions and ask me whether I agree or disagree with them. That is not what committee stage is about. We've had the debate; I have explained ad nauseam why we're doing it. I don't think he would find in any of my comments anything that resembles the conclusion that he has just drawn. Let's get on with the debate.

K. Krueger: If the minister's looking for another debate, he's going to get it. If we're going to have difficulties in committee, then that's coming.

I continue to receive input from the public, who are very concerned about this, and from the experts in industry who are watching this debate. Some of the opinions that are coming to me from those experts are that they are very frustrated with the nature of the debate, that the minister doesn't seem to be well informed, that his arguments are weak and that he seems to have the opinion that not many people will be affected by this provision, when obviously many will.

The Chair: Member -- relevance to the section.

K. Krueger: Hon. Chair, one of the questions these people put to me is: has anyone actually examined the consequences to union pension plans -- for example, the human rights complaints that will surely flow? Has anyone attempted to involve Revenue Canada and really engage them on the questions that will be raised by those who will present the downsides of this legislation to them? This is indeed precedent-setting legislation -- this particular section, section 48 of Bill 58. What are the prospects for trustees of pension plans being able to defend these provisions when they're challenged for breach of fiduciary duty? What if they are challenged on a class action basis, which is a very likely thing? You can pick any potential victim and proceed with a class action now in B.C., and once you do that, the pension funds will have to foot the bill for all those legal proceedings. That being the case, there's a very legitimate question about whether this provision will help with the unfunded liability difficulties of the pension funds at all, because that will be a

[ Page 13644 ]

Hon. D. Lovick: I think I've answered these questions before, but let me now simply say yes.

K. Krueger: Well, that's good to hear. What were the predicted costs?

[1550]

K. Krueger: Well, that could only be because of the slipshod approach that was used in getting ready for this legislation -- the lack of an exposure bill, the lack of a White Paper. How could anyone think that it's not going to be expensive for pension funds to defend themselves against class action suits? That is preposterous and is another indication of the negligence of this government in bringing forward this legislation and another reason to question this government's motives.

I believe that if the unions understood the risks that I've just outlined, they wouldn't want this legislation, and that the whole matter will end up tied up in expensive class action suits. Up until now, if the superintendent got involved in a problem such as she was involved with -- involving the Sheet Metal Workers Union pension plan; resolved last summer by the Supreme court of British Columbia -- she was not required to look for other complainants, only to deal with the one that she knew about. Hence, when the Lord case ended, the matter ended for the time being, although this government has now chosen to resurrect it and disable the superintendent from having the same toolkit she had at that time.

But now, if this suspension of pensions is permissible under the Pension Benefits Standards Act, it will no longer be a matter in the superintendent's purview, so it will be open for plan members to take their grievance to court through the class action process. Does the minister not understand that that will be a cost to pension funds?

[H. Giesbrecht in the chair.]

Hon. D. Lovick: Alas, the minister understands what the legislation is about and has to continue dealing with those who apparently don't.

Let me remind the member again that there was a council resolution in 1995 recommending that this particular power to suspend benefits should be formalized -- should be made part of the legal framework. That was 1995 -- before the court case, hon. member. That was considerably before the court case. That's point one.

Number two, let me remind the member, as well -- I thought I'd made the point, but if I haven't, it's my error -- that the practice of suspending benefits has gone on in this province in union pension plans for a very long time. It has been the norm, indeed. It's commonplace; it's done. There have been no challenges that I am familiar with, in terms of human rights or restraint of trade or anything of that sort. The primary reason is essentially the one that I offered to the members opposite -- to the Leader of the Opposition, I believe, or perhaps his colleague from Richmond-Steveston. The Charter of Rights, when we talk about those important rights -- more particularly, we were talking about mobility rights, for instance -- says very clearly that all of those important rights that we cherish and believe in that are enunciated in the Charter are nevertheless subject to such reasonable restraints as can be imposed legitimately in a free and democratic society. We do that all the time in this country. For the member opposite to suggest that because we have in fact given a legal framework to a practice that's gone on in this province for probably 30 years and in the country for probably 50 years or more -- widespread, commonplace. . . . We're doing what any responsible government ought to do -- namely, giving it the legal framework so we don't put people in that awkward position of not being sure just what their rights and their responsibilities are. To suggest that that is somehow draconian and is somehow putting us on a collision course that will get us into difficulty with the courts, and so forth and so on, I think, quite frankly, is a huge leap of imagination. It's a huge stretch in credibility.

K. Krueger: Well, the minister says it has gone on. . . . Apparently it certainly went on before 1993, but this government brought in the existing Pension Benefits Standards Act, which made it illegal as of 1993. The superintendent went to court to prove that and got a judgment in 1998. Demonstrably, from 1993 until now, this practice has been illegal. But the minister keeps saying that it has gone on. Have unions, with the minister's knowledge, been suspending pensioners in spite of the fact that the superintendent won the court case?

[1555]

K. Krueger: The minister asks that I repeat the question. The question was: have unions been suspending pensioners in these circumstances, with the minister's knowledge and without retaliation by the government, in spite of the superintendent's success in court in 1998 and the government's knowledge between '93 and '98 that this practice was illegal?

Hon. D. Lovick: I want to thank the member for repeating the question. I was making a note about another issue.

The answer is that anybody who is acting outside the requirements of the law has been advised. We haven't condoned that or ignored that at all. Once that judgment went against what we perceived to be the normal and the standard practice. . . . Once that happened, obviously we complied with the law, and the superintendent has done so assiduously ever since.

K. Krueger: So when the minister says that anyone identified as indulging in this practice has been advised. . . . Is that as far as it went? There was no further sanction against these pension fund managers for handling their pensioners' benefits illegally.

Hon. D. Lovick: My understanding is that there have been only two cases, and in both instances, the pension plan administrators, trustees -- whatever -- were required to pay back the benefits that they had suspended.

K. Krueger: Well, there's an astounding document published on a B.C. government web site which I referred to in

[ Page 13645 ]

Now, that was on the web site as of December 15, 1997. So there was a union openly stating that it was operating in violation of the law. I can give anyone who wishes it the web site address.

I will read a couple of quotes from that web site:

"As a deterrent to members contemplating employment after retirement, our plan calls for suspension of pension payments during the period of reemployment after retirement."

"We understand that in mid-1996, a subcommittee of the Pension Benefits Standards Advisory Council recommended that the suspension of pension benefits be allowed and that the issue was forwarded to Victoria for new regulations to be drafted. We later discovered that Bill 44 contained wording granting the Lieutenant-Governor-in-Council the authority to make regulations regarding this issue. However, this legislation was shelved earlier this year with the rest of Bill 44.

"For the past several years, we have continued to suspend benefits while changes to the PBSA were being contemplated. With the shelving of Bill 44, the superintendent of pensions will have to act on complaints and enforce the current laws.

"We are seriously concerned about the implications this will have on our plan and our membership once it becomes public knowledge that pensions may no longer be suspended. It is exceptionally frustrating to us to know that all of the relevant parties are in favour of legislation" -- obviously the pensioners aren't relevant parties to this union -- "that would allow us to suspend pensions, and the only reason it has not been passed is due to various procedural delays.

"Recommendation. This is serious issue for the carpentry workers' pension plan of B.C. and other multi-employer plans within the construction industry. The proposed amendment for the Pension Benefits Standards Act -- formerly the Labour Statutes Amendment Act, 1997, Bill 44 -- addressed the concerns of members collecting pension payments while employed after retirement. The amendment was not passed, because Bill 44 was withdrawn. This issue continues to be a real threat to the financial position of the pension plan. Therefore we recommend that this amendment be reintroduced in the Legislature as soon as possible."

[1600]

Hon. D. Lovick: I am disturbed that the member continues to insinuate as a matter of course rather than simply make a direct statement.

A couple of points. The superintendent has acted on every complaint ever received. Let's make that clear, first of all. Second, there were two complaints. Only one of those happened to be from a carpenter, so let's get that clear, as well. Number three, the so-called government web site that the member refers to was the report of all the submissions that were made to the independent commission that looked into the nature of the construction industry in the province.

[P. Calendino in the chair.]

Government, believing that it has an obligation to share information rather than be secretive about it, took all of the submissions made to the commission and put them on the web site. One of those submissions is what the member quotes: the submission made by the Carpenters Union -- the Provincial Council of Carpenters, I guess -- to the Lanyon-Kelleher-Ready commission.

To say that this is part of the government web site. . . . No, this is somebody's submission to a particular commission, and government, believing that it is its duty to share information with the people of this province, put everything on the web site. We don't own this document. Let's be clear about that.

The final point is that if the member's conclusion is simply that, "Aha, the carpenters said they wanted this to happen, and therefore somehow this is tainted," or "My goodness, the carpenters got their way with the government, and isn't that nasty," let him believe so if he wishes.

I have said from the beginning that since 1995, there has been a resolution before the council -- the pension council in British Columbia -- recommending that we should do this. It happened before; it happened before the court case took place. Government have been persuaded by the opinions we have received -- certainly by the opinions and the recommendation we have received from the pension council. The pension council, in turn, apparently was persuaded in large measure by the statements made by Mr. Brown, the actuary who happened to also be acting on behalf of the sheet metal workers.

I don't know if I can be any more clear than that, and I'm not sure if there is anything else the member is asking of me. I can just say this: I have never seen this document, the one that he just began to quote to me, before this moment. Whether this was part of anybody's calculus back in the days of Bill 44, a couple of years ago, I don't know -- nor do I much care, frankly. I'm concerned about the legislation that we're presenting in the House right now and that we're supposed to be debating right now.

K. Krueger: The minister ought to care. He makes this obscure point that because it's somebody else's document on the government web site, it's not government information. Of course it's government information. It's on a government web site. I think the minister's right. There's an obligation for the government to disclose information like this. There it was for all the world to see. Of all the people who should have been paying attention to it, the Ministry of Labour is right at the top, and I think they did know about it.

[1605]

[ Page 13646 ]

Hon. D. Lovick: What happened in the case of the individual carpenter who wrote to offer a complaint to the superintendent is that the superintendent responded by saying: "Yes, indeed. The union can't suspend your benefits, according to the law, and therefore you have recourse to go. . . ." The superintendent never heard from that individual again. How that case resolved itself, we don't know.

K. Krueger: The minister has just confirmed, then, that the only person the government bothered to deal with to ensure that he knew his rights was the one that complained. The government has known all along that these people have been ripped off, cheated and had their pensions illegally suspended.

Interjection.

K. Krueger: The minister is wincing and moaning. But that's the truth; this has been illegal since 1993. In 1997 a pension plan puts a notice on a government web site that they've been ripping people off. How many of their other members turned down employment because they knew that this union pension plan was ripping members off and suspending their pensions? What sort of damage did that do to those people's livelihoods, their families and their local economies, wherever they lived? Apparently the government has been turning a blind eye to this and taking the point of view that unless someone complains, having found out his rights independent of government, it will just happily stick its head in the sand and ignore the fact that British Columbians are being ripped off by their pension plans and eventually bring in legislation that will make it legal. Is that the case?

Hon. D. Lovick: I don't think "ripped off" is exactly the terminology that is in any way accurate. Suspension of benefits in particular circumstances. . . . When those benefits are obviously still guaranteed to the member and will be reinstated entirely at some point is hardly the same as a rip-off, as we normally understand the terminology.

The superintendent advised various pension plans that according to the regulation, suspension was not, as she perceived it, legal. What happened was that we ended up in a court case. People took the superintendent to court, saying that they thought it was legal. Therefore we went to court, and the superintendent's opinion was upheld. Indeed, according to the law of the day and of the time, they were not allowed to suspend those benefits. The superintendent, it seems to me, has acted with integrity throughout, obviously responding to complaints whenever they arose. To suggest that somehow the government has done some terrible thing by deliberately looking away while this outrage was perpetrated is, I think, quite frankly ludicrous in the extreme as well as offensive.

K. Krueger: Nobody is questioning the superintendent's integrity.

Interjection.

K. Krueger: The superintendent did the right thing.

And no, hon. minister, when you say, "Sure you are," we are not. We're challenging your integrity as a government -- that you would have allowed this garbage to go on. You knew it was illegal. You brought in the Pension Benefits Standards Act in 1993, and this has been illegal ever since. When you say government has a responsibility to act on complaints. . . . Government has a responsibility to enforce the law and not to allow people to abuse individuals just because they don't know that they're being abused.

There are all kinds of laws in this province that protect people, that people don't even know about. In other branches of government, when it is discovered that violations of those laws are occurring, then people's rights are protected. For example, I stopped a man from beating his wife two weekends ago, and I don't think she wants to lay charges. But it's the law in this province that charges are going to be laid, and I'm going to make sure of that, because that's my responsibility as a knowledgable witness.

[1610]

The Chair: Member, would you take your seat. please.

May I remind the member to use language that is respectful of this chamber. The member knows that certain words are not permitted to be used in this chamber. May I remind him, as well, that we are dealing with section 48 of this bill. I remind him to stay with that section.

K. Krueger: I am on this section. And the fraud was perpetrated by a pension plan. I am asking the government if it deliberately tied the superintendent's hands behind her back and only let her finally act on this issue because the Sheet Metal Workers Union sued the government. Is that what's really been going on since 1993 -- that this government's been just turning a blind eye, winking at this abuse of pensioners, knowing full well that it's going on, certainly with this union and maybe with lots of them? Is that what's been going on -- the government has deliberately allowed pension plans to break the law for over six years? Will the minister say yes or no?

Hon. D. Lovick: I am advised that the superintendent, based on the law, advised many, many plans that they were indeed carrying out activities that were not legal and that many plans were forced to change their practice as a result of that intervention. In short, what was done was responsible and absolutely in compliance with the law. I am also advised by the superintendent -- whose integrity or professionalism I

[ Page 13647 ]

Mr. Chairman, given that this is a little hot, and given that we have been at this now for a couple of hours, my suggestion would be that we take a brief recess. If that's agreeable, then we can come back, pick it up and perhaps be more relevant to the section under discussion.

The Chair: Does the committee agree to a short recess?

Okay, we will reconvene in about five minutes. But before we go, may I remind both sides to use parliamentary language in this chamber.

The committee recessed from 4:14 p.m. to 4:23 p.m.

[P. Calendino in the chair.]

The Chair: We're still on Bill 58, section 48.

K. Krueger: We are indeed on section 48 of Bill 58. I want to ask the minister to stop raising the question of the superintendent's integrity, because this side has never disputed or challenged the superintendent's integrity. Indeed, I think a lot of the superintendent.

I don't think much of the government. I think that the government has been deliberately shielding its union buddies from the appropriate response from government with full knowledge that this practice has been going on illegally for six years. This government has a predisposition to bend over backwards for the Premier's buddies, the building trades unions -- the only real job that the Premier ever had. That's what we see in practice here.

The minister appears to have said that the only time the government would allow the superintendent to respond -- or at least the only time the government bothered to respond to this illegal practice -- was when complaints came forward. Presumably, then, and judging by the carpentry workers' pension plan submission on the government web site, which I submit the government had a responsibility to read and know about and act on, there may be thousands of pensioners who have been defrauded of their legal entitlements in this province over the past six years.

If the minister needs a complaint before he'll act on that, consider it filed right now. I'm filing it on their behalf. I want those pensioners repaid the amounts that they've been ripped off. The official opposition will make sure they find out that they've been ripped off if it needs to. But the minister can save a potential class action suit by them -- certainly a lot of expense -- by making a commitment right here, right now, that he'll fulfil his responsibilities as the Minister of Labour in charge of a ministry that has had formal notice on its own web site since 1997 that the carpentry workers' pension plan was ripping members off and has only acted on one complaint -- and apparently didn't get any money back there. This ministry had an obligation to act on that knowledge and to find out who has been ripped off and get the money back to them. If the minister will commit to do that, then we'll move on. Will he?

Hon. D. Lovick: If the member has any particular complaints, or if I receive any complaints, of course we will investigate. I have no hesitation whatsoever in doing that.

[1625]

Again, to the member's point, I think I've answered his question. I have said that if indeed we had particular complaints, of course I would look at them.

I was about to sit down, but I think I need to state something else very clearly. It's a point that apparently went by the member opposite. When we became aware of the fact that particular pension plans were contemplating trying to suspend benefits -- which, because of our legislation of 1993, we perceived then would be not allowed; in short, it would be illegal -- the superintendent responded to each and every concern that was raised with her. She also advised pension plans that they were not, by our reading of the law, able to do so.

Most pension plans, as far as we know, were in compliance. We learned only very recently that the carpenters may not have been, based on the material that the member read into the record. But I would remind the member that it was the efforts of the superintendent to deal with the letter of the law, to advise all the pension plans that they were not allowed to suspend benefits -- and to be challenged on that. . . . It was, indeed, the sheet metal workers who challenged the superintendent and said: "We refuse to do what you're telling us to do. We believe it is our right, and therefore we'll see you in court." It was, in short, the activities of the superintendent acting on behalf of government, acting on behalf of the letter of the law, that provoked the court case.

Now, how anybody can suggest that government is somehow participating knowingly in what the member refers to as fraud, given that fact pattern, amazes me. It seems to me the superintendent has done all she should have done. The record is absolutely spotless. The final assurance then: if there are instances where people have indeed been deprived of benefits they were legally entitled to for a particular period, then of course I'll be happy to look at those individual cases.

K. Krueger: That's good. For the record, nobody is challenging the superintendent's integrity, but I have all sorts of concerns about the integrity of this government and the competence of this government. We always suspected -- everybody does, I think, in B.C. -- that all of the NDP consultation processes are phony and that they don't pay any attention to the input that they get. This appears to be a minister telling us that the government didn't read its web site. The government posted all this input on the web site, solicited the input to Messrs. Kelleher and Lanyon, but didn't read it -- didn't read the startling revelation that here's a carpentry workers' pension plan openly stating, on the government web site, that it has been breaking the law since 1993. The government is saying it didn't know about it.

[ Page 13648 ]

[1630]

The minister at least made a commitment that he would act on complaints. If the minister will listen to my question -- since I've had to repeat a number of them this afternoon. . . .

The pensioners obviously wouldn't have known that this is an illegal situation. The government wasn't telling them. The pensioners didn't know that they were being ripped off. Now the minister has committed to act on complaints from those pensioners, and that's well and good. How are we going to make sure that they know that they have an opportunity to gain back benefits they were ripped off for? I think it's the government's obligation to make sure that they know that. This government's not at all shy about spending money on advertising. It's constantly spending money on blowing its own horn -- every little excuse of an announcement, radio ads, newspaper ads, television ads. So let's advertise this.

Will the minister commit to putting out a strenuous, zealous advertising campaign that alerts pensioners that this practice that this government is now making legal in Bill 58, section 48, was illegal until now: "Pensioners, if any of you were suspended by your pension plans for working, that was illegal. We've got an obligation to help you collect your money back. We've done it for the ones who have complained. We invite you to complain because you've been ripped off, you've been defrauded, and the government's going to be your advocate and get your money back"? Will the minister commit to an advertising campaign to make sure that these pensioners know that they've been ripped off and that the government's committed to helping them?

Interjection.

The Chair: The hon. member for Coquitlam-Maillardville rises on a point of order.

J. Cashore: The member knows that unparliamentary language is not acceptable, and I ask that he withdraw that.

The Chair: May I remind all members to please maintain language that is respectful of this place.

Hon. D. Lovick: For the record, the carpenters were told to comply, along with other unions. They apparently decided to disregard that advice. When the superintendent learned that they hadn't complied, via this particular information on the web site, then they were advised again that what they were doing was illegal. I believe that they were also told to make sure that those people whose pensions had been suspended were given the money that they should have received. Again, emphasizing that this information. . . . The superintendent reminds me that she has only just received this and so has taken that action immediately upon receipt of the information.

To the member's particular question: no, I won't commit to some kind of paid advertising campaign to do this. I believe that probably the great majority of those pension trustees have indeed responded to the directive they were given by the superintendent of pensions when the legislation was in fact proclaimed in 1993. I suspect we're talking about relatively few. I don't know that. As I say, certainly the superintendent has made very clear to those persons who are apparently acting in contravention of the legislation that they must not do that.

K. Krueger: This government will spend advertising money on its phony budget, on ICBC premiums, on all and sundry. This government had a responsibility to these workers. This government had a responsibility to know what was on its web site and act on it. This government failed in its responsibility and was negligent. It is perfectly obvious from the carpenters' own submission that a number of people have been ripped off. When the minister says that he believes that the numbers were small -- or few or none, or whatever he said -- that's wilful ignorance.

This government web site included a guilty plea by the carpentry workers' pension plan: "We've been doing this. The silly old NDP haven't got our law through, so now we're going to have to stop or the superintendent's liable to come after us." The minister, I suspect, didn't really want the superintendent going after anybody. That's why it took the Sheet Metal Workers Union suing the government to put this law to the test. However unwilling the NDP was to stand up for workers and to have their rights not be ripped off of their pensions, under an act that the NDP brought in themselves in 1993, the superintendent nevertheless won the day. It was the superintendent alone who bravely stood up for pensioners in this province. It's clear and obvious that this government never meant to do so, and now it's turning around and attacking them.

This minister and this government have an obligation to alert those pensioners who were ripped off by the carpentry workers' pension plan and any of the others that it was illegal up until now. Surely the minister can do something more than shrug his shoulders and say: "We'll deal with any complaints that come forward." People didn't know, or they would have come forward. Pensioners need their benefits. Pensioners may well have passed up work because they thought that this was something that their pension plans could get away with. Will the minister not come up with something better than waiting for complaints to trickle in, when people obviously don't know that they were being ripped off?

[1635]

K. Krueger: I don't think it's good enough, but it's a start. I think the minister, through the superintendent, could certainly ask every pension plan for a list of members whose pension benefits have been suspended, contrary to the Employment Standards Act, between 1993 and the time that this odious section is proclaimed -- if it ever is. Will the

[ Page 13649 ]

Hon. D. Lovick: The superintendent is, of necessity, granted some considerable independence in the exercise of her duties. I cannot interfere in her judgment in how she might deal with that problem, but she has advised me that she will certainly take that matter under advisement and see if something can be done to ensure that the concerns expressed are indeed dealt with.

K. Krueger: I'll look forward to word from the minister or the superintendent about what has been done in that regard. I think it's perfectly legitimate for her to make that demand of these pension plans, and we'll look forward to word of the result.

Will the minister commit to providing that information to the official opposition -- not necessarily the names of pensioners, but the numbers of pensioners whose situation has been identified and who have been alerted to the fact that this was an illegal practice?

Hon. D. Lovick: Whatever the superintendent in her wisdom decides to do and shares with me, I will certainly ensure that that information is disseminated.

K. Krueger: I want to move to the draft regulations -- or the list of anticipated principles, however the minister chooses to characterize what was provided to us; we've repeatedly asked for a draft of the regulations. I'd like to know, in a matter of this significance, in a matter of reversing itself on a question this important to pensioners and to workers, why the government has chosen to have a "tiny little section" -- as the minister referred to it last week -- in Bill 58, rather than actually spelling out, chapter and verse, in the legislation how this process will work. It's a reversal of protection that has been there for pensioners in the past. It's a precedent-setting piece of legislation for this country. It's a startling and very unusual development, and I submit that it's wrong to bury the details in regulations. So I'd like the minister to answer the question: why is the detail not spelled out in the legislation?

[1640]

The member's question is essentially inviting some justification of this particular approach. Suffice it to say, this is more or less standard practice; details are typically spelled out in regulations. I would refer to things that I know the member is familiar with, like workers compensation, for example, or occupational health and safety. We use a regulatory framework as a matter of course. It's not about burying or hiding things. I don't imagine the member's already forgotten the assurance I gave yesterday that we would indeed have a fairly wide -- what I think can be fairly called wide -- consultative sharing of information in terms of the principles that will animate the regulations. Indeed, we will publish the regulations themselves and give people an opportunity to comment. So it's not anything secretive. As I've said many, many times, it's the intention to make those open and widely accessible.

K. Krueger: I do appreciate the commitment to an exposure draft of the regulations. I think it would have solved a lot of problems with regard to Bill 58 in its entirety if that approach had been followed. I'm counting on those regulations being circulated in that manner, in advance of being implemented, on all sections of Bill 58, not just section 48, even though it is the most odious and objectionable portion of the bill.

One of the things I intended to ask the minister at this stage of my questioning in committee was the self-employment question. I think the minister, in fairness, has been utterly clear about that: people will not have their pensions suspended -- and the government will ensure that they don't -- for being self-employed. But I submit to the minister that until this draft regulation, or principles of the regulations-to-be, was given to us yesterday, and until he made those comments on the record, anyone reading this legislation and seeing that it says, "restarts work or service in British Columbia in a trade or industry" -- we amended that to "and industry" yesterday -- "covered by that plan but with an employer who is not a participant in that plan. . . ." Anybody seeing that and thinking, "Well, self-employment. . . . I have an employer -- myself -- who's not a participant in the plan," would have had good reason to believe that self-employment was one of the situations that would trigger pension suspension. Indeed, the way that legislation is worded, a plumber could be suspended for working on his own sink because he's doing something for himself at the time.

So this is an alarming piece of new legislation for people. There have been very legitimate questions about the self-employment issue, but I think the minister has given a very watertight assurance that self-employment will not trigger suspension; and unless he gives me the nod that he'd like to speak to that, I'll carry on.

A question that has concerned us and that we certainly raised at second reading and that doesn't appear to me to be dealt with in these principles for the regulations is: who will the pension police be? Who will the people be who identify these transgressors -- these people whose motivation the minister deemed in second reading to be greed? How will they be caught? How will they be found? Will people -- enforcers -- sally out into the communities and into the workplaces of British Columbia and look for them? Will they wear armbands or uniforms? Will they drive around in surplus photo radar vans with tinted windows? How will this be done? Who will the pension police be who are going to go after these pensioners that the minister hypothesized must be motivated by greed?

[1645]

K. Krueger: That really isn't comforting at all, because I think there need to some limits on what sort of violation of people's privacy and their homes and workplaces might come about as a result of overzealous pension plans -- one of which

[ Page 13650 ]

Will the government not commit to put some regulations in place to ensure that any activities that pension plans might indulge in to identify these pensioners that this legislation attacks -- any activities -- are strictly within the law? Will the government not commit to that?

Hon. D. Lovick: I'm struggling not to take this too seriously. The reality is that the mandate of the pension benefits standards legislation is to ensure, essentially, that the law as spelled out is indeed complied with. Thus the superintendent is in regular contact with pension plan trustees and examines their plans to make sure that they are indeed in compliance, that they're doing what they're supposed to do.

In terms of the matter of people transgressing particular regulations or requirements, that's another whole area certainly well beyond the scope of this bill. Indeed, we could offer the same comment about probably any statute in the province: how will this be enforced, and what will be done?

Well, it's done by a number of other statutes. All the protections that people have against overzealous enforcement are to be found, again, in a number of other statutes, in terms of their civil liberties and their rights under the law. But that has nothing whatsoever to do with this particular section of the bill.

K. Krueger: It's permissive legislation. It's enabling legislation, if you will -- enabling these so-called trustees of these pension plans to go after their own pensioners, their members. Even the fact that they want to do that is alarming. If the government's going to bring in permissive legislation that says, "Yeah, go to it; go after those pensioners if you think, as the minister said, they're motivated by greed and you want to get them off your pension rolls," surely it's appropriate for the government to make some appropriate move to ensure that illegalities don't occur. Some of these people obviously have no. . . .

Hon. D. Lovick: For God's sake, be serious.

K. Krueger: The minister says: "Be serious."

I just read him his own web site, which he hadn't read in two years, saying that these people have been operating in violation of this law. Why would he be so naïve as to think that they wouldn't operate in violation of privacy laws and human rights provisions? Why would he think that? Why would this minister naïvely assume that nothing bad is going to occur, when he has an admission of lawbreaking on his own web site -- which he never read until I read it to him? Surely the government can do something, even if it's in the implementation package with unions, that puts them on notice. There are a number of things that you cannot do, and there are limits on how you can involve yourselves in people's lives and implement your pension police.

[1650]

Surely the minister thinks it would be appropriate to at least have a communications package with these pension plans that sets out what they must not do, what the pension police must not look like and how they must not behave. Will the minister not at least commit to that?

Hon. D. Lovick: Mr. Chairman, I think this is going to be my last answer. This is miles beyond this legislation. The member is saying that there will be pension police; he makes that up. I have told him that there will be no such thing. He could look in vain to find any reference to that in the legislation, because there isn't.

He says: "What about all their privacy rights and so forth?" Well, that's why we have a whole series of laws to protect against that. We don't spell that out in every statute that's brought before the chamber. We don't do that. Rather, we start from a proposition of something analogous to common sense, which says that any enforcement of any provision in law, in our statute books, is going to be subject to the laws of the land. You can't violate people's civil rights. You can't go knocking on their doors in the middle of the night and scaring the whatever out of them. You can't do that. That's what we have laws to protect. . . . You don't need to state all that stuff in the legislation, and to suggest that we do is ludicrous.

We're talking about this particular section, and we've answered every question on this particular section. If the member is going to continue to make speeches, he's going to be speaking in a vacuum, because I ain't answering any more of this stuff.

K. Krueger: "You can't go out and break the law," says the minister -- who, on his own web site, for two years has had notice that that's what the carpentry workers' pension plan was doing. And he didn't even read it. An admission -- they said so flat-out. . . . So it's utterly naïve to think that they wouldn't do it with regard to identifying the people, the pensioners, that they're going to go after.

Another aspect that is not identified in the principles of the proposed regulations is whether there will be a threshold. Is it any work at all that falls within the description as amended, or is it a threshold number of hours? Or does it relate to a particular size of pension? Will this happen even to pensioners who are getting $240 per month, as some of them are? Is there a threshold, or will any work at all, which falls within the amended provisions, trigger the pension suspension?

Hon. D. Lovick: We've provided a list of principles governing the proposed regulations, or what we thought might be taken into account. We did that as a courtesy to the members, because they had some concerns about the regulations. The regulations, however, and this document that I shared with the members opposite are not part of the bill. We provided that as a courtesy, and I'm not about to start going through

[ Page 13651 ]

I also gave my undertaking that we would share with the people the draft regulations, so we will indeed give people every opportunity to ask questions about them. But that is not part of the bill and therefore not to be discussed at this point.

The Chair: Member, may I remind you that we are on section 48, and the line of questioning should be relevant to section 48. It seems to me that we are beginning to be repetitious both in questions and in answers.

[1655]

Section 48 has been referred to by the minister as a little, tiny section. It has far-reaching ramifications; it's precedent-setting. We're entitled to ask questions about it, and I'm asking those questions. If the minister doesn't want to answer them, that will be what the record shows; but I'll ask the questions, and they are relevant.

How does the NDP expect in any way to get Revenue Canada or the federal government to register pension plans with these provisions?

Hon. D. Lovick: I've answered the question before. More specifically, we have confirmation of that agreement with the chief of technical interpretations at the registered-plans division of Revenue Canada.

K. Krueger: These drafts refer to pensioners who have been working as threatening the plans by abuse or double-dipping, and refer to unfair use of these so-called subsidized early retirement pensions. That's an alarming attitude to me and certainly to the pensioners who are affected. They're not abusers; they're not double-dippers. Double-dippers are people who enjoy a pension from their employment and then go out and get the same type of employment with the same employer and enjoy both a pension and an income -- for example, retired MLAs who go and get government contracts.

I remember a letter in Maclean's by Ed Broadbent, the former leader of the NDP, who signed himself off as a proud double-dipper. I have a letter in front of me signed by the MLA for Vancouver-Fraserview, where he writes to Mr. Troy Lanigan of the Canadian Taxpayers Federation, and he says: "Indeed, I believe, there are all sorts of individuals receiving federal pensions -- like ex-RCMP, ex-service people among some -- who are fully entitled to and are taking federal pensions while working at provincial jobs, or vice versa."

There is only one level of taxpayer. The taxpayer pays local, provincial and federal government. It's still the same taxpayer. We don't call these people double-dippers, so why in the world would the minister's points of principle with regard to the proposed regulations refer to these unfortunate pensioners, who are being attacked by this legislation, as double-dippers? How could that be?

Hon. D. Lovick: This isn't part of the bill.

The Chair: The member continues.

K. Krueger: Well, the bill doesn't offer very much. The minister has apparently decided to stonewall us now, maybe a little sorry that he shared his extremely limited thoughts on what the regulations would look like. That's what they look like. They're garbage, a piece of garbage. The minister won't even talk about it. Well, here it is -- let the minister eat it.

The Chair: Member, take your seat, please. That is unparliamentary behaviour, member, and I would ask you to apologize for your action.

K. Krueger: Hon. Chair, I do apologize. I'm extremely frustrated with this minister and this legislation and this abuse of pensioners in this province.

Interjection.

K. Krueger: The minister says: "How many hours have we spent?"

The Chair: Member, member. Can I remind you again to be relevant to section 48.

K. Krueger: I'm receiving e-mails and faxes from people who want to know answers to these questions. How is it going to work? What does it mean to say that the work is identical? Who's going to define that? There are a lot of terms flying around in this debate and in the minister's answers in committee that aren't defined anywhere in the legislation nor even in this Mickey Mouse draft of regulations. This term "early retirement pension". . . . An early retirement pension is simply a pension that starts prior to normal retirement date. The pension is supposed to continue for life. Once commenced, a reference to a normal retirement date is irrelevant; the retirement has commenced. So an early pension continues past what would otherwise be a normal retirement date. What if a member continues working in the offending employment past his normal retirement date? How will that member be affected?

[1700]

K. Krueger: Would the minister flesh out how he envisions the opportunity to appeal being implemented? Who will these pensioners appeal to -- and how and when and where? Does the minister have something in mind that would offer some reassurance to people who feel they may be targeted?

Hon. D. Lovick: The answers to that question will be found in the regulations.

K. Krueger: Cold comfort, indeed, to the people who know they're being targeted.

[ Page 13652 ]

Hon. D. Lovick: Again, we're outside the bill. We're talking about the document that I referred to. What I have said is that we will consult on the regulations and answer the questions as a result of that consultation process. No, I don't have a particular number in mind.

The Chair: Once again, member, please refrain from asking questions on issues that are outside of section 48.

K. Krueger: Hon. Chair, I'll follow that guidance. I don't think any of my questions have been, but obviously if other people think so -- particularly yourself -- I'm not going to get my questions answered. But people certainly have these questions, and they're very concerned for their livelihoods and their families and their personal security. We don't really seem to have any draft regulations; we don't seem to have anything to take out to the public yet. That little list of proposed principles. . . . It's astonishing to people that the pension standards branch and the Pension Benefits Standards Advisory Council, having been considering this for years, haven't apparently got any further than that. It would seem as though very little thought has gone into the regulations for this section -- perhaps for the entire bill. We just have, at best, some principles that someone's been apparently toying with.

When we referred to this concern of members about what level of pension benefits they'll enjoy if and when they are reinstated, that's a matter of profound concern as well. Now, the document said that the members' benefits are to be recalculated at resumption of benefits to ensure against loss due to the suspension having occurred. Well, how will that work? Will it be actuarially, including the amount and time value of suspended payments? If so, that would be cost-benefit-neutral to the multi-employer plans, which further defeats the fiscal argument for these suspensions. Can the minister give us any idea of how this calculation will be done?

Hon. D. Lovick: The member is referring again to the regulations that might be developed. They're not before us at the moment. They're not part of the legislation. We're involved in a consultation process to try to determine what those regulations should be. I can't answer about what isn't yet drafted.

K. Krueger: What about the potential for fiduciary conflict, then? Let's move away from the regulation, if the minister doesn't want to give us any more detail, and talk about that. Now, it's our understanding that only a few unions have actually been asking for this change, even though the change being implemented could -- and, I submit, will -- affect thousands and thousands of British Columbia's pensioners and workers.

The Premier has called this issue a tempest in a teapot, or at least so he was quoted on June 10 in the Vancouver Sun. He said that the changes are minor and will only affect a few people. That's in the Globe and Mail of the same date.

[1705]

Hon. D. Lovick: The only analysis that we have, I believe, was done by one actuary on behalf of the sheet metal workers. Again, I would point out, though, that it's not about the ability of the plans to pay benefits. It is, rather, to continue to pay the subsidized benefits -- the topped-up benefits.

K. Krueger: If the fiscal argument isn't supported -- and any numbers the minister has been able to offer us are very small; a couple of people here and there, it seems, and there don't seem to be any large numbers of people that have been identified anywhere as actually even doing this going back to work when they're on pension -- then the issue is really the union issue. Offending workers are, in the terms of Tom Sigurdson, quoted June 8 in the Vancouver Sun, "undercutting their own previous wage rate and are in direct competition with the company that formerly employed them." If that's the real issue, might not the trustees of a multi-employer plan who use this provision be seen to be acting in the interests of the union and unionized employers, rather than in the interests of the beneficiaries of the plan?

Hon. D. Lovick: The only pensioners who are affected are the people who have been unionized employees working for unionized companies. There are no other pension plans. So to try and set up some kind of tension -- conflict -- between the two is ludicrous. If indeed the non-union -- and the non-craft union other alternatives, I suppose -- were paying out pension plans, then the rules would obviously be somewhat different. But the reality is that it is only that one small part of the construction sector that has pension plans. It's union pension funds; that's where they came from.

K. Krueger: The minister missed the point of the question. There is a tension; there is a conflict. And that conflict is between the pensioner who is going to lose his pension benefits and the driving force that caused that to happen, which, according to Mr. Sigurdson's comments, apparently is the concerns of the unions and unionized employers about the financial position of their plans. If that's the case, could this not be a breach of the trustees' fiduciary responsibilities to plan members -- implementing a change like this, which is negative to their interests?

[R. Kasper in the chair.]

Hon. D. Lovick: Let me quote again; I've done it at least three or four times. I've said what the Supreme Court of B.C. judgment was, and it talked about the fiduciary duty of the plan trustees. They still have a fiduciary duty to "consider whether the suspension is in the best interests of all the members, including the member suspended." I'm quoting. I can't say it more clearly than that, nor do I think I need to say it again.

K. Krueger: There's a question with regard to the definition of multi-employer plans and the exemption issues that we've talked about. There are other what I think people could refer to as multi-employer plans, such as University of B.C.

[ Page 13653 ]

[1710]

K. Krueger: Then I understand the minister to say that the superintendent has the power to exempt a pension plan but not the power to take that exemption away later or remove anybody else's exemption. She can give exemptions, but she can't remove exemptions. Is that a valid understanding?

Hon. D. Lovick: The superintendent advises that if a plan does not meet the definition of multi-employer plan, there is nothing she can do to make it meet that definition. She's obviously governed by what the definition is -- yes.

K. Krueger: Then the minister's position is that the authority, as he said yesterday, to remove an exemption and include a pension plan in the multi-employer definition rests with the Lieutenant-Governor-in-Council. Is that correct?

Hon. D. Lovick: It used to be the case that only cabinet had that authority. The law was changed so that the superintendent now has the authority -- she has.

K. Krueger: It seems to me, then, that the minister has just told me two different things. Obviously he wouldn't have meant to do that. I must be misunderstanding him, and I'd like a clarification. If a plan currently is exempt from the definition of multi-employer plan, who has the power to remove that exemption so that they're brought into the definition, and how is it done?

Hon. D. Lovick: This is a commonsense answer. Whoever granted the exemption in the first place would be the only one that had the authority to remove the exemption.

K. Krueger: If the superintendent granted the exemption, since the rules were changed, the superintendent is the only person that has the power to remove the exemption. If the Lieutenant-Governor-in-Council, the cabinet, granted the exemption, then only they have the power to remove the exemption. Is that correct?

Hon. D. Lovick: That's correct.

K. Krueger: I understood the minister earlier -- and the record will show us -- to say that the superintendent had the power to grant an exemption but not to take one away. Was that a mistaken answer on his part or a misunderstanding on mine?

[1715]

K. Krueger: One of the concerns that has been voiced to me about this dramatic change, section 48, is that the early retirement provisions for pensioners who elected to take them were anticipated in the funding of these pension plans -- ergo, paid for in advance by those pensioners as they went along as one of the terms of the pension plan. This is a contractual situation. They knew that right was there for them. They opted to join the union and to pay into the plan. Therefore it seems very unfair to now take the right away from them. The minister may argue that the right is not being taken away from them and that they're only going to be suspended as long as they're working. But that wasn't the understanding they had during their many long years of service.

Would the minister answer the question of whether he agrees that funding for these so-called early retirement provisions. . . ? Even though some of these people have worked for 30 years, they're just under what might be considered a normal retirement age, but they have significant length of service. Is it not the case that funding was, or should have been, anticipated for those provisions all along and that that is what the pensioners believed as they paid into the plan?

Hon. D. Lovick: A couple of points. By definition in the legislation -- I've quoted it a couple of times -- these pensions are indeed topped up. The second point is that the actuaries, in terms of setting up the plan -- I'm talking about its viability -- did so in the days prior to 1993, of course, when they had every legal right to suspend benefits. Their calculus obviously has been revised, I suppose, to accommodate more recent circumstances. Therefore they make the recommendation they do, the one that I've quoted a couple of times from Mr. Brown.

K. Krueger: The Sheet Metal Workers Union obviously has been a driving force in all of this. It was the Sheet Metal Workers Union pension plan which sued the government and took the superintendent to court, where she beat them. The superintendent was successful in defending the rights of pensioners, but the sheet metal workers' pension plan appears to have carried the day in that now we see this bill before the House, which is exactly what they wanted.

The business manager of the Sheet Metal Workers Union, a Mr. Bob Colvin, went public in the media last week and said:

[ Page 13654 ]

The Sheet Metal Workers Union has obviously had its way in this situation. They're actually getting government to change the legislation for all of British Columbia to suit what they want. This is provincial law that we're debating here. Since they've obviously been influential enough to make that happen and since now they're on public record as saying that another goal of theirs is that this should be extended to the police and firefighters -- I don't know who else they're thinking of, but obviously they've got more of a hit list than the government might have anticipated -- would the minister please comment on whether the government is moving in that direction and whether the Sheet Metal Workers Union will be successful in this goal as well?

[1720]

I want to clarify it again for the record, because I think there is some confusion. What the sheet metal workers did is challenge the superintendent's interpretation of the law. That's what the court case was about. The superintendent gave an interpretation of the law. She said: "This is what the law says, and whatever my preferences might be, I can do nothing except abide by the law." That's what she did.

However, it is worth noting that the benefits council argue that the pension council indeed passed a resolution suggesting that suspension of benefits ought to be part of the legislation -- that that should be provided for in the legislation -- before there was a court case. I think that historicity is important to get on the record.

I would also point out that it wasn't only the sheet metal workers; indeed, I understand that there was a resolution by the entire Building Trades Council. That represents -- what? -- some 16 pension plans. The B.C. and Yukon Territory Building and Construction Trades Council joint administrators' committee made a formal recommendation on pension legislation. The paper is dated December 15, 1997.

K. Krueger: I've had a communication from the CIA on Bill 58, section 48. That is not the shadowy agency that the minister refers to in the United States of America but an even more shadowy organization for many of us because we've never heard of them. We know they're out there doing their job, and we're thankful for it, but they seldom seek a public profile. That's the Canadian Institute of Actuaries, the CIA.

People have been letting me in on their web sites and their private communications about this bill, because as I've said a number of times -- I know the minister's sick of hearing it -- the pension industry would have liked to have been involved way before now. The CIA, I'm sure, is included in that. They would have liked to see an exposure bill.

The synopsis that I'm going to read a little bit from says this:

"Many of the union-sponsored pension plans in this province have been working toward providing their pensions to their members that include generous early retirement subsidies."

"The feeling was that by subsidizing early retirement for older members, they can encourage younger people to join the trade at a time when a great number of trade union jobs were being lost to non-union companies. The loss of these jobs was particularly galling to the unions in light of the fact that they were the organizations that were running and hence subsidizing the only training facilities in the province for all those workers, who were then leaving the union to work for the non-union companies. So now the unions are in the position where they feel that the union pension plans are subsidizing early retirement for members who are then turning around and undermining their position by working non-union."

They go on to say:

"Unfortunately" -- and I shouldn't give the impression that I'm necessarily speaking for the whole organization; these are internal communications amongst the members -- "they have now left themselves in the position where not only are they subject to all the bad press that they've received as a result of this position but have suffered it to gain the right to impose rules upon their retirees that are operationally virtually impossible to apply consistently.

"How will they find out if Joe was working for a big, bad, non-union employer for two weeks, six weeks or four hours? They'll tell you the membership will police the situation, but then are boards to cut Joe off pension on Bob's word? What about if Joe helps out his neighbour -- or his Premier -- by building a deck on the back of his house and is paid in beer? Then there's all the costs of stopping the pension, recalculating the pension and restarting it."

Hon. D. Lovick: The member is going back, again, to what we did and didn't do in introducing the legislation, and I find it difficult to see that as connected to committee stage on this particular section. Moreover, the member is not quoting an official document from the Canadian Institute of Actuaries. Rather, he is quoting from the chat line and one person's opinion, apparently, in this whole debate that goes on. So I think we need to get that clarified.

[1725]

I have copies in front of me -- which I don't want to take up the time of the House to read into the record -- of letters from the Coalition of B.C. Businesses and the Business Council of British Columbia written to the minister, both on June 10, putting him on notice that these organizations are very concerned about the provisions of Bill 58, section 48 in particular. Does it give the minister pause at all that these major business

[ Page 13655 ]

Hon. D. Lovick: No.

Section 48 as amended approved on the following division:

 

YEAS -- 35
Evans	Zirnhelt	McGregor
Kwan	G. Wilson	Hammell
Boone	Streifel	Pullinger
Lali	Orcherton	Stevenson
Calendino	Walsh	Randall
Gillespie	Robertson	Cashore
Conroy	Priddy	Miller
Dosanjh	MacPhail	Lovick
Ramsey	Farnworth	Waddell
Hartley	Smallwood	Sawicki
Bowbrick	Doyle	Giesbrecht
Goodacre		Janssen
NAYS -- 25
Whittred	Plant	L. Reid
Neufeld	Coell	Chong
Sanders	Jarvis	Anderson
Nettleton	Penner	Weisgerber
Weisbeck	Nebbeling	Hogg
Hawkins	Stephens	Krueger
Thorpe	Symons	van Dongen
Barisoff	Dalton	J. Reid
	J. Wilson

Section 49 approved.

Section 50 approved on division.

Section 51 approved on division.

Sections 52 to 56 inclusive approved.

Section 57 approved on division.

Sections 58 to 63 inclusive approved.

Section 64 approved on division.

Sections 65 to 69 inclusive approved.

Section 70 approved on division.

Sections 71 to 75 inclusive approved.

On the title.

K. Krueger: I'd like to suggest to the minister that the bill be named the Pension Suspension Bill. Perhaps the minister would care to comment on that.

The Chair: Member, that would not be in order.

Title approved.

[1735]

Motion approved on division.

The House resumed; the Speaker in the chair.

Bill 58, Pension Benefits Standards Amendment Act, 1999, reported complete with amendment to be considered at the next sitting of the House after today.

Hon. D. Lovick: Madam Chair, I'm not sure whether I should be calling Education estimates. I don't see the minister handy. I will call Committee of Supply, then, and we will entertain the estimates of the Ministry of Education.

[1740]

ESTIMATES: MINISTRY OF EDUCATION
(continued)

G. Hogg: When we were last engaged in discussing these estimates, which seems so very long ago now, we were. . . . At least the last time I was present doing that, I believe I had to depart for a period of time to deal with some issues of storms and floods in White Rock. In the interim, a number of members were asking some specific questions around their constituencies and matters that pertain to them. When we were last discussing this, I was trying to convince the minister with respect to some goal-setting and issues around goals, and I didn't have great success in terms of doing that. I noted that there has been some discussion about the portable classroom reduction. There are some GVRD school districts. . . . The portables, as established in 1998 and their projections for 2002, and the estimated numbers of portables to be removed. . . . I'm not sure where this sheet of paper came from, but I'm wondering if the minister has access to information regarding portables at this point in time, or have we been called so quickly that the minister has not accessed those?

I'm interested in the number of portables that currently exist in the province -- the reduction plan, the goals. How those are going to be reduced? If that could be broken down in terms of schools districts, that would be helpful in terms of the planning that we're looking at as well.

Hon. P. Ramsey: We will have staff with us shortly, I suspect, or after the dinner break and then we can go into what we know about district-by-district reductions. Last week I gave folks an update on where we are with portable reductions one year into the plan. Actually, I reported on those figures to this chamber, I think, before we made the public report on it. I said that last fall, the fall of 1998, we had 3,150, if

[ Page 13656 ]

G. Hogg: Hon. chair, through to the minister, are you saying. . . ? I don't mind if you wish to take the adjournment at this time to have access to your staff. I've got a number of subject matters I want to move into. Are you comfortable just moving onto other matters?

Hon. P. Ramsey: Whatever the member wishes. Staff are arriving as we speak, including the person who has all the details on capital construction. That's why he's bowed under the weight of those binders. I'm sure we can provide the member with the details of where we are in portable reduction, district by district, depending on what line of questioning the member wishes to pursue.

[1745]

Hon. P. Ramsey: I knew staff would have the sheet of paper I required, and I have it in my hand. It actually includes a reporting out by district of existing portables for the current year, projected for '99, projected for 2000 and actually on into 2001 and 2002. The one thing I would caution the member on -- if he is looking at the portable update fact sheet which was provided to the media last Friday -- is that it shows for the Greater Vancouver regional district a move upward in the number of portables after the year 2000. Is that the sheet that the member has in front of him? Yes.

This reflects the fact that the figures for portable reduction include only projects currently announced. This includes the effect of the announcements we've made since the portable reduction plan was initiated in the spring of 1998. We announced the first batch of reductions in the spring of '98. Last fall, after we asked the school districts to produce a capital plan earlier than usual, we announced a further batch of projects -- actually, two further batches of projects. Then a few weeks ago we announced the final part of the capital plan and portable reduction projects included in the budget that we're now debating, -- the '99-2000 budget.

Obviously there will be additional projects required to meet our targets, and those will be announced as part of the year 2000-2001 capital plan and the following year's. So the figures that the member has in front of him, that I have in front of me, project what our current portables are, where we're going to be this fall and where we're going to be in the fall of the year 2000 just based on currently announced projects. There will be more to come so that we can meet the targets that we've set for ourselves.

G. Hogg: The paper which the minister was referencing. . . . Is that something which will now be made available to me to review with respect to the breakdown of school districts and the portable plan for each of those districts?

Hon. P. Ramsey: Surely.

G. Hogg: Then I will expect to receive that sometime in the near future. All right.

Interjection.

G. Hogg: Over dinner -- a wonderful time.

My intent is then to move into the provision of services and some of the roles of government and governance within that. I guess we'll start into that at this stage, then, rather than call for our dinner break.

As the minister is aware, there have been a number of comments and questions over the past year with respect to the role that school districts are playing within the overall provision of educational services and the role that PACs are playing within the provision of services. I believe the number which was put forward was some $30 million that PACs raised across this province during the past year for the provision of a number of services within schools. A number of those PACs and a number of the principals in the schools in which they are functioning talked about some of the services they provided. Some of those were interpreted by some school educators as being core services. I'm interested in the minister's definition of what constitutes a core service and whether or not he sees those core services as being provided out of the operational budget -- or the impact that PACs might have on an operational budget.

[1750]

G. Hogg: How would the minister then explain the $30 million raised during the past year and the statement by a number of educators that some of those dollars were in fact used for textbooks in various areas. I appreciate that some of these may be specific examples that are difficult to respond to, but I know of a number of areas where the schools have actually provided textbooks and such things as copying paper through that. A number of the PACs have been actively involved in some of those areas, but my premise would be that those constitute core services. Certainly that's the interpretation of those PACs as well.

Given that the minister has stated that the budget before us for discussion at this point in time will encompass and be sufficient to provide all of those services in those schools, then. . . . The same statement was made last year, yet we're still hearing from a number of PACs and schools that in fact that did not occur. Is that something that. . . ? Well, I don't want to try to provide an answer for it. I should leave the minister to look at that.

Hon. P. Ramsey: Let me just put a couple of things on the record. We're unable to verify the figure of $30 million raised

[ Page 13657 ]

Let me just say this. You can't prevent parents from raising funds. Frankly, as long as there have been PACs and parents, there has been fundraising going on in our public schools for things around the edges of school activities. I remember my days as a PAC chair, and as I've said in this chamber and to others, I sure did my share of selling hot dogs and chocolate-covered almonds. At the time, we were intent on a couple of things that were nice to have for the school, that we wished to have and that weren't seen as priorities by the administration of the day. We think we did good work for our kids. I think PACs today do exactly the same thing. They do have access to some resources that we didn't have back in the early eighties when I was doing that sort of thing.

Let me say this, though, on the issue of school supplies. It is the ministry's expectation that the budgets provided to districts are sufficient to enable districts to provide the school supplies and texts that the member talks about as required learning materials. One of the things, when we get into this discussion, that frankly puzzles me a bit is how one school in a district can say that a PAC is raising money for paper and that other schools in the district aren't. This has occurred. The member may even have clippings in front of him that suggest that fundraising for paper occurred in district 57, my own school district. Well, there are some 66 or 68 schools in that district. I do not understand why two or three of them say that they're so short on paper that they have to fundraise for it and the other 65 seem to be just fine with the allocation for paper and supplies that is provided by the ministry and then distributed by the school district. I grant you that fundraising does go on, at times apparently for aims that I believe should be and are covered by core funding provided by the ministry

[1755]

One measure of the resources that school districts have available to them is that we provide around $25 million a year in learning resources, which goes into the trust accounts in school districts. When we checked on how much those trust funds contained at the end of the last school year -- unspent, being held by school districts -- the answer was $12.15 million. Now, maybe there's good planning and all those funds are allocated for some purpose within school districts. Frankly, we do not have the ability to track that, nor should we. That's in the hands of the school districts. But I would suggest to the member and to the chamber that the magnitude of those trust funds held by districts suggests to me that there is money in the system for the sort of core supplies -- books and paper and other consumables that are used in learning -- that we think should be provided through the public purse.

Noting the time, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported progress, was granted leave to sit again.

Committee of Supply A, having reported progress, was granted leave to sit again.

Hon. P. Ramsey: I move that the House at its rising stand recessed until 6:35 p.m. and thereafter sit until adjournment.

Motion approved.

The House recessed from 5:58 p.m. to 6:36 p.m.

[The Speaker in the chair.]

Hon. P. Ramsey: In this chamber, I call Committee of Supply to consider the estimates of the Ministry of Education. In Committee A, I call Committee of Supply to consider the estimates of the Ministry of Employment and Investment.

The House in Committee of Supply B; W. Hartley in the chair.

ESTIMATES: MINISTRY OF EDUCATION
(continued)

G. Hogg: My thanks to the minister and his staff for the provision of the information with respect to the portables and the breakdown by districts. I'm sure that will make for exciting reading later this evening or later in the week. We carry on.

The minister made reference -- just prior to us taking a break -- to some $12.5 million which was located in the trust funds that exist for school districts around the province. I wonder whether or not there has been any planning by the minister or his staff with respect to limitations on that -- regulations, ways of managing what appears to be a valuable amount of money in terms of the utilization. I understand that it is given with some restrictions. It is held in the trust. Is there any direction with respect to how that might be expended? Are there any plans to change the regulations, limitations, utilization of that money so that it might be better utilized for the overall goal of providing those types of services to students -- which we've talked about, and which districts have talked about feeling so tight and difficult around?

[1840]

[ Page 13658 ]

The rules around it are fairly straightforward. They do get modified on occasion. Any expenditures from those trusts must be reported to the ministry so that we know what it's been spent on. Obviously, it's for learning resources, books, supplies, lab supplies and the like. It's not to be used for capital. In the near past, the issue of computers came up. You can use this account for software, but you can't use it for hardware. We have another trust account that's devoted entirely to technology equipment, with the same sort of parameters around it. By and large, this works well.

As I said to the member, by pointing out that the districts had, at the end of last year, $12.1 million held in these trusts, I'm not in any way saying that they don't have good plans for this or aren't intending to use it appropriately or that it will not be expended appropriately. I'm sure that it will be expended appropriately. My point was that it's hard to reconcile some of the expressed concerns that occasionally arrive from a particular parent group -- attached to a specific school in a specific school district -- that's there's a huge shortage of resources for books and paper when this magnitude of funds is held in trust by school districts around the province.

We think this is an appropriate way of provincially saying, "Look, ongoing renewal of supplies, books and the like is an important part of what schools do; we think it's important enough that we'll tag this money for you," while at the same time leaving the school district unfettered in their ability to decide in any one year whether it's going to be spent on a new set of grade 4 math books or enhancing supplies in a grade 11 biology classroom. We don't want to fetter the school districts in that regard. Frankly, when you get down to that level of planning, it's far more appropriate that it's done at the local level.

G. Hogg: I certainly share and support the sentiment expressed by the minister. In an effort to reconcile the types of problems which we're seeing or which are being expressed by a number of school districts and, more specifically, schools, I too search for some way to rationalize the fact that some schools are saying they don't have enough money for textbooks when a $12.1 million trust fund exists somewhere. I can see the frustration which may emanate from those people in receipt of those queries.

Has the ministry or the minister looked at a rationalization or a comparison of those school districts which are making these statements about not having enough money and whether or not they are the ones, in fact, with trust funds? Or do we have some with trust funds that exist out on one side, and they are not the ones that have the shortages which are being expressed? It seems to me that in the process of co-governance, it would be in the interest of the minister to ensure that there be some rationalization of those dollars with those school districts which are expressing those types of concerns, because the antithesis of that is, obviously, that there may well be school districts who do not have funds in their trust accounts, who are short of the provision of what we were talking about as core services and may therefore be in need of the supplementation which is occurring through the fundraising which the PACs have referred to. So I'm just wondering whether or not there has been inability -- or whether you have the ability -- to break that down to the level necessary to provide that type of rationalization.

[1845]

I don't know what's specifically in their budget that they intend to spend that on. We can probably get that information. But one expects that they will continue to carry a sizeable balance on reserve in this trust account. That does make it frustrating for parents who are hearing, on the one hand, that there are no supplies in the schools and that things are going to be very difficult, and on the other hand, the books show that the district is carrying substantial reserves in this trust account.

G. Hogg: I think the principles that we're talking about in terms of this probably go to the crux of delegation of authority, delegation of responsibility and the accountability that exists with that. I'm sure the minister is well aware of the principles of delegation: the more we delegate and decentralize authority, the greater the accountability that must exist within that. I'm just wondering where the accountability process ties into that.

I hear the minister saying that it exists at the district, but the ministry has to hold them accountable for the reasonable and responsible expenditure of those dollars.

Interjection.

G. Hogg: The minister is saying that they do. Yet we sit with this dilemma of having PACs say they raise money that goes into that, and on the other hand, these funds are sitting in there. At some point I guess it would seem reasonable to do some rationalization with respect to those districts, those schools that are saying that and saying: "You have money here. How can this be rationalized?"

Consistent with that is the whole notion of school fees and fees for various items that occur within the process and course of an educational year. I have been privy to a number of letters which the minister has received, I believe, from a woman in his riding with respect to which he's had an ongoing debate -- a sometimes acrimonious debate -- with the school district and the minister regarding the whole role of school fees and how they tie into it. Of course, the naysayers or the doomsayers may talk about the PACs having to raise their $30 million to support core services -- school fees coming into it -- and are trying to portray us as moving towards a two-tier educational system as a result of that.

For the record, I would just like to have the minister's response with respect to those issues around school fees, perhaps even referencing the case coming out of Victoria where there was a decision regarding that. Would he give us a full sense of the ministry's position regarding school fees and

[ Page 13659 ]

[1850]

The basic principle is pretty clear. The School Act sets out that this is a free public education system, and one should be able to attain graduation requirements without payment of fees. The difficulty is that the school system keeps evolving, and what we've been attempting to do is make sure that there are opportunities within the school system for activities that, frankly, in the past might not even have been contemplated.

Let me take a very obvious one: field trips. Schools -- districts -- are allowed to charge a nominal fee for field trips as long as they're also making provision that this is not a barrier for students who wish to participate. Most school districts do this very sensitively, very well, school by school, and when children do not have the wherewithal for whatever it is -- in the case of Prince George it might be 20 bucks for a field trip to Barkerville for a day, a common site for a field trip -- the child will get to go.

The chronology actually goes like this. Last year we did have a challenge in Victoria. We did change the school regulation in response to that case. Permissible fee categories are really rather limited, and I'll read them into the record for the member. Materials used in goods intended for a student to take home for personal use or as a gift; the purchase of paper, writing tools, calculators, student planners, exercise books, computer diskettes and other school supplies and equipment for students' personal use; the rental of musical instruments for students' personal use; and the cost associated with field trips. That's where we sort of said: "Right."

It's equally clear that there are a number of fees districts charge that really have far more to do with ancillary activities around running the school than with coursework. I don't know what it's like in the high school where the member's children might have attended. In my case, there was a fee that kids paid for lock rental for the year -- essentially a deposit fee. I know that it didn't cover the cost of the lock, but if you didn't get the lock back at the end of the year, you forfeited your fee. Gym strip -- you're going to buy that. Well, I don't think schools are in the business of providing free gym strip, and I don't think they'd want to actually rent them and have them returned.

In the summer of '98 we clarified the school regulations around fees -- that it had to be limited to educational resource materials, goods and services, as I've just outlined -- and most districts then set about modifying what they were doing within their districts to fall in line with that regime. I must say that there were some that did not, including district 57. District 57 has now brought forward, for its board's consideration, changes to fees that are charged in Prince George schools to bring them in line with the school regulation. I expect that this will, hopefully, satisfy this constituent in Prince George that we are not moving towards a two-tier system. Indeed, the principle of public education is that this is a taxpayer-supported education for all British Columbians, accessible to all children regardless of the financial circumstances of their families.

[1855]

Hon. P. Ramsey: The member has just stumbled on one of my favourite illustrations of where the lines should be drawn. Let me fly at it.

Schools should not be charging for the sorts of materials that are required to complete basic projects in a woodworking course -- you're making a bench out of pine. On the other hand, if the student decides to undertake -- as my daughter did -- the building of a loveseat in oak, I would not expect taxpayers to assume the cost of those materials, since that oak loveseat now sits proudly in my cabin in northern British Columbia. Obviously the real beneficiaries of it were my daughter, in terms of learning the skills associated with building such a project, and our family, in having the result of her efforts in that course. There's a line that I think we can draw. Obviously with such a line, you get some fuzz around the edges, but I think it's fairly clear where the lines need to be drawn

G. Hogg: Last year and again this year, a number of school districts have seen their budgets as being rather restricted in terms of the provision of services that they saw as being appropriate. Some chose to cut some areas of special services; others chose to go over their budgets in some areas.

Are there any provisions in this year's budget in terms of rewarding those school districts that cut services last year? I'm just wondering whether or not the minister has considered incentives rather than disincentives in some of the budget allocations. I make reference to Surrey, which I discussed with the minister last year. The Surrey school district worked hard to make some provisions and cuts. Then, with the agreement-in-committee coming in, it compensated for areas that they had not cut in, that they had protected. Therefore they saw themselves as being mistreated by the process that took place.

I'm just wondering whether or not there are any considerations, provisions, ideas to look at the type of equity that might come out of that in terms of the school districts which have seen themselves responding responsibly to some of the initiatives that come forward and yet are seeing themselves penalized by a more generic approach to the budgeting process by the ministry.

Hon. P. Ramsey: I guess the first thing I would say is that I'm not totally comfortable with the way the member has described the effects of the provincial collective agreement. I don't really want to prolong the debate that we had last year. I said in that debate, in estimates and then as we debated the legislation, that everybody recognized that the contract would have variable application in the 59 school districts across the province.

But what we are looking to do is look past the actual deliverers of education at the regional level, districts, and look

[ Page 13660 ]

[1900]

In terms of incentives, I'll mention a couple. School districts get funded for heating and lighting pretty much based on what they actually spend. We've sought to build an incentive into our funding of school districts by saying to districts: "Look, if you do a review of your heating and lighting expenses and find a way of reducing those, and if you do indeed reduce them, we'll let you keep the difference for five years. We'll keep funding you at the higher level even though you've found ways to reduce it by 10 percent or whatever -- in some cases, maybe even more than that."

Similarly, in another area of school district expenses, transportation, they said: "Well, this is an expensive item for some districts. If you can find ways of reducing transportation costs, we'll let you keep a portion of that difference for three years." Again, it's obviously some incentive to continue to provide transportation, but if efficiencies are found by, say, coordinating with B.C. Transit in a community or sharing services in some way with other agencies, school districts can retain a portion of that difference. That's the sort of incentive that we have been working on.

We've also sought, in a variety of areas where it is appropriate -- as I think the member knows -- to actually assist districts by assuming a broader responsibility. One I've mentioned is acquisition of licences for software. If we have 59 different districts or 1,700 different schools, each trying to go out and get the best price for Microsoft Word from a local supplier, chances are there are going to be huge variations. So we've struck one licencing contract for that and have been able to provide that software to districts at a price considerably lower than even an educationally discounted package through a local supplier.

That's the sort of ongoing work we have in seeking to assist districts and achieve efficiencies in delivery of education.

G. Hogg: The issues we've been talking about since the break: the expenditures and the roles of the PACs; the issue of school fees; the issues of incentives within the context of the budget; referring to some of the specific issues that are contained within the overall role of government and consequently of governance; co-governance as it applies to the school district level and the ministry level; and the dynamic tension -- perhaps that's a good term -- that would exist between the provision of services in those two areas. . . . One of the issues which has been continually portrayed in the media -- and, again, it's an issue which I've had reported to me a number of times -- suggests that we get into positions where the school district is pointing at the ministry, saying, "That's your responsibility," and the ministry is pointing at the school district and saying: "That's your responsibility." I attended some of the public meetings held by the school district in greater Victoria and listened to a number of the discussions they had around music programs and the impact of them.

I'd just like to read into the record. . . . I have a copy of the minister's letter that was sent to the Coast Mountains board of school trustees around that, and I'll just read a bit of that. I think it categorizes or exemplifies the concern that I see with respect to the issues of governance, with two sides pointing at each other. I'd be interested in the minister's comments, not on this issue specifically in terms of this school board but more particularly in terms of the issues of responsibility and clarity that exist within that. In the letter the minister says: "I categorically deny making any suggestion that your school board cut band programs in your schools. Those kinds of decisions are made solely by you and your colleagues at the district level, and I deny the allegation that I have told your board what you should do. Mr. Turner's suggestions -- that I have been less than supportive, even dismissive in terms of your budgetary concerns -- are false." This is the minister's letter to Linda Campbell, chair of the school board.

[1905]

Hon. P. Ramsey: It is regrettable, actually, when relations between a minister and trustees, or a ministry and local administration, become acrimonious. I think the letter that the member quotes from represents, regrettably, a breakdown in the relationship that I seek to have with trustees around the province. But I must say that the trustee who was asserting things was doing so, really, contrary to fact and was seeking to advance that as a position of the minister and the ministry, and I simply could not let it stand.

What we seek to do, though, is work with boards that are having difficulties, and that is surely true of district 82, Coast Mountains. They had difficulties balancing their budgets; they asked for permission to run a deficit in, I believe it was, the '97-98 school year. I approved that permission to run a deficit but also required that they retire it in the coming year and provided them with some assistance in the form of what we were calling efficiency advisory teams. These comprise people who have experience -- either administrative or district level; often at both -- in school district financing and programs and the like, and seek to provide both the school board and the ministry with a view of financial difficulties that a board may be experiencing and a list of recommendations or possible actions that a board can consider as it seeks to get its financial

[ Page 13661 ]

I want to make it clear: decisions about what programs, or how a board chooses to provide the learning opportunities within provincially mandated curriculum in standards and goals, rest with the board. I tread into those grounds delicately. The School Act, frankly, provides only fairly crude instruments. Boards are required to produce a balanced budget. If they do not, there's a provision in the School Act that the minister can approve a deficit that is usually tied to a plan for retiring that deficit.

[1910]

G. Hogg: I was struggling to try and get the principles that may underpin the pointing of fingers as school boards face minister and minister faces school boards. If I accurately understand what the minister is saying, I think you're saying that the principle is laid out in the act, and beyond that it's a matter of cooperation, agreement, reconciliation and mediation in an effort to come to some type of agreement. If one becomes recalcitrant in their position, then ultimately the minister has to respond to the needs of the act and put that within context in terms of retiring debt. The debt is, of course, interpreted by parents and school districts in terms of services and having to deal with those services.

Would the minister say that I have a reasonable understanding of the statement that he made? Or is there some more overriding, pervasive principle which underpins and gives greater clarity to this?

Hon. P. Ramsey: I don't intend to elaborate too much. In our financing system for school districts, we seek to distribute the $3.6 billion that we're debating in these estimates fairly and equitably. I know the member has been briefed on the funding allocation system. It is a complex system. It seeks fairness. It seeks to have as its goal the needs of children to receive an education and to work through the various circumstances that kids find themselves going to school in: small classes in a remote community, large schools in a major urban centre, differences in transportation, maintenance, heating and lighting costs. There are a huge range of factors that go into differentiating costs.

We seek to make sure that that formula reflects the requirements of delivering a quality education and that it is constantly reviewed to make sure that it is distributing funds fairly. So equity and fairness are the underlying principles of distributing the moneys that we're debating in this chamber tonight.

G. Hogg: The debate has been so exciting that we've been able to fill up a number of the seats on both sides, and as the Minister of Health just pointed out to me in a little note, people have great confidence and trust in those over here because of the excitement. In fact, it may be that people are watching in their offices and are so entranced with the discussion that they can't get away from their TV to come here and partake in it in person.

Hon. P. Priddy: I said that?

Hon. U. Dosanjh: I am certainly interested.

G. Hogg: I appreciate that the Attorney General is also totally enthralled with the discussion that has gone on to date. If those people who are in their offices want to take the time to get here, we could probably allow them a couple of minutes. I promise not to say anything too exciting that they'll miss. I'm sure that we'll be able to fill them in later, should they jog here quickly and miss out on that.

[1915]

Hon. P. Ramsey: I want to point out that no district has submitted a deficit budget for '99-2000. Districts ask permission to run a deficit, usually during the course of a school year. The list I'm providing here for the record is for '98-99, the current school year -- not the current budget year. There are 12 districts that have indicated that they may need deficit approval or have formally requested one. I think that's exactly the same number as last year. It seems like each year you have a number. This is now my third set of estimates in the Ministry of Education. It's been around a dozen each year.

This is in numerical order of school district. District 20 requested $120,000, which was approved; there will be a one-year retirement of that deficit. The district 28, Quesnel, request for $150,000 is in progress; we haven't signed off on that yet. Burnaby requested approval for a $400,000 deficit; it was approved with a one-year retirement. District 47, Powell River, requested $179,000; we requested further information. District 63, Saanich, had $255,000 approved -- one-year retirement plan. Gulf Islands, district 64, had $390,000 approved; this is, I think, a two-year deficit retirement plan. They got themselves in some considerable difficulties a couple of years ago. Coast Mountains want $730,000; information was requested -- clearly a serious situation there. It'll probably be a multi-year retirement plan, but we haven't finalized it yet. The district 85, Vancouver Island North, request for $150,000 is in progress.

So as the member can see, those are the ones that are actually new this year -- eight of them, which are really for relatively modest amounts relative to budget. Clearly the one that is of the most serious concern is district 82.

We also had four that actually had carryover requests; we'd signed off on a multi-year deficit retirement plan in

[ Page 13662 ]

[1920]

G. Hogg: The minister has reviewed and looked at a number of criteria that would be in existence for these 12 districts which have sought permission to carry their deficit, and has said that there are a range of ways of looking at them. Does there exist for the ministry, for comparative purposes, a set of criteria or a checklist? Or do we just look at the various circumstances as they exist? What in fact is the template upon which a school district is measured before it would be given permission to carry a deficit, and what is the direction given subsequent to that?

[J. Doyle in the chair.]

Hon. P. Ramsey: Yes, there is a list of the criteria we use when we review requests for the approval of deficits. I'll just read them into the record for the member: this has to be the result of something unforeseen -- as I said, the districts are required to submit a balanced budget, and therefore we don't expect a deficit to be run because of a circumstance that was well known and foreseen at the time a budget was put together; a reasonable explanation of why it's going to be incurred; in most cases, a requirement that it be repaid within one year -- I'll get to the exceptions; under a set percentage of budgeted expenditures, usually 1 percent; the district has appropriated to the current year all its accumulated operating surpluses from prior years -- in other words, it's not asking for this year and still has cash in the bank; it should not have a history of multi-year deficits -- in other words, there's not a pattern here of a structural situation that's not being dealt with rather than an unforeseen circumstance; and finally, that the district has submitted a deficit retirement plan -- how it intends to get expenditures in line with revenues.

If we approve a deficit, the approval will require retirement within one year unless we're acting on a recommendation, usually from an efficiency advisory team, that we consider a longer retirement period. If we're not sure about any of these particulars, obviously we ask for more information from the district and consider approval case by case if we've got really exceptional extenuating circumstances. The final thing I'd say is that if we do have a deficit retirement plan. . . . We do ask for quarterly updates once we've approved a deficit to make sure that the district is on track for actually getting things in order -- that they're adhering to the plan and not incurring a new deficit in the coming year.

Finally, if we do have a circumstance where we've got a multi-year plan and the district has obviously had some severe financial difficulties that it's trying to overcome, we may require monitoring that's a little more intrusive -- perhaps even monthly reports on how they're doing in adhering to the plans that they've submitted and we've approved.

[1925]

The quizzical look upon his face would suggest that I haven't been perfectly clear in my question. It'll be great communication if I'm not perfectly clear and you're not perfectly clear. Through the hon. Chair. . . . I love having conversations that are circuitous in nature.

Hon. P. Ramsey: Let me say that I assume the member is not talking about information around the retirement of deficits. Obviously deficits occur during the school year, not in advance of budget preparation. Circumstances arise as they arise, and then the trustees have to deal with them as they go on. I assume that what the member is talking about is the time period from when districts are given preliminary budget figures for the coming school year and when they're required to submit a budget. The target we constantly shoot for is to make the date specified in the School Act, which is that we've given it to them by February 1. Then we ask them to submit their preliminary budgets by the end of April. Where we really vary greatly from that. . . . Then we seek, if necessary, to provide a little more leeway on behalf of school districts as well.

In the current year the block announcement was some three and a half weeks late -- not February 1, but February 26. The date for submission of a budget remained, I believe, at April 27. We didn't receive a lot of requests for extensions. If we had, we'd have been prepared to look at it. Every year we do find that there are a few districts that don't quite hit the date. Frankly, we don't do much about that as long as they're coming in and we know from them when we can anticipate it. I think the latest this year was -- what? -- maybe ten days after the date that had been set.

G. Hogg: I'm delighted to see that the member for Shuswap was one of those people who was watching on television and beat a hasty path to get here to participate and witness the excitement that's taking place here.

I'd like to go through some of the enrolment statistics as they exist and are projected, looking at what the overall expected enrolment is in the coming year compared to this year. If we could have some type of geographic breakdown of that. . . . I don't know whether you have. . . . Perhaps there's

[ Page 13663 ]

[1930]

The rough story, though, is this. Last year -- actually, the current school year -- for the first time in many years, we actually had a slight decline in school enrolment. School enrolment this year was 614,458 total enrolment. That was down around 1,500 from the previous year; it was 615,980 the previous year. That was the first year we'd had a decline, really, since this chart started at the beginning of the decade. So we'd had a whole decade of quite extraordinary growth -- growth rates of 2.5 percent, 2.8 percent, 3.7 percent -- year over year. This year it went down by 0.2 of 1 percent.

Frankly, this decline caught some school districts by surprise. They planned, when we were doing estimates at this time last year, for enrolment that would continue to grow. Some were projecting enrolments of 8,000. That's what the estimates contained. We debated them. School districts were saying: "Well, at least four." In any event, it turned out that we had a slight decline.

I have been urging, both formally and informally, school districts to plan quite conservatively for the coming year. If more students show up than they anticipate, we provide additional funding for each student. There's no real problem with having more students show up than you plan for. Sometimes there are great difficulties if you have significantly fewer students show up than you plan for. This year the districts have told us that they are planning on the basis of some 3,000 to 3,400 fewer students next year than this year. I think they're following what I suggested to them and are planning very conservatively. There's a real division of opinion as to whether that figure is going to be accurate or whether we will be nearer flat enrolment next fall.

That's where we are right now. That's the current planning number that the districts are working on. I would caution the member that we won't know until the kids actually show up in September. Last year we and the school districts planned for considerably more children than actually enrolled in the fall. We won't know for sure until we see students entering the schools in September.

G. Hogg: Do you have access to enrolment numbers for the breakdown of, for instance, the fine arts programs -- the number of students who might be doing that in, say, grades 11 and 12 -- and any comparisons to previous years? I'm interested in whether or not we're seeing some type of shift around fine arts programming and whether or not we have access to information regarding that.

Hon. P. Ramsey: That information is usually gathered in a form that we can report on in the fall, following the close of a school year in the spring. We don't have any for the current year obviously, and we don't have that sort of detailed breakdown with us in the chamber. I'd be able to provide the member with, say, the last ten years of enrolment in whatever program category he wants to request it for.

[1935]

Interjection.

G. Hogg: The fine arts in particular. If there are some other specific trends. . . . I'm just interested in the arts, music -- those types of areas -- and any types of trends that may be in existence within those.

Moving quickly, if I may, to the issue of home schooling, can the minister advise me of the number of students we have in home schooling this year, our projections for next year and any comparisons that might exist with past years?

Hon. P. Ramsey: I can give the member an estimated number for the current year and then exact numbers for the last few. The current school year estimate is that we have 4,600 students in the province that are being home schooled. In '97-98 it was 4,300; the year before that it was 4,900; in '95-96 it was 4,800; the year before that it was 4,300; and the year before that it was 4,200. There seems to have been a jump in the mid-nineties, and since then it not only stabilized but declined slightly.

G. Hogg: The organizations I've spoken to and the many people who are home schooling their children seem quite satisfied with the support they get from the ministry and the issues that are contained in those. One area of concern that has been expressed is that of, at this stage, not receiving acceptance from the university level. You graduate from home schooling, and you can get accepted at the college level. However, some people who are involved in home schooling are, as a result of that impediment to the post-secondary education which might be available to their children, going back to a regular school system for the final year in order to achieve that.

I'm wondering whether or not the minister has looked into that -- whether there is any possibility of addressing that in the future, whether that is in fact a reflection on a statement with respect to the quality of home schooling, whether or not our standards with respect to them are managed in a fashion which would allow us to say, "You're able, if you graduate through home schooling and meet the requirements of the ministry anywhere in this province, to qualify to attend any post-secondary institution in our province," and whether or not that exists solely with the universities and the minister has looked at that.

Hon. P. Ramsey: What the member's asking for are ways to overcome a problem, but the problem is really inherent in the nature of home schooling. I mean, there is no provision under the School Act or regulations -- in this province, at least -- that home schoolers adhere to the provincial curriculum, meet the accepted outcome standards that we expect for grade 12 graduation in a public school or an independent school, or demonstrate that proficiency through standardized examinations as we do in the public school system. So this obviously leaves post-secondary institutions with a considerable challenge in seeking to evaluate the qualifications of a student that has been home-schooled for his or her elementary and secondary years.

[ Page 13664 ]

T. Nebbeling: On the subject of home schooling, I would like to ask the minister about a program that I was exposed to about three months ago when I visited Fort St. James. In Fort St. James there was a program broadcast via the Internet where students were educated at home, according to the curriculum prescribed by the Ministry of. . . . Is the minister aware of this particular program?

[1940]

T. Nebbeling: I am specifically talking about children that have an Internet link at home and are instructed from this particular centre. At the time that I visited, there were 347 students enrolled. These students were all over the province, but they also had some students in the United States. Is it a program that is in part financed by the Ministry of Education, or not?

Hon. P. Ramsey: I want to first distinguish between two things for the member. One is an electronically delivered program, through the Internet or elsewise, which follows provincial curriculum, instructs the courses that are specified, tests on the learning outcomes that are expected in those courses and enables a student to meet graduation requirements and receive a Dogwood Certificate as if he or she had attended school in a more face-to-face environment. Okay? That's one type. That is, I believe, what the member is referring to. It's a program called E-Bus; it's a distributed electronic learning program that district 91 offers.

There are, if memory serves, I think, 18 or 19 different districts that offer some form of distributed electronic learning program. As the member says, students can enrol in it from just about anywhere and receive learning in that way. Look, these programs must meet ministry standards. They must provide a full education program. The school board that's doing the monitoring of it is responsible for ensuring that provincial curriculum is followed, that student learning is directed, that there are appropriate learning resources and that there are assessments and reports on student progress. That's one type.

Home schooling. If a parent chooses to home-school their children in British Columbia, unlike many other jurisdictions, there is no requirement for a parent to follow provincial curriculum, to meet prescribed outcomes or to do any of the things that we expect to be delivered. So there are, really, two very different sorts of programs. Where the member is correct is that many parents who like the idea of keeping their kids at home for some schooling are now using electronically distributed learning, rather than simply saying: "We're out of here; we're not going to have any truck nor trade with the school district." In that way, it may be a net positive and might actually address the problem that your colleague from Surrey-White Rock was pointing to -- of home schooling not being able to demonstrate proficiency that would gain university entrance.

T. Nebbeling: So just to clarify the last point that the minister made, students that do participate in the program through the E-Bus system, so to say, would qualify after graduation for university level, versus the other home schoolings? Or are there still other elements of courses to be taken before they would qualify for university -- only because they have done this electronic system rather than participated in a regular school environment? That was my first question. Maybe the minister wants to answer it before I ask another question.

[1945]

T. Nebbeling: Can the minister explain the financial assistance then given to parents who choose to have their children educated via the electronic system, via the E-Bus program -- how these parents are financially assisted in making it possible or introducing computers and Internet programs into the environment? How does this work? Does the school district provide this or is this something that parents have to provide?

Hon. P. Ramsey: The ministry provides the district with $3,500 per student that is receiving instruction through a distributed electronic learning program. How the district structures that program is the purview of the district.

The member is correct in that my understanding is that some districts do, indeed, provide either a leased computer or a donated computer to the parents for use in this program if they don't have one of their own. But that is entirely a decision of the school district. What we've sought to do is provide some money for provision of instruction in this electronically distributed way.

T. Nebbeling: I'm asking these questions because of a situation in school district 48. Recently, PAC groups were asked to meet with the superintendent in district 48 and were asked to assist the school district to meet its budget numbers by finding 60 parents who were willing to enter a home schooling program for the education of their children. The savings that would be achieved by having 60 children in home study programs rather than coming to schools were in the order of a quarter of a million dollars, and it was about $244,000 short.

I did get some phone calls from parents, but then, about three weeks ago, there was actually an ad in the Whistler Question and in the Squamish Chief soliciting interested parties who would like to see their children enter into a home training program or a home schooling program. So firstly, if this is going on, is it sanctioned by the Ministry of Education? That's the first question. Secondly, if it is on this basis -- that it is

[ Page 13665 ]

[1950]

Distributed learning is quite different. The school board then has the responsibility of ensuring that the provincial curriculum is being followed, that standards are being met, that students are being assessed as they go along and that learning resources are provided. For that level of accountability, we fund the boards to the tune of $3,500 apiece.

I will only say this, and I'll say it rather gently: I do not think it's appropriate for a board to be, shall I say, encouraging enrolment in a distributed learning system, if the parent really wishes to be free from that sort of school district supervision and adherence to curriculum. What we're going to be doing and have begun is auditing the provision of distributed electronic learning by districts to assure ourselves and parents in a district that if a child registers for an electronically distributed learning program, he or she is actually getting the provincial curriculum, the assessment and the resources that are expected.

The situation that the member describes, frankly, raises a number of concerns for me. If the member wishes, I'd be pleased to discuss this issue further with him -- perhaps not in this venue -- and then we can talk to staff about what other information we might want to acquire.

T. Nebbeling: Then I will not lengthen this short debate -- because I see some concern.

The reason that I did ask these questions is that I'm concerned. It's not that I have personally been told that it is mandatory for 60 families, but some families were under the strict impression that somehow district 48 was going to find 60 families that would enter into, most likely, an electronic program. That was the reason for the phone calls.

I would certainly like to do a follow-up with the minister on this one. Now that I have the assurance that it is not mandatory, I think that will immediately relieve some people of some anxiety. And we will have a follow-up. Thank you, minister.

G. Hogg: If I may, I'd like to move on to some issues around the operating budget, in particular reference to the issues of advertising, including the brochures "Better Learning" and "Bright Lights" and a number of the brochures that have gone home with students. I'm interested in the amount of expenditure which the ministry has allocated for such promotions and/or advertising in the past year and which is contained within this budget year.

[1955]

[W. Hartley in the chair.]

Briefly and very roughly, it costs about a dollar a year to distribute the three issues of "Better Learning" for every child. We produce around 600,000 copies of each. So far, the reaction to this and to other initiatives has been quite positive. I would reference the curriculum guide that we advertised last fall, I think it was: "Better Learning." We anticipated that we might get requests for maybe a couple of thousand of these. So far we've distributed 20,000.

The whole idea here was to get more information about the school system into a parent's hands. It seems to be working. The cost is significant, but I think, given the results so far, that it's a worthwhile expenditure.

G. Hogg: I'm sorry I missed the no doubt harmonious discussion that took place with respect to that. I must declare that in the obligation that I was taking care of, I was at one meeting where I did flick on the TV, and it didn't appear to be that harmonious to me. It seemed to me that there was a considerable degree of acrimony flying about the room, which was much to my surprise and dismay. I will go back and review the Hansard and become fully informed on that, because that's again something that I truly enjoy doing in the evenings and on weekends.

With respect to the full costs of implementing the new teachers' provincial agreement, there were some comments when it was being debated that it would be fully funded within the estimate that's being put forward. Can I just ask the minister to assure me that it has been fully funded in the current budget estimate being put forward and that each of the districts is funded according to their needs, within this budget allocation?

Hon. P. Ramsey: The short answer is one word: yes. Getting there has taken a lot of work, both by school districts and the ministry, to make sure that we're hearing accurately what the requirements are for meeting the needs of it. We believe we've fully met the needs of the collective agreement.

[2000]

I was glad to hear the critic ask the minister about the teachers' agreement last year being fully funded and that he answered in the affirmative. The difficulty, of course, that I have is that in school district 61, which I know the minister is very well aware of. . . . There have been articles written and published in the local paper here, the Times Colonist, about the prospect of school closures. In fact, as I understood it -- and I can't find the original quote. . . . I understand that the minister has said that school closures are not an option, yet I'm hearing daily that there will be potential school closures in school district 61.

Admittedly, there are only five members in this Legislature that represent school district 61, and I'm the only one in

[ Page 13666 ]

I have taken the opportunity to speak to the school trustees because I understand that protocol dictates that they are the locally elected representatives and that they are there to make those decisions as locally elected representatives; however, I have not found that there has been much information relayed to me. In fact, I understand there was a press release that the school board issued about two months ago. Contained within the press release was that the school board Chair, Carole James, whom I know the minister knows well, indicated that she had consulted with locally elected members. I've never been contacted by her personally, and it was only upon my initiation to the school trustees -- the few that I sought out -- that I was able to garner any kind of idea of the possibility of school closures.

So what I would like the minister to do is perhaps provide me, as best as possible, with an update of his understanding on the issue of school closures for school district 61.

Hon. P. Ramsey: First, without reviewing too much past history, let me say this. The question about closure of schools in Victoria first arose as the board was preparing its '99-2000 budget. There were lots of rumours that they were considering closing schools this September to balance their budget. I said -- very firmly -- that no, closure of schools was not on for this September. That does not, however, mean that the Victoria school board shouldn't be considering how to best use the space that it has. Currently the Victoria school board has a capacity in existing schools for 29,000 students. They enrolled, I think, slightly under 22,000 last year. They have enough surplus space to house every student currently enrolled in West Vancouver without building one more school. So Victoria does have a considerable overcapacity situation in its schools.

Now, unlike Ontario, which simply says, "We're not building any new schools until you fill up every seat in existing ones," we're far more flexible here. But I know that the board is considering whether it will undertake a consultation process that might lead to closures of schools in the fall of the year 2000 -- in other words, 15 months from now. Boards have the ability to look at this as a way of rationalizing how they deliver education. They must also seek the minister's approval for school closures. For that approval to be given, I review a summary of responses from the consultation process that they've undertaken.

They are required to consult fully with parents, community, students and staff around closures of schools. They must adopt a school board resolution that they wish to close surplus space. They must present a really good analysis of current and projected school capacities and admissions, so it's clear that the decision they're making fits not just the year they're doing it in but the needs of the neighbourhoods for years and years to come and that they have a clear business case for the proposed closures -- that this is indeed a savings to the taxpayer, by decommissioning unused space, rather than an increase in cost to the taxpayer.

That's the current status, as far as I know it. I do understand that the staff of the Victoria school board have met with ministry officials so that they clearly understand the requirements of the School Act before they can seek permission to close a school. I do think that the board may well be embarking on an examination of what they do with 7,000 unused student spaces in the Victoria school district.

[2005]

That isn't necessarily their first choice. I've always said, and I've always been proud to say, that I am a product of the public education system, at a time when school classes were 35 or 36 -- very fortunate, I suppose. I had very good teachers and have never disputed that it's workable. But the comments or the reasons that came out of school district 61, the greater Victoria area, as to why school closures were being looked at were clearly laid at the feet of the difficulty of the teachers' agreement that was provided last year. Not in every case, but certainly when the parents were trying to find answers, they were informed that there were only two options for getting their potential $1.5 million deficit back to zero. The only two options were school closures or cutting programs, neither of which, in all fairness, would seem to benefit the students, which is what the public education system is designed to do -- provide a service to our students. Closing of schools will not necessarily provide that service, especially for the elementary-age students who have to venture out further. Cutting of programs is definitely not in the best interests of students.

There was an article on April 15 entitled "School Board Airs List of Program Cuts." The school board was creative in getting their message out and essentially said, "What would you cut?" and proceeded to list about ten items, and made it very difficult for parents to understand and accept that. . . . Essentially, I suppose, it shifted responsibility onto the parents to decide what programs would be cut, and indicated that these were hard choices -- the hard choices that the school trustees themselves were having difficulty with.

[2010]

[ Page 13667 ]

As I say, what is most disturbing is the fact that the parents feel that they have not received full consultation. Yet the minister has indicated that there would be full consultation. The school trustees that I have spoken to have indicated that they have already had a process of full consultation with the parents. We're clearly getting some mixed messages here. I would like for the minister to clarify at this time, if possible, what he would envision as full consultation from the parents' perspective versus from the school trustees' perspective.

Hon. P. Ramsey: First, let me say it very clearly and for the record again: no schools in Victoria will be closed this September. The board, I understand, does indeed intend to consider school closures for the following school year -- the year 2000-2001. It is my expectation -- and I think it's what parents would expect -- that consultation around that issue will be thorough and lengthy. I believe that the Victoria school board intends to follow that sort of a process. They may be beginning that process in the near future. Obviously we're 15 months away from any decision on actually closing the school. As a parent, I would want to know if it was my school that might be affected. What are the provisions for transitions? Is my child going to get improved learning resources or at least what I've got now? What happens to teachers that my child may have formed attachments to? There is a whole range of issues around the continuity of education for my children. I think the Victoria school board would clearly be looking at those issues as well at issues for staff. What happens to staff when you close a school?

For the member's information, schools close in British Columbia every year. This may be new to Victoria, but this is not new to British Columbia. Actually, a school will close in my school district this fall. The enrolment has simply dropped to the point -- due to a commercial decision by a forestry firm -- that it's no longer possible to sustain an independent school, and the board will be seeking permission to close it. So this is not new in British Columbia.

The root cause of the situation that Victoria finds itself in is steadily declining enrolment over the past decade. At the start of this decade -- in '92-'93 -- Victoria enrolled 23,065 students. This year it enrolled 22,420, and it's projecting going down to 22,161 next year. So it's declined by 2.4 percent over those years. It's not because the population in Victoria is declining. I think it's growing, actually, in the greater Victoria area. But they seem to be producing fewer children. The demographics seem to be shifting, and there are fewer children enrolling in Victoria's schools. So a system that was built to house 29,000 is now housing 22,000, and the trend is pretty steadily downward.

I think the school board is doing the appropriate thing and looking forward and saying: "So where are we going to be? What space do we require? How do we deal with this in the coming years?" It's not easy. It's far easier, frankly, for school districts to build a new school when you've got rising enrolment -- and open it -- than to deal with the difficulty of declining enrolment and the potential consolidation of space.

[2015]

Victoria does have some difficulties to deal with. Largely, I think, the root source here is that school-age enrolment is declining in this district.

G. Hogg: I seek leave to make an introduction.

Leave granted.

G. Hogg: I know that those myriad of people who are watching this evening's proceedings on television will be unaware of exactly how full the galleries are this evening of people interested in these estimates. But one person who is amongst the many in the gallery is one of our researchers with the B.C. Liberal Caucus, Hazel Mitchell. I would ask that the House make her welcome, along with the many others who have come with her to witness these scintillating discussions and debates.

I. Chong: I would like to ask the minister some questions specific to his comments. He mentions that there are 29,000 spaces for students in greater Victoria. Can he advise whether that is with or without portables?

Hon. P. Ramsey: That's just the school space, just the space in permanent facilities.

I. Chong: Those watching or listening will ponder awhile and wonder if there was an answer there, because portables, although you would like to view them as temporary, are in some cases very permanent in some schools. If we were to count up those portables that are existing throughout greater Victoria and include them in this number of 29,000, then exclude them, I'm wondering how much closer we would be to the actual number of spaces that would be available, seeing that it was apparently an objective of this government to reduce portables throughout the province. Yet we still see that there are many portables that continue to remain on sites with no efforts toward removal. If the minister can elaborate on his previous answer, I would appreciate it. If not, I will move on, but I'll give the minister that opportunity.

Hon. P. Ramsey: Frankly, the last district that I thought we would be debating a huge number of portables in is Victoria -- with the declining school-age population, falling enrolment and 7,000 empty seats in permanent facilities. Look, we are attempting. . . . We set a clear goal -- and we're going to meet it -- of cutting the number of portables in the province in half over five years.

[2020]

[ Page 13668 ]

Our difficulty has been, hon. member, that in too many districts, not including Victoria, we've had too many students spending all their school lives in temporary facilities. We've had schools that have been more portable than school, and that's the problem we're determined to eliminate. I think we started this with the member's question of whether the 29,000 spaces included spaces in portables. The answer is no, it does not include the spaces in portables. Of the 29,000 in permanent facilities, currently 7,000 are empty spaces. Frankly, I think all members could agree that having one-quarter of the seats unfilled -- 25 percent of the teaching space unused -- does present some concerns for the use of tax dollars.

I. Chong: On the minister's last comment, I would agree that we're always trying to be fiscally responsible on this side of the House, and I appreciate that the minister would also accept that to be the case. When we address the potential issue of school closures in school district 61, I would hope that the decisions that lead to that. . . . As the minister said earlier, there would need to be a really good analysis provided. That really good analysis would include a really good financial analysis as to whether the cost savings that are predicted as a result of school closures will in fact exist. I have been led to believe that the $1.5 million shortfall that school district 61 is struggling with. . . .

They are looking for savings in school closures, but the staffing that they're hoping to save on will not necessarily be there. In effect, those extra school principals or administrators or janitorial staff -- what have you -- that currently require funds in the district budget will be redistributed or relocated to other schools. So there won't in fact be a savings in the overall budget. Perhaps the only savings that we can anticipate are those of the operating costs of the school, and whether that's significant or not in the scheme of things I guess we'll have to judge in that "really good analysis." I say that quickly and in quotes, because the minister used that terminology.

I want to comment on what the minister stated earlier -- that schools close all the time. I certainly recognize that schools do close. But the reason schools close in some areas is because of dropping enrolments. There's a community that has been devastated as a result of a one-resource town being devastated, for example, and entire families moving out. Granted, the population growth in students may not be high here. I don't know what's happening, but they say that there'll be a lot more kids in six years because of the millennium. We need to leave those schools around, because everybody's racing to have children on January 1, 2000. I don't know what projections the minister has done in that area.

[2025]

We may be looking at a February to May time frame, because a decision would then have to be made for September 2000. Although 15 months seems like a long time away, in the whole scheme of things I don't think there is much time to get the public consultation process underway -- unless the minister can give me some assurance that he has staff who are prepared to initiate the consultation process at this time, regardless of what is going to happen in the fall in terms of a municipal and school board election.

Hon. P. Ramsey: The requirement for consultation is a requirement placed on school boards and their staff. I believe that the requirement is fairly clear. First, the member asks whether there has to be a business case for closure, and the answer is yes. The proposals around school closures that are brought forward to me for consideration include a business case for it. Obviously the school board itself has to both advocate for that case and see it as something that fits into their financial plans. As far as the consultation, my expectation is that the board makes a full and timely disclosure of all the facts and information that it's relying on -- I would assume in writing -- to the parents of students attending the school.

I would assume that that information would include how the closure is going to affect catchment areas for the surrounding schools; where the current students would be enrolled; the effect on neighbouring schools; the number of students affected; any transportation needs; dates; financial considerations; what use they intend to make of the closed school -- whether they plan to sell it or not; and what opportunities for public input there would be, including, I would assume, public meetings so that people have an opportunity to discuss the closure, its implications, options the board has considered, possible future community growth and where this fits into the future capital plans.

So the expectation is for as full as possible consultation, and I expect that that's what the Victoria school board will be undertaking if it chooses to pursue school closures as a way of dealing with declines in enrolment. I must point out to the member that declining school enrolments and this necessity for adjusting space is not something that's even unique to British Columbia. This cycle is caused largely by baby-boomer kids leaving the system. While in-migration and immigration may partially offset that, in the case of Victoria it appears not to be doing so. The board has had a decade of declining enrolments, with the expectation of future declines. I see the millennium bringing in many new things, but I'm not sure it'll also bring an increased number of kids to the Victoria school system.

I. Chong: I'm not sure what the millennium will bring. I know that there is certainly talk of that, and that's a prediction that I'm not prepared to venture into. I would like to put on the record, as well, some comments that I've received from some parents -- some questions, in particular. But before I do, I want to again refer back to a comment that the minister

[ Page 13669 ]

[2030]

If $1.5 million -- which appears to be the number that has been thrown about for school district 61 -- in operating expenses is what must be found this year or next year and in perpetuity, it begs the question as to how we will continue to keep that $1.5 million cost reduction, given that there will always be impositions by legislation as to what teachers agreements or what objectives the government has.

Without the additional funding from government, it's very difficult for school districts to meet the objectives without the idea of school closures. I want to be certain that we are talking about operating budgets versus capital budgets. If the minister could comment on that, I would appreciate it.

Hon. P. Ramsey: The member's right in saying that disposition of capital assets would usually go into a fund that would be spent on future capital expenditures at a school board level. The only exception to that is when a capital asset was acquired entirely with funds from the school board. Since financing of capital facilities has changed over the years, there may indeed be facilities in Victoria where the receipt of any revenues from sale of that facility could be used in any way a board wishes, rather than for future capital assets. So with that one qualification, the member is accurate in saying that disposition of capital assets could offset future capital projects in the district but couldn't be used for offsetting operating difficulties. Having said that, there clearly are savings from amalgamating schools -- in administration, in maintenance, in utilities, in a range of areas. Obviously that's part of the business case the board has to make -- that this does make sense financially and that you're not closing a school for sort of a one-time infusion of cash but that this makes sense over the long term. I think I'll leave it there. There's much else that could be said, but I think we've probably thrashed out school closures in Victoria fairly thoroughly.

I. Chong: I would like to state for the record some of the schools that at this time have been rumoured for closure, so that it is recorded in Hansard and the minister is aware of what's happening. In the riding that I represent, in particular, I've heard of potential closure of elementary schools: Torquay Elementary, for one; possibly Gordon Head Elementary; and Uplands Elementary. Those are the three schools that I've heard are targeted. I've also heard that Cedar Hill Junior Secondary is being targeted; and that takes a more personal tone, actually, because that is a school I attended. I understand that is another school. . . .

[2035]

On the Uplands Elementary closure -- and I hope the minister will indulge me for a moment -- I received a condensed version of a recent meeting that was held in school district 61 with, I believe, some parents -- or perhaps parents were in attendance. It was at the June 4, 1999, meeting that the board announced that the following criteria would be used to determine which schools would be closed. Perhaps I will list those criteria, and the minister can either confirm or negate those. These are the seven criteria that the board announced -- and this is what has caused alarm for some of these parents: (1) school capacity, (2) actual enrolment and projection of enrolment to the year 2008, (3) school catchment areas and how they could be altered to accommodate a closure, (4) physical geography which may affect accessibility to certain schools, (5) walking distances created if a school is closed, (6) physical condition of the school, and (7) ownership of the land.

Those were the seven criteria the board announced to parents who attended. I'm wondering if the minister can affirm that those either are the criteria or are not -- and if they are also in those priorities or if they will be looked upon as a whole, and neither one of them ranks as sort of the number one key factor.

Hon. P. Ramsey: I don't think it would really be appropriate for me to comment on that. These are the board's criteria. If the member is in receipt of a document from the school board. . . . They're not the ministry's. This is part of what I would assume would be a consultation process by the school board. The school board has provided me with no list of schools that it might wish to examine for possible closure. This is in their purview. I've told the member what criteria I will use in assessing their request for closure, if they should decide to request closures.

I. Chong: I appreciate that, and certainly local school boards have the ability to set out their criteria. If it is not in exact agreement with what the ministry is doing, then, with the minister being the ultimate decision-maker on whether schools are to be closed, I would certainly heed those criteria from the ministry.

The board also indicated at that meeting that two contractors with the Ministry of Education would be assessing how these criteria would be weighted for each school and that a list would be published on June 24. Can the minister, through his staff, confirm that that is happening and whether or not there are two contractors with the Ministry of Education who specifically are there to assess criteria when the issue of school closures comes up?

Hon. P. Ramsey: The ministry is not providing the school board with staff or contractors around the issue of school closure. These matters around consultation and decision-making are in the hands of the board.

I. Chong: I thank the minister for that.

[ Page 13670 ]

Also, I have indicated that I received a number of letters for Torquay. I want to just throw these questions out for the record. The minister doesn't need to answer them at this particular juncture, but I would like them into the record, only because he made comments that the teachers' agreements are funded. . . . This is how parents are feeling. I'm sure he's heard it as he travelled around, but this is what the parents are saying in the community that I represent.

[2040]

I can also state that the parents very much want to be involved in school boards' budget processes. I don't know if there are limitations to that and whether the Ministry of Education, through the School Act, states that there are limitations for parent participation in school budgets. I don't know if that is also a problem. So if those are things that the minister can address and have the ministry staff look at, again I would be appreciative.

I've given the minister an idea of the schools that are being looked at. I can tell the minister that I'm also watching very closely to see whether the criteria that are used are primarily those of enrolment and numbers. I will be looking at the numbers at schools in the constituency that I represent, and I will also compare them to those in the ridings that I don't represent. I will very quickly challenge that and wonder if the schools that are slated for closure in the riding I represent have higher populations in terms of percentage than other ridings. And I would challenge not only the school board but the ministry to look at those details as well.

With that, I've concluded my questions for this minister. If he would like to respond, so be it. If not, I'll defer back to the critic.

Hon. P. Ramsey: District 61 is a well-run school district in our province. For the past six years, it's run a surplus, including a surplus of $1.5 million last year, $2.1 million the year before that and $2.4 the year before that. So I assume that this district will continue to operate in a sound way. I think, as the member has said, that they provide excellent education for kids that are enrolled in schools.

The one thing that I must say, though, is that it is not a question of opinion about the funding of schools in this province. Whatever people may say about funding, there are objective measures of funding for schools in this province. The per-student funding for students in our province this year is higher than any province in the country. We have continually increased it, this year by a $143 per-student average across the whole province -- some districts more, some districts less. We have embarked on a huge infusion of new funds into schools to lower class sizes in kindergarten-to-grade-3, unlike any other province in the country, so we can get more attention to our youngest children to make sure they succeed and go on to succeed in school and then in their careers. We've undertaken a huge and aggressive capital program to get rid of half the portables and build the thousand new classrooms we're going to need for those smaller classes.

While I am always willing to work cooperatively with school boards -- and seek to do that continuously -- and while I will obviously seek to have the ministry respond to the letters that the member has received, we need to be very clear that choices have been made to put education as a top priority in this province and in the budget that we're debating. Frankly, that's quite different from the choices that some of the governments that this opposition holds up in admiration constantly have made.

If this member was representing a riding in Ontario with 7,000 empty spaces, the government would not be saying to the school district: "If you go and consult about school closures, you must meet certain criteria, and we'll be looking hard at the business case for closing them." The government would be saying to the Victoria school board: "You must close 7,000 spaces -- we don't care which; get it done."

[2045]

There are very different decisions being made across the country. While I always seek to work cooperatively with school districts -- and will continue to do so -- school boards are well funded in this province. We're continuing to increase funding and improve learning for our students.

I. Chong: I just want to reiterate that certainly the issue of fiscal responsibility weighs heavily on the minds of all members on this side of the House, as I'm sure it does on the parents that are having to face school closures. But parents are wondering whether the increased funding that the minister speaks of is in fact reaching the classrooms.

The $143 extra per capita may sound like a wonderful increase, but I can tell you that there have been reductions in programs and that there have been cutbacks of librarians in some cases. In fact, the one area that the member for Fort

[ Page 13671 ]

So I want the minister to also understand, from my perspective, that it's not always a question of dollars per student. That, in essence, doesn't necessarily provide the services that students require. It's just a number -- a numerator divided by a denominator. It is also based on the fact that government legislates certain of their policies that require an additional cost to school districts that don't necessarily benefit students. That is also a consideration.

In an area such as Victoria, where we have a good public education system, where we have a number of teachers who are in senior positions, surely they garner a greater demand on the budget than in districts where there are more, I guess, incoming new teachers. Those are also cost considerations. But if you look at the cost per capita, certainly you'll see that the cost per capita may have risen in one area versus another, but it doesn't mean that it's going to filter down to the classroom. That is primarily what I'm concerned about.

I also want the minister to know that when I make comments about increasing programs and members opposite on the government benches stand up and suggest that I'm asking for more money to be spent, that is not the case. I'm looking for value for money. At some point somewhere, someone along the line is going to call on this government to provide a better analysis of the value for money gained in the classrooms, because it certainly appears to have deteriorated in the past few years. That is speaking from the parents' perspectives, for those whose children have gone from grade 1 and are now entering the junior high school level. I'm not an expert on that, and I don't profess to be an expert. All I can say is that I hear from parents, and to me, they are the experts as to the quality of education their children are receiving.

Again, if the minister wishes to respond, that's fine. If not, I defer to the Education critic to continue.

Hon. P. Ramsey: First of all, the member may well be right -- that there are more senior teachers in Victoria than in other districts. The member will be interested to know that the funding formula takes account of that. The money that the school districts receive for instruction mirrors the step 1 scale that teachers have achieved. The funding formula also fully covers increments that teachers are receiving. Yes, there are difficulties and variations from district to district. The funding formula that we use to allocate the $3.6 billion that we provide to school districts takes account of that and many other variations that occur.

I must say again that I don't think the member can have it both ways. If it's not a matter of money, then let's not raise the money issues. Many of the things that the member has raised are straight dollar issues. I submit again to this chamber and to the member that the funding this government has provided to school districts for the education of our kids is really second to none in the country.

[2050]

The final thing I'd say is this. We can debate -- and it's a good debate, and the critic and I have had it -- about how we measure success in the school system. But I think we should be cautious with anecdotal evidence that the school system is "failing." Frankly, I don't see it, and I don't see decline either. By every measure that I can think of, our school system is succeeding, and succeeding better than it did a generation ago. Graduation rates are up. Our students are achieving well. They're going on to post-secondary education. We have a good school system, and it has improved over the last decade. That's what's going on. So when I look at this, I'm quite willing to engage in the debate about how we measure those successes, but I do not think we should simply say that it's "declining" because somebody feels something about it.

Finally, I was just reflecting about the member saying that when she went to school, there were 36 kids in the class. Look how well she turned out. Can you imagine what kids are going to do when they only have 18 kids in the class? It's going to be incredible.

J. Reid: Parent frustration is a concern to everyone involved in education, because the attitudes of the parents are certainly reflected in the children, and the cooperation the parents provide in the school system has a lot to do with the success of a school and the support that the teachers receive. I've had constituents coming to me explaining their reasons for frustration. And these parents have been saying that they've been called "partners in education," but they feel that they really don't have a respected place in the partnership, other than to get the child to school in the morning and to support whatever decisions are made by the school or by the ministry. When they oppose decisions that are made, they don't have a voice. So, I'd like to ask if the minister would define what "partnership" is for the role of the parent and how the ministry views that.

Hon. P. Ramsey: I'm not going to quote some broad statement about parent involvement. Let me just say this: I think that the role of parents is crucial to the success of children in school. We seek to support that in a number of ways. As the member probably knows, the School Act mandates parent advisory councils at schools in British Columbia -- a formalization of their role at the school that their children are attending that many other provinces lack. Indeed, the parent groups in other provinces sometimes come here and seek to figure out how they can do it. We support the activities of parent advisory councils at the district level, at the school level and at the provincial level.

The British Columbia Confederation of Parent Advisory Councils has just celebrated its tenth year. I believe the number of participating PACs in that confederation is over 60 percent, maybe approaching 70 percent. They're a strong voice for parents in the "partnerships" of groups that we consult on education matters. BCCPAC sits on the provincial education committee, which meets regularly to consider broad areas of public policy in the education system. So we seek to hear the voice of parents at that level. I know that most districts have district parent advisory councils that they seek to listen to at the district level and then at the school level.

But I want to distinguish for the member that there clearly are some matters that are given by the act that this Legislature passed and this ministry is charged with administering that don't lie in the ambit of parents. Curriculum is set by the province, and we provide that curriculum to all school boards.

[ Page 13672 ]

[2055]

In my experience, in most cases there is a good working relationship between parents and teachers and school. The difficulty is that in any system with 600,000 students in it and however many parents there are -- maybe a million or so; I think that around one out of three British Columbians has a child in the school system -- there is friction. And we've been working with lots of groups to find ways of easing those frictions and making sure that there is cooperation at the school level as well.

One of the ways we did that was by actually funding the advocacy project run by BCCPAC to look at how parents could be and should be advocates for their children within the public school system and where the bounds work. So I recognize what the member says -- that sometimes there are frustrations. In any system this large, I think that's probably inevitable. I must say that in my experience touring schools, talking to parents and the like, that's the exception rather than the rule. The rule seems to be a fair level of cooperation.

Noting the time, hon. Chair, I would move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported progress, was granted leave to sit again.

Committee of Supply A, having reported progress, was granted leave to sit again.

Hon. P. Ramsey moved adjournment of the House.

Motion approved.

The House adjourned at 9 p.m.

PROCEEDINGS IN THE DOUGLAS FIR ROOM

The committee met at 2:42 p.m.

ESTIMATES: MINISTRY OF EMPLOYMENT AND INVESTMENT AND
MINISTRY RESPONSIBLE FOR HOUSING
(continued)

G. Abbott: I want to continue our discussion of SCI, which we began this morning. Has the minister or staff had an opportunity to locate a copy of the audited financial statement for '98 to this point? Or is that something we'll have to await for some time after the conclusion of these estimates?

Hon. M. Farnworth: We should be able to get them to you by tomorrow.

G. Abbott: More specifically, we had been discussing the capital expenditure program for Skeena Cellulose. We had some discussion around the reduction in that program from $170 million to $110 million but had noted that some things had been postponed as part of that as well as the re-engineering, which has been pointed out in the press release and elsewhere -- including the integration of the A-line and B-line mill, for $35 million, and other projects cumulatively estimated at $25 million to $30 million. Could the minister tell us at this point what is covered by the $110 million cap-ex program? What are the things that are going to be done for that money?

Hon. M. Farnworth: The bulk of the money is involved in upgrading the B line, the boilers and the environmental requirements around the CLO2 generators.

G. Abbott: Since we are talking about $110 million. . . . -- I appreciate that technical experts may not be here, but approximate amounts in relation to those improvements on the B line and elsewhere. . . .

[1445]

G. Abbott: That's close enough to the $110 million to cover it off. We have talked about at least a couple of the things that aren't covered off by the $110 million -- the integration of the A-line and B-line mills and some miscellaneous projects. Is there anything else that the minister can identify at this point in time which is not covered off in the $110 million cap-ex program?

Hon. M. Farnworth: That pretty much covers everything -- with the exception of what we talked about this morning -- if you did the full $170 million, and that is the integration of the A line's dryers with the B line's. Other than that, pretty much everything else is included.

G. Abbott: I don't follow the Ministry of Environment's worst-polluters list that closely. I know that in the old days -- at least four or five years ago -- Skeena Cellulose used to appear on that list with regularity. I don't know if the list is even still done. But if they do it, is SCI on it?

Hon. M. Farnworth: My understanding is that SCI is still on the list, but a lot of the cap-ex changes will deal with the issues that cause it to be on there.

G. Abbott: What does cause it to be on there?

Hon. M. Farnworth: I'll get the specifics, what the actual. . . . They probably involve some multisyllable chemical formula name.

[ Page 13673 ]

As the minister knows -- we discussed this in the estimates last year -- the government has set a deadline of, I think, January 1, 2002, for pulp mills in British Columbia to go to zero AOX. Is SCI. . . ? I better stop using those initials now. Using two sets at a time is not permitted. Is Skeena Cellulose AOX-compliant at this point in time?

Hon. M. Farnworth: It is anticipated that they will be in compliance with the AOX regulations by the time they're supposed to be. That's one of the things that the cap-ex program is intended to address.

G. Abbott: The minister anticipated my next question. How much has been devoted in the capital expenditure program to the AOX project?

Hon. M. Farnworth: I can get you that information.

G. Abbott: Has the. . . ? Well, let me put it this way. The rest of the pulp industry is having some difficulty understanding why the government is forcing them to go to a zero-AOX product when it's been tried and there was no market for it. Has Skeena looked into this market problem with respect to chlorine-free pulp and not found markets for that product, or are we in a different position than the rest of the industry?

[1450]

G. Abbott: There was a Swedish producer that achieved zero-AOX discharge. Their pulp was found to be inferior to northern bleached kraft pulp from a strength and brightness perspective, and they found that there was simply no market for it. I know that what's happening here is, frankly, the balance of the industry is not taking the 2002 deadline seriously. They're prepared to shut their doors before they go to a zero-AOX situation, because they're going to be producing a product that nobody wants and that is produced to standards that nowhere else in the world is prepared to accept. I guess the issue really is: are we going to be completely out of step with the rest of the world and put thousands of pulp workers out of work as a consequence? My understanding is that this issue has been referred to the job protection commissioner for his deliberation. Is the minister aware of that?

Hon. M. Farnworth: I'm not aware, we're not aware of the JPC looking at AOX in an overall context. In terms of AOX and the AOX technology and the concerns you raise around quality and brightness and those sorts of things, the technology has been changing quite dramatically over the last number of years, with a move to addressing those issues. I understand the issue around the Swedish company and its pulp being judged inferior. Maybe I'll just offer up a Don Cherry quote. That is: "I'll stack up our good Canadian-produced pulp against some inferior European pulp any day."

A Voice: I don't recall Cherry ever having said that.

G. Abbott: Yeah. I think, as Howie Meeker used to say: "If you handicap our producers in the way you're proposing, the Europeans will be all over us like a hoop around a barrel." I think that'll be what'll happen with respect to this.

Anyways, we don't need to spend all day on the zero-AOX issue. I think it's an important one, and we'll be revisiting it again next year. That's because, frankly, as I noted earlier, I don't think anyone in the industry believes that the government will stick with the zero-AOX requirement, (a) because nobody else in the world is doing it, (b) because you end up with a product that's not found to be saleable in the marketplace. If we have a whole bunch of big pulp mills in British Columbia producing a product that the world's not interested in, we're looking at a recipe for disaster. I expect -- I presume this is the game, and I know this from the Minister of Environment -- that the job protection commissioner will probably come back and offer the government some route out of this current dilemma that the former Minister of Environment got us into. So it'll be interesting to see how that all plays out.

The issue of, I guess it could be called, the public exposure to costs with SCI. . . . The Deputy Premier, in the press release of May 26, I think it was, set our public exposure at $283 million. The difference between that and the higher figure which is sometimes cited with respect to government's commitment to SCI is, I presume, the $65 million that FRBC has put out to the small creditors. Is that the minister's understanding as well?

[1455]

G. Abbott: The other thing that the press release of May 26 did was go into the issue of the operating line for Skeena Cellulose. One of the issues that it raises is the increase in the operating line from $120 million to $200 million. Now, we've talked about the reasons for the decline in the capital expenditure line. We haven't talked about the reasons for the increase in the operating line. Can the minister outline that, please?

Hon. M. Farnworth: It was actually from $150 million to $200 million. It's in part because -- actually, it's in fact because -- we're starting up the B line.

G. Abbott: I guess that's part of the confusion here. It appears that at some point we went from $120 million to $150 million in terms of the operating line. The press release. . . . I think this is a matter of the date being wrong, but we have -- and this is on page 2 of the press release of May 26 -- a note that says: "In May 1998 the province approved an increase in the operating loan to $200 million and Skeena Cellulose was authorized to proceed with the remaining components of the $110 million cap-ex program." I presume that was just a typing error, and that should be 1999. Okay. Well, that assists in the understanding.

Why is the operating line increased by this $50 million because the B line is coming on? One would assume with it coming on that we'll in fact be looking at improved revenues. Or is the operating line being used for capital purposes?

Hon. M. Farnworth: You need more working capital to get the B line up and running. Second, you need working

[ Page 13674 ]

G. Abbott: Do we have some assurance that there will not be a requirement for further operating funds? I mean, given that we have seen a substantial rise here in response to the B line coming on, the need for more timber -- and it turns out to be expensive timber -- and more working capital as the operation moves closer to what the minister characterizes as a world-class operation. . . . Are there going to be further increases required in the operating line?

[1500]

[P. Calendino in the chair.]

Hon. M. Farnworth: Under current pulp price projections, we are not. . . .

G. Abbott: I've seen some pulp price projections from SCI, and I think they involve going to -- what is it? -- $500 (U.S.) a tonne or something like that.

Hon. M. Farnworth: Very conservative.

G. Abbott: They are fairly conservative estimates, the minister judges, and I hope they are. The pulp industry has suffered enough. I do hope that's the case. If it ends up not being the case -- if we continue in the current trough that we are in -- does the exposure of the public increase? Will there need to be a further injection of operating capital from the province in order to get us through to that happy day when we have pulp at $500 (U.S.) a tonne?

Hon. M. Farnworth: We expect that the operating line is sufficient. It is based on very conservative figures that are significantly lower than conservative forecasts within the industry. We expect, given what we're seeing in terms of prices starting to recover, that our operating line is what's required and that we will not need to be coming back.

G. Abbott: We can bring this particular part of the investigation to a halt with one of those brief yet incredibly definitive statements about it, as we did on capital expenditure -- that it's at $110 million, and after that it's private sector only. We're not going to throw any more in. Would the minister care to provide a brief yet definitive statement with respect to operating capital from the province for this operation?

Hon. M. Farnworth: I will say I am not planning on going back and asking for an increase in the operating line of credit. We have confidence in the plan that's in place; we have confidence in the CEO and in the fact that he's gotten costs under control and has reduced costs substantially. We are also confident about the fact that the forecast for pulp prices upon which our plan is based is very conservative. So I am not planning on going back and asking for more money.

G. Abbott: That statement was not as brief and definitive as the earlier one with respect to capital expenditure. Therefore it doesn't inspire the same heights of confidence that the earlier statement did. But I suspect that, frankly, it's as close as we're going to get.

Just briefly, this is a list of where the total exposure lies in respect of Skeena Cellulose. I don't propose to spend a long time on this, but if the minister and the assistants can just make a note of this and see whether these are all more or less on the mark. . . . I suspect they are. In fact, I'm pretty sure they are, but just so we can confirm this for the record. . . . We have the FRBC small creditors, pay-out of about $65 million; Royal Bank share purchase, $31.3 million; unsecured creditors, $14.5 million; capital expenditure loan of $122 million; operating loans of $62 million; wage offset, $26.9 million; roadbuilding, $7.2 million; and stumpage deferrals of $20 million -- for a total of $348.9 million. Does that accurately summarize the government's financial exposure to date with respect to SCI?

Hon. M. Farnworth: No, that would be incorrect.

G. Abbott: The record would be enormously grateful for a brief correction of those items that are incorrect.

[1505]

What has flowed has been the purchase of the Royal Bank shares of $31.3 million; payment to unsecured creditors of $14.5 million; the cap-ex loan, in terms of a loan and a guarantee, of $4 million and $10.5 million; the operating loan, $51 million; the roadbuilding loan, $18 million -- for a total of $129.3 million. Included over and above that are contributions to wage offset, $1.7 million, and on the roadbuilding for hemlock, $3.8 million, for a total of $134.8 million. That's what has been advanced. In the money from the $65 million loans program out of FRBC, $28 million has flowed.

G. Abbott: I thank the minister for correcting the amounts. By some miracle, we actually arrived at the same total but by somewhat different means. It's useful to have that correction.

We did note at the outset that there is now -- although we don't have it here, apparently -- an audited financial statement for '98. When COFI -- or, I guess, PricewaterhouseCoopers, to be more accurate -- put together their summary of the performance of the forest industry in 1998, would that have included the results at Skeena Cellulose? I think not, but perhaps I can be corrected on that.

Hon. M. Farnworth: No, they would not.

G. Abbott: The forest industry totals that were put together by PricewaterhouseCoopers showed a total loss, including write-downs, of $1.57 billion for '98. Of that total -- and, again, I'm operating from memory here -- around $450 million was actual operating losses over the year 1998. What was the Skeena position at the end of the 1998 year?

Hon. M. Farnworth: I'm going to put my answer in context -- in terms of where the price of pulp was and where the price of pulp is, and the fact that the price of pulp has

[ Page 13675 ]

[1510]

Hon. M. Farnworth: We can get that information for the hon. member. Yes, you're correct on the pulp side of things. But in terms of the overall and the breakdown around the solid-wood side of things, we can get that information for you as well.

G. Abbott: Again, if the minister doesn't have the numbers here, I won't try to get them. You don't have them -- right? We won't have them until tomorrow.

I'm delighted that the magnitude of loss is improving, if we can put it that way. Of that $49 million, was 75 percent, 80 percent or 50 percent -- or what -- related to the pulp operation? Do we have a rough idea of that?

Hon. M. Farnworth: I think virtually all of it would have been pulp.

G. Abbott: The press release of May 26 suggests that the improved pulp prices, in concert with some cost-saving measures that have been implemented by the new CEO, resulted in more favourable results for the first quarter, although they were just looking at a portion of the first quarter in offering that comment at that time. Do we have a report to offer from the first quarter? Do we have a report to offer from the first quarter?

Hon. M. Farnworth: We can get exact figures for you. But what I can say right now is that we are showing a slight profit on solid wood and a slight loss on pulp.

G. Abbott: I'll look forward to seeing those results. I guess that kind of takes us back to the question or the comment that I had at the start, about the reporting out of financial results from SCI. Why, for example, would the results from SCI not have been included in the PricewaterhouseCoopers summary? Is it because they didn't ask or because SCI didn't offer up the results to them?

Hon. M. Farnworth: The '98 numbers should be in there. But in terms of the later numbers -- like the first quarter of this year, which is when you'll really start to see the impact of rising prices, coupled with a decrease in the cost of production -- those probably wouldn't be in there. It comes back to what I said earlier. We've changed the reporting day from December 31 to March 31. It is our goal to get us into timely reporting.

[1515]

Hon. M. Farnworth: Some of it will be; we're not sure if all of it is.

G. Abbott: Will we in the short fullness of time -- i.e., in the near future -- be seeing SCI reporting out on a quarterly basis, along with M&B and Ainsworth and Slocan? They all report their quarterly results a few weeks after the end of the quarter. Will we be seeing Skeena Cellulose doing the same thing?

Hon. M. Farnworth: Right now we are on annual reporting statements. We are looking at coming out with quarterly statements, particularly now as the situation there has stabilized, and we're moving forward with the cap-ex plan and things like that. That's what we're trying to achieve. My understanding, on the comments around Ainsworth and other forest companies, is that they are publicly traded. So they have some regulatory requirements to receive. . . . But I do take the member's point, and we are moving in that direction.

G. Abbott: Is it correct that Arthur Andersen Inc. has been retained to do the annual audit on SCI?

Hon. M. Farnworth: That is correct.

G. Abbott: Could the minister provide me with an indication of the operation of the different portions of SCI operations during 1998? For example, how many months of the year were the A line and the B line operating at the Prince Rupert mill?

Hon. M. Farnworth: The B line was not operating in '98, and the A line was operating, with the exception of regularly scheduled maintenance shutdowns.

G. Abbott: Were any of the three solid-wood mills forced to take anything more than maintenance shutdown time?

Hon. M. Farnworth: It was all principally maintenance shutdown.

G. Abbott: The issue of profits and losses in the different divisions -- we briefly talked about that. Essentially, the minister advised that we're not going to be able to get -- for some time at least -- a breakdown of profits and losses by divisions. I did, however, receive one analysis of the different divisions, including the pulp mill, the Terrace, Carnaby and Smithers solid-wood divisions. It appears that some improvements have been achieved there in terms of production and cost reduction and that sort of thing. Is there anything that the minister can add in respect to those divisions and their future profitability, apart from what I have there?

[1520]

[ Page 13676 ]

G. Abbott: I don't believe, from the literature I've seen or indeed from the discussion that we've had here, that there's any provincial cap ex contemplated for any of the three solid-wood mills. Is that correct, or is there some provision in there for it?

Hon. M. Farnworth: It's a very small amount; it's insignificant. I don't have the exact number.

G. Abbott: So again, if there is significant capital expenditure that will be required to correct the deficiencies -- if we can call them that -- at Carnaby and Terrace, the expectation of the government is that a future buyer will take care of those capital expenditure needs. The government is not contemplating getting involved to correct any of those.

Hon. M. Farnworth: The answer there is yes, and there are ways around it that don't necessarily have to involve expenditures of dollars either by government or by the private sector. You could do it through trading different types of timber -- those sorts of things. I mean, it is certainly something that can be dealt with, but we're not anticipating being the one spending the money.

G. Abbott: I think everyone is well acquainted with the fact that there was a very cut-throat market for pulp in '98. Was SCI forced on any or many occasions to discount pulp at a loss on the world market?

Hon. M. Farnworth: No, we did not engage in discounting like that.

G. Abbott: I want to briefly ask. . . . This sort of relates to the organizational side of things and goes back to the report by Ralph Torney on the future of SCI. He made a number of recommendations to the government with respect to the future of Skeena Cellulose. I don't want to go through them all, but I do think we should reacquaint ourselves with three or four of them and see what has occurred with respect to them. I see the look from the minister, saying: "He's going to ask a question that he already knows the answer to." You know I would never do that, so. . . .

Hon. M. Farnworth: Never, and I would never do that to you either.

G. Abbott: No, I know you wouldn't. And that's a wonderful thing about this place: we never do that.

Recommendation No. 3 is the creation of an advisory committee to the board. And he says: "I had recommended that the board of directors appoint an advisory committee comprised of representatives from the small to medium-sized forest sector business community and community leaders; this committee would report directly to the board of directors." Has that been done?

Hon. M. Farnworth: No, it hasn't.

G. Abbott: Why has it not been done?

Hon. M. Farnworth: The priority and focus around the operation was put into stabilizing the operation and into reducing costs. Now that we've done that, I think we're in a stronger position in terms of looking at issues such as you are now raising.

G. Abbott: I guess this begs a final question on that: with some success, at least in the short term, being achieved in terms of cost reductions and improved efficiency at the mills and so on, does the government still endorse recommendation No. 3 with respect to the advisory committee to the board? Or is this something we will be seeing achieved in the next few months?

Hon. M. Farnworth: Yeah, I would say that I agree with the recommendation. I think it probably is a good idea. But I would also add the caveat that we are in an aggressive sales mode right now, and I'd be quite happy to see it sold if we can sell it before the need to establish a board. . . .

[1525]

Hon. M. Farnworth: Well, part of that process was done by installing Bill Steele as the CEO. One of the first things he did when he went through the operation was do a review in terms of management at SCI, and then a part of that was involved in the cost reduction measures. So that has in fact been taking place.

G. Abbott: I'm understanding from the minister's comments that in the view of the minister, objective 4 has been completed.

Recommendation 5 is: ". . .I recommend that a person with considerable and senior experience in the forest or business sector and who is domiciled in northwest British Columbia be appointed to the board of directors." Has recommendation 5 been implemented?

Hon. M. Farnworth: The answer to that one would be no, for much the same reasons as probably relate back to the earlier question about the advisory committee. But I would also say that I think there is probably something just as unique and every bit as valuable as recommendation 5, and that is that for the first time in the history of this company, I think, and probably of any forest company, we have a CEO who is domiciled in the area of the major components of the industry. The CEO lives in Prince Rupert.

G. Abbott: Furthermore, he's got good corporate experience with West Fraser Timber Co., and that's an advantage. Does all of that backslapping tell us that we don't need recommendation 5, or is this something that we have put off in anticipation of the sale and that may come back on the table again?

Hon. M. Farnworth: I won't say that it has been put off the table. I would say that we are now at a point where I think

[ Page 13677 ]

[1530]

The issue of the board of directors. . . . We talked about this last year, and I think I have a clear understanding. The numbered company that envelopes SCI and SCI Ventures Ltd. . . . I think that last year we had. . . . I guess we can look at this precisely. Last year in our discussion, there was a board of directors, but it comprised only two directors at that point in time: Mark Lofthouse -- I'm not sure whether he was an appointment from the bank or an appointment from the government -- and Doug Callbeck. Is the board of directors still comprised of two, or has it become more elaborate?

Hon. M. Farnworth: It is comprised of two, and they are both here in this room at this time, as we speak.

G. Abbott: Excellent. Would you like to introduce them for the record?

Hon. M. Farnworth: I was going to see if you could guess which one is which. There's Mark Lofthouse -- he knows -- and Doug Callbeck.

G. Abbott: Okay, good. Thank you.

Is it the considered view of the minister that for at least the foreseeable future, that will constitute the board of directors of Skeena Cellulose?

Hon. M. Farnworth: Yes.

G. Abbott: Again -- and I'm sure we've got this right after asking this a few times -- is that small, by industry standards, board of directors a reflection of the government's continued interest in the sale of its equity in Skeena Cellulose rather than a view that small boards of directors operate more efficiently?

Hon. M. Farnworth: I think you could say that it could be a combination of both.

G. Abbott: Combination of both -- okay.

With the size of the board of directors, they probably don't have that much difficulty getting together to meet, but perhaps they do. How often does the board meet?

Hon. M. Farnworth: The board meets quarterly.

G. Abbott: There are a couple of others that I want to inquire about. Recommendation 12. . . .

Hon. M. Farnworth: I just want to make one quick clarification. In my earlier answer around the board of directors for Skeena, I just want to make sure that we are clear that we're talking about the numbered company. They are the directors of the numbered company.

G. Abbott: What is Mr. Steele's relationship to the board of directors? Does he sit as a director as well, or no?

Hon. M. Farnworth: He does not sit on the board, but he is essentially the secretary and adviser to the board.

G. Abbott: To turn to recommendation 12: ". . .avoid the perception of interference." I'll just quote from Mr. Torney's report: "Accordingly, I recommend that the province adopt and continually reinforce a 'hands-off' approach with respect to the management of Skeena and that the board of directors and the company's management staff be entirely responsible for directing the organization without interference or the perception of interference." Is it the considered view of the minister that that recommendation has been achieved?

Hon. M. Farnworth: The government's representative is interested in the profitability of Skeena but is not involved on the regulatory side. That's strictly the domain of Forests. There's a sense of a Chinese wall between the two.

G. Abbott: In short, it's the minister's view that recommendation 12 has been achieved.

[1535]

G. Abbott: One of the questions that came to mind as I read recommendation 12 was whether in fact government majority ownership would make it more difficult for SCI and its management to achieve reforms. I'll ask the question by posing a particular problem that faced SCI before it was owned by the government. SCI has long had a dispute with the government -- if we can call it that -- around the appraisal and stumpage system we have in British Columbia. It's been the view of Repap -- and, I think, SCI after that -- that the way the stumpage and appraisal system was developed in B.C. tends to work against wetbelt operators because of some of the costs that are faced by them and others that operate in the wetbelt of British Columbia. Is that appraisal and stumpage issue still an issue with SCI in relation to the government? Has it been resolved? Does the fact that there's this awkward relationship with the government make it more difficult to resolve?

Hon. M. Farnworth: Yes, it's still an issue, but our board does not deal with that issue. The CEO deals with it, in the same way that probably any other CEO of a forest company in British Columbia would deal with the issue. In that sense, we are not involved.

G. Abbott: Perhaps on some other occasion we can talk about that particular dilemma for SCI. I'll only offer this as a brief comment. Evans Forest Products Ltd. shared this concern about the appraisal and stumpage system with Repap, and both encountered difficulties prior to its resolution. I'm disappointed to hear that the issue with SCI and the government has not yet been resolved. That takes us pretty much into a Ministry of Forests issue, as opposed to an Employment and Investment issue.

[ Page 13678 ]

Hon. M. Farnworth: That issue and the impact of Nisga'a on the TFL have been incorporated into the business plan and taken into account in Skeena's numbers. At the same time, it's the intention of Skeena to continue to be involved in this case with the Nisga'a, in the harvesting of that timber. We expect that this will continue.

On one other point, just back to the previous question, I will also say that while that issue around stumpage is outstanding, the fact is that there has been progress made. It's not a static thing, but there is progress being made. I would like to see it resolved, and hopefully we can. But there is progress being made.

[1540]

I'm satisfied, as well, on the point. . . . If everything goes as is hoped in terms of the change to TFL No. 1, we won't be seeing a significant impact on the fibre flow to SCI and its mills. But SCI -- or its earlier incarnation, Repap -- was very concerned about what the consequence of the Nisga'a agreement or the AIP would be. In fact, Repap was still operational when the AIP came along. They were demanding, I believe, some $80 million in compensation for the lost timber from TFL No. 1, plus what they anticipated to be the possible reduction in timber supply to their operations. Is this a continuing concern for SCI in its current incarnation? How is the corporation managing the issue of compensation for lost timber from this?

Hon. M. Farnworth: They are being treated in the same way as any other tenure holder who would be impacted by the Nisga'a settlement, and that's where it's at.

G. Abbott: Actually, I think SCI will hope they'll be treated differently than other tenure holders up there, because most of them are under the 5 percent, which means they won't get compensation. I think that SCI is the only one that has a substantial loss from the Nisga'a agreement. But I'm assuming that the minister really meant that they will be treated fairly by the government. We've had a fair bit of discussion around that. Is it the CEO of SCI who has been dispatched to do the negotiation, or is the board of directors doing that?

Hon. M. Farnworth: It's principally their corporate counsel who is handling that, and he is reporting to the CEO.

G. Abbott: Those readers of Hansard who are fascinated by where we go here can go to the Hansard for the extensive discussion that was had on that, under the forest resources section of the Nisga'a agreement.

A Voice: It's near the end of the debate, before closure was invoked.

G. Abbott: Yeah, that was just before closure was introduced. I thank my colleague for pointing that out.

There are a few questions I have around where we sit in terms of the current financial position, and those are actually the last of the questions that I have, pretty much. But someone has just passed me an article from the Vancouver Sun back on March 5, 1998. The headline reads "Skeena Sells Pulp Under Market Price," and the article goes on to say that Skeena has been selling in at least a couple of markets at $20 (U.S.) a tonne below market prices. Does the minister have any comment to make in respect of the article by Gordon Hamilton? Was it inaccurate or. . . ?

Hon. M. Farnworth: I mean, this is the same paper that suggested I would bulldoze down the Ford theatre. Quite frankly, I don't believe everything I read in the Vancouver Sun; nor should you. The fact is, though, that those reports are inaccurate. Skeena was asked. . . .

Interjection.

Hon. M. Farnworth: Well, I actually responded earlier on that question. I said that the value of the land more than covers the assets, so even if you bulldozed it, you would still have the value in the land. I never said that you should. . . . But the Vancouver Sun is inaccurate in that particular case. In fact, the. . . .

Interjection.

Hon. M. Farnworth: I would never misquote you, hon. member.

The Chair: May I remind both the minister and the members that any addressing is through the Chair, please.

Hon. M. Farnworth: The fact is that it's inaccurate, and it's not correct.

[1545]

We need to look a little bit at. . . . Well, we're handicapped here a bit by not having a consolidated financial statement to March 31 for the current year. But perhaps the representatives of SCI can pass on to the minister the answers to a couple of questions I have here. We'll go through the deferred accounts payable, at this point, from the financial statements. What is the amount of deferred stumpage to the Crown that currently exists as a liability for SCI?

Hon. M. Farnworth: We don't have that figure with us today, but we will get it for you at the earliest opportunity.

G. Abbott: In short, we don't know that at the moment -- or we just don't have that information with us?

Hon. M. Farnworth: Being mindful of the Chair, we don't have that information with us, but we will get it for you. It will be gotten for you by tomorrow.

[ Page 13679 ]

Hon. M. Farnworth: It stays the same, with the exception of interest.

G. Abbott: In that case, it would remain around $20 million, I expect.

Waste permit fees. We were looking at about $965,000 in waste permit fees as of the end of March 1998. Are those still sitting about the same, or have they been discharged?

Hon. M. Farnworth: We see no reason why they should have changed. We don't have the definitive figure, but again, we will get that for the hon. member.

G. Abbott: To cut the chase short, is there any reason to believe that the deferred accounts with respect to WCB and the municipalities would have changed?

Hon. M. Farnworth: No, those should not have changed, apart from some interest maybe, but that's about it.

G. Abbott: Is there any shortfall in the completion of silviculture obligations by the company?

Hon. M. Farnworth: No.

G. Abbott: Does SCI still retain partial ownership of Kitwanga Lumber Co. Ltd.?

Hon. M. Farnworth: We actually own all of Kitwanga.

G. Abbott: That pretty much completes the list of questions I had with respect to SCI. I think we've covered off most of the points.

When might we expect to be hearing further about the sale of SCI?

[1550]

G. Abbott: Given that that was the same response that I received last year, I don't know that it inspires great confidence.

Apart from the outstanding issue of finding my quote, that completes my perusal of SCI. If the minister wants to table that document now, he can. Or again, as I suggested this morning, he can actually withdraw the suggestion he had made.

Hon. M. Farnworth: I would never deliberately misquote the hon. member. But we will look for the quote. Anyway, if I said anything inaccurate, I will make an apology right now.

We are having a five-minute recess, which is good, and we will then proceed to Hydro estimates.

The Chair: Okay, the committee will recess for five minutes.

The committee recessed from 3:52 p.m. to 4 p.m.

[E. Walsh in the chair.]

S. Hawkins: We will now proceed with the Hydro part of the estimates. I do want to thank the staff for providing us with a briefing binder -- and quite a good briefing, albeit a bit late. Perhaps next year we can get some of this stuff a little bit earlier. There's a considerable amount of information to go through. We'll do our best going through some of it. If the binder is in front of the staff, perhaps I can just move from tab to tab. That might be easier.

I'll start with tab 2. At the briefing, we learned of quite a bit of polling that Hydro does. I'm interested in how much money B.C. Hydro is spending on polling. And if we can start with this budget year, what is the cost estimate for polling?

Hon. M. Farnworth: The amount of money that's spent on market research, which is what takes place, is between $500,000 and $700,000.

S. Hawkins: For comparative purposes, can the minister tell me how much it was in last year's budget for '98-99? Is this an increase or a decrease from last year's budget? If he can commit to getting me some numbers from 1995 to 1998, as well, just so I can compare year over year. . . .

Hon. M. Farnworth: It's about a 40 percent decrease from last year. We can get you those numbers from the previous years.

S. Hawkins: If the minister can just. . . . If the staff can remember, then, from the years '95 to '97-98, were those years going up or down? Has there been a decline?

Hon. M. Farnworth: Basically it's been flat and then down 40 percent.

S. Hawkins: That's quite a bit of money to be spending on market research. I'm just wondering: what are B.C. Hydro's customers supposed to compare themselves to? B.C. Hydro is a monopoly; customers have no other company to buy from. So what are the customers comparing themselves to?

Hon. M. Farnworth: It does a number of things. One is a quarterly tracking of customer satisfaction with call centres' service on key service-drivers, so that people. . . . You know, are we serving customers in the way they expect us to?

In terms of program participant satisfaction, would people -- small business involved with Hydro, to test the appeal and impact, for example, of specific bill-paying partners, bill-paying methods. . . ? And, you know, test new formulated products for the business market. . . .In terms of our services for Hydro's water and wastewater centres, are they doing the job that they should? It's interesting to note in this one, actually, the name of the market research company: Farrell Research.

Anyway, you know, it's to test a whole range of views and issues that affect the customer of B.C. Hydro, because we are in a service business. . . . We do provide a product to them; we do have to monitor our competition in terms of other utilities. So that's where most of the market research occurs.

[ Page 13680 ]

[1605]

Hon. M. Farnworth: We are trying to be customer-friendly, as if we were in a non-monopoly situation. We are trying to identify areas of concern that customers have, and we are trying to react. The fact of the matter is that we do measure ourselves against other utilities -- for example, B.C. Gas or B.C. Tel.

We are always monitoring changes that take place within the industry. If we can introduce them and they're beneficial to customers, we try and do that. Part of doing that is market research. As I said a few moments ago, we're spending 40 percent less this year on market research than last year.

S. Hawkins: I have a document in my hand, a briefing note that was forwarded to the official opposition. It is for the '98-99 fiscal year. Instead of going through each little piece of it, I wonder if the minister can tell me if he will commit to giving me the total receipts or break it down line by line and tell us what was spent in this document. I can send it over to the minister if he wants to have a look at it, to see if he would commit to doing that.

Hon. M. Farnworth: We will get that information for the member.

S. Hawkins: We'll move on to tab 3 under "Financial overview."

At the briefing we were told -- and certainly the document here notes -- that B.C. Hydro gets an 18 percent return on equity. That's a lot of money; that's a lot of return on equity. Is the minister aware of any other utility that gets that kind of return?

Hon. M. Farnworth: That's a standard number that would be the allowed rate of return for any private sector utility in the province. For example, it is the rate of return that B.C. Gas is allowed.

S. Hawkins: My understanding is that B.C. Gas gets roughly 12 percent return on equity. Does the minister have information that I don't have?

Hon. M. Farnworth: That may be their after-tax rate of return. They are allowed and we are allowed. . . . The number is basically the same for the two, and the number that I mentioned -- the 18 percent -- is the pre-tax rate of return.

S. Hawkins: I'll check those numbers.

We'll move to tab 4. Under "Domestic and electricity contributions," in the year 2000, $188 million is estimated for domestic electricity contributions. I'm wondering how much of this $188 million is from the downstream benefits.

[1610]

S. Hawkins: Under "Electricity trade sales and profit margins," I wonder if the minister can tell me what B.C. Hydro's Powerex margins are on their buy-resell transactions. It seems to me that Powerex is spending more to purchase power, and the margins have decreased in the past years. I'm wondering what the margins on the buy-resell transactions are to date.

[J. Doyle in the chair.]

Hon. M. Farnworth: That's explained by the fact that the profile of power that is traded or sold by Powerex has changed over the last several years. When we sell our own power that is surplus, we can get a much higher margin for it. When we are doing as we have been doing in the last few years -- selling other people's power as well -- the margin there is narrower. That's why you're seeing the change in the margin.

S. Hawkins: Can the minister give me an example of a profile change when you're selling somebody else's power?

Hon. M. Farnworth: Let's say you went back a few years. Typically, in terms of purchases in the U.S. for U.S. sales -- so you're buying in the States to sell in the States -- that accounted for 8 percent of the sales, and it's now 46 percent. That's why the margin on that will be slimmer. You're buying from one -- you've got to take your costs in there, right? -- and take your profit, and then you're selling again, so you have to be competitive in that. The margin's going to be a little narrower than if you're taking your power and then just selling it to a second party. For example, purchases in the U.S. for sales in the U.S. were 8 percent, and that's now about 46 percent. That's how that would impact on the profile.

S. Hawkins: Under "Expenses," I notice that the overall unit cost of energy has doubled in the past couple of years. This does present a liability, and I'm wondering how B.C. Hydro is going to address this.

Hon. M. Farnworth: The energy costs are accounted for as a whole, as opposed to separately. As you've got the trading taking place in the States -- the purchase of energy in the States by Powerex -- that raises the energy costs for the whole. But the energy that's still produced here in the province -- the cost of producing that has not changed. So that's where you're seeing the increase in costs. You're spending money buying power in the States; you've expanded your energy sales. The energy that's produced here in British Columbia is the same cost that it has always been, but the global is offset by the fact that you now have expanded and are making energy purchases in the United States. That doesn't impact on the cost of energy here in the province. You'll also see that reflected in terms of revenues as well. The fact that you've expanded one means that you're also expanding the other.

S. Hawkins: Can the minister address the issue of perhaps a risk or a future liability in the way Hydro is buying and selling the energy that it's buying and selling in the States?

[1615]

[ Page 13681 ]

They have a thermal generating system, a gas-based system, so they're not in a position to turn their generating capacity off. They have to keep it running 24 hours a day. In the middle of the night they're not using electricity, so they're looking for a market. We can buy it at a very cheap rate. Then we have the ability to deliver: to turn the dams back on, to slow the generation and to sell the power at peak power demand periods when it's needed -- let's say, in the morning or in the afternoon -- and wherever it's needed. That's the way in which we deal with the issues the member is raising.

S. Hawkins: I'll move to tab 6. I'm interested in Powerex's tax payments in the U.S. In the briefing, we did deal with the fact that there is a confidentiality issue around third parties. I understand that. But the bottom line is that there is a certain portion of Powerex's bottom line that pays U.S. taxes. I wonder if the minister can tell us: of the earnings in the U.S., what U.S. taxes did Powerex remit in 1998-99?

Hon. M. Farnworth: We file tax returns with the federal government in the United States. We are exempt from having to pay taxes under the Canada-U.S. tax treaty.

S. Hawkins: Is that shown on statements that Powerex files with Hydro every year as well?

[1620]

S. Hawkins: Can the minister commit to finding out if there is a cost and share that with this member?

Hon. M. Farnworth: We can get the information for the member. The only costs may be filing costs. There is Oregon state tax that's payable in the state of Oregon. That was about $200,000 last year. Apart from that, there are no other moneys that are payable. In fact, in terms of the U.S. federal government, we are exempt under treaty.

S. Hawkins: In this briefing note under this tab, it makes mention of a provincial oversight committee on the Powerex marketing strategy. Can the minister inform me who makes up this provincial oversight committee?

Hon. M. Farnworth: Are you talking about the oversight committee for the Columbia River Treaty? If so, which page are you looking at?

S. Hawkins: I am looking under tab A, under Powerex's section of the briefing binder that I was given. Under the background, bullet 2, it says: "Powerex is working closely with the provincial oversight committee on marketing strategy."

Hon. M. Farnworth: It's made up of representatives of MEI, Ministry of Attorney General and Crown corporations secretariat. Those are the people who make up the oversight committee.

S. Hawkins: Can the minister tell me the terms of reference of this committee -- what they do? What is the marketing strategy?

Hon. M. Farnworth: They're currently drafting up the terms and conditions of how Powerex will market and manage the downstream benefits. That's not been completed, but it will be coming forward for approval in the near future.

S. Hawkins: Once approved, will the minister commit to getting me a copy of that?

Hon. M. Farnworth: Yes.

S. Hawkins: We'll move to tab 9, on the Sumas gas plant. There is mention of a feasibility study done by the transmission and distribution group. Who paid for that study?

Hon. M. Farnworth: B.C. Hydro's transmission department.

[1625]

Hon. M. Farnworth: It was a preliminary feasibility study to see if it's technically feasible to move power from one location to the other. We will get the number on how much it cost for you.

S. Hawkins: I understand that the minister is committed to getting me the study as well, so I thank him for that.

We'll move to tab 14, on the Burrard Thermal station. Hydro uses a 1997 emissions inventory; that's from the briefing note. If you go to tab 4, to the water inflows chart that's provided here, we see that in the year 1997 the runoff was the highest, and well above the average. Therefore 1997 was a low operating year for Burrard. What are the emissions from Burrard when all four units are running with a firm gas load? Can the minister advise me on that?

Hon. M. Farnworth: We have yet to run it with firm gas. We won't be in a position to do that until November.

S. Hawkins: Then I will look forward to asking the minister the same question next year.

My colleague advises me that I was remiss in asking about the Sumas gas plant. For the record, can the minister tell the House what discussions or negotiations were carried on for the Sumas gas plant?

Hon. M. Farnworth: They approached Powerex with a proposal. The proposal was analysed by analysts within Powerex. There were discussions around the analysis, and it did not go forward from there. So there were no negotiations entered into.

S. Hawkins: I will move on to tab 23, regarding the advertising budget. If the minister will tell me. . . . I believe he

[ Page 13682 ]

Hon. M. Farnworth: With everything in, it's $4.6 million.

S. Hawkins: Will the minister commit to getting me a breakdown of that?

Hon. M. Farnworth: Yes, we will.

S. Hawkins: For year-over-year comparisons, will the minister. . . ? If the minister has this information now, can he tell me what the budgets were in previous years, perhaps going back about five years -- what they were year-to-year and if this year reflects an incline or a decline in advertising?

Hon. M. Farnworth: It's down from $7.9 million last year, and we can get you the numbers from previous years.

S. Hawkins: Thank you, I appreciate that.

Last year Hydro did a B.C. Hydro Track Day at Mission Race Ways track -- on June 4, 1998. I think the minister remembers that; it seems to me that he's nodding.

A Voice: He got the T-shirt.

S. Hawkins: I don't know if he got a T-shirt, but I think I refreshed his memory. He is nodding. The company that was sponsored, I believe, was Driving Unlimited, at an estimate of over $10,000. I'm wondering if Hydro has any plans to do sponsorship of this type within their advertising budget this year.

[1630]

S. Hawkins: Will the minister share with me the policy that Hydro has about doing these kinds of sponsorships or events? What's the public policy with regard to spending money on these kinds of events?

Hon. M. Farnworth: Hydro does, as the member is aware, a number of philanthropic activities. We partner with the private sector in that. We look at events and opportunities for Hydro to participate in on a case-by-case basis. Sometimes we are approached by private sector companies; sometimes we go out and look for partnerships. It's a question of applying a series of criteria to see that they fit in with Hydro's overall goals and priorities. Some of those things include such things as education, the environment and aboriginal issues. It's on that basis that we make decisions, and we'll be pleased to sit down with the member and discuss policy further with her.

S. Hawkins: Before we have that discussion, is this policy in written form and can the member get a copy, so that I can review it before we have that discussion?

Hon. M. Farnworth: Yes.

S. Hawkins: I just want to point out $4.6 million. I think that's the number that was given to me for just the advertising budget for 1999-2000. That's a heck of a lot of money. I want the minister to comment on spending priorities, given that the budget has posted a huge debt and deficit and other ministries are being asked to cut back. I'm wondering how Hydro justifies or rationalizes spending that kind of money -- and the minister approving that kind of spending.

Hon. M. Farnworth: As I said a few moments ago, (1) the amount of money has been reduced, and (2) Hydro is a large company that has a very large presence in the province. The initiatives around advertising focus on some of those key areas -- such things as water flows, customer satisfaction, call centres and changes that are made to inform the public of the changes that Hydro has been making -- and in some cases, around new initiatives. The call centre is an example of that.

Another one that you often see advertised on TV, on radio and in print media is around Power Smart and the Power Smart program. That's a long-term program that's been in place and one that we're trying to encourage and to increase awareness around. Another one that you'll see is around the safety issues. And you will have heard the advertisements on the radio about what to do if you come across a downed power line, what to do if you're excavating in your back yard or you're going to do tree trimming -- things that enhance safety and that the public needs to be aware of. That's where the key focus is, so that's where the advertising dollars are spent. As I said a few minutes ago, it's down by 40 percent over last year.

[1635]

Hon. M. Farnworth: I think informing people what to do around power lines is a good use of tax dollars. I think informing people what to do if they're excavating in their yard and they need to know who to contact is a good use of advertising dollars. I think informing people about Power Smart and energy conservation is a good use of dollars. I think informing people of the changes that are made in Hydro policies and letting the public know about new initiatives around call centres and customer service centres to make it easier for them to deal with Hydro, to show that Hydro's responding to consumer demands, is appropriate. It does cost money, but as I said, it's been reduced from what it was last year.

S. Hawkins: That's the point I make. If the minister thinks it's such a good use of tax dollars, why did they cut the budget? Or if they think it's such a good use of dollars -- millions of dollars in advertising -- why was the budget cut by 40 percent?

Hon. M. Farnworth: In part it depends on a number of factors. One is the type of programs and the number of programs that you're trying to communicate and advertise; the second is media placement in terms of the different types

[ Page 13683 ]

S. Hawkins: Would the minister detail for me, then, because the budget's taken a 40 percent cut, what priorities were given to advertising this year, and where the cuts were made?

Hon. M. Farnworth: Production costs were cut.

S. Hawkins: Well, I think that's an overwhelming number for advertising. I can tell you that I appreciate ads that educate me, but Hydro does a lot of feel-good ads, and I don't feel so good knowing that that money is being spent on advertising rather than ratepayers getting a break on their rates. I can tell you that the ratepayers would be a lot happier if they saw some of that money coming back to them rather than telling them via advertising what a great job Hydro is doing.

I want to move on to tab 32, unless anybody has a comment on that. No. Okay.

Moving on to tab 32 in the briefing binder that was provided, the briefing note deals with an Intalco aluminum sales agreement, and my question to the minister is: are the transmission costs on the U.S. side of the border 50 percent of energy costs? Can he confirm that?

Hon. M. Farnworth: They buy at the border. We don't know what the transmission cost is after that, with Bonneville Power. It varies depending on where you go in the western U.S.

S. Hawkins: Can the minister tell me if they could be up to 50 percent?

[1640]

S. Hawkins: Can the minister, if he has the information, tell me what BPA charges?

Hon. M. Farnworth: In general, they charge $2.50 per megawatt-hour, but in terms of Intalco, if they have a specific contractor. . . . What it would pay, we don't know.

S. Hawkins: I'd like to move to BCHIL. I have a few questions before. . . . The member for Vancouver-Little Mountain wants to address the issue as well. We were given a document draft, actually, of B.C. Hydro International Ltd.'s monthly financial report of March 1998, so I'm referring to that document. The expensed business development schedule of the 1998 BCHIL financials indicates that $31,000 was spent on the Team Canada mission. My question is: was this for Hydro alone?

Hon. M. Farnworth: That is correct. It is for Hydro alone.

S. Hawkins: Does this include payment for the minister or any of the minister's staff?

Hon. M. Farnworth: No.

S. Hawkins: The schedule also refers to an expense of $20,000 for the India trade mission. Again, was this solely Hydro's expense?

Hon. M. Farnworth: Again, that's for Hydro alone, including Hydro's subsidiaries.

S. Hawkins: If the minister or ministers or representatives of the government go, who pays for their part of that mission -- the different trade missions that are going to different countries?

Hon. M. Farnworth: They would not be paid by Hydro.

S. Hawkins: E&I?

Hon. M. Farnworth: E&I would be the one whom they would come to. But it would not be done through Hydro. Hydro may pay for a dinner if they're having a dinner; that may be something that's there. But in terms of hotels, travel and those sorts of things, no, that would not be picked up by Hydro.

S. Hawkins: The trip I'm referring to, the $20,000 for the India trade mission -- can the minister tell me if the Minister for the Public Service went on this trip with this trade mission?

[1645]

S. Hawkins: Can the minister tell us who paid for the expenses of the Minister for the Public Service?

Hon. M. Farnworth: It would not have been B.C. Hydro; it would have gone through MEI, through BCTIO.

S. Hawkins: There is also on the list of business development expense costs an expense of $80,000 in expenses for Jim Gemmill in 1998 and $88,900 for W.C. Seyers. Can the minister please detail these expenses?

Hon. M. Farnworth: These are both employees of Hydro. The expenses are incurred in the nature of the business development that they are involved in. If the member wants a breakdown of the expenses, we can get that information for her.

S. Hawkins: I would like a detailed breakdown, so I will ask the minister to forward that to me when he gets it. If I could get the detailed expenses of the member for Esquimalt-Metchosin when he went on that trip that we spoke about, the $20,000 that Hydro didn't pay for. . . . But he also went on that trade mission. If we could get those expenses from E&I, I would appreciate that. Can the minister confirm that?

Hon. M. Farnworth: Yes. In fact, I think you have an FOI request in on it, probably.

[ Page 13684 ]

Hon. M. Farnworth: The subsidiaries don't produce annual reports. Their activities are rolled up in the overall annual report of Hydro. In terms of financial statements, again, while financial statements are produced, they are also included in Hydro's overall financial statements.

G. Farrell-Collins: Can the minister tell me, then, why there were in existence early this year no financial statements for B.C. Hydro International dated the year-end for March 1998?

[1650]

G. Farrell-Collins: The minister's telling me that for the year ended 1998 -- which is over a year ago -- the financial statements for B.C. Hydro International have yet to be audited?

Hon. M. Farnworth: They have been reviewed by the auditors, they have been used in the creation of the overall audited statements in terms of how they apply to Hydro, but they have yet to receive an auditor's certificate. They have not, at this time, received that certificate.

G. Farrell-Collins: Is it common practice for the financial statements of the subsidiary corporations of B.C. Hydro to submit financial documents and not have them audited for over a year?

Hon. M. Farnworth: Yes, it is not common practice. There are statements: they have been reviewed by the auditors, and they have been used in the preparation of the overall Hydro report. They have not received a certification from the auditors in part because of the complexity of issues on the other side of the water in Pakistan.

G. Farrell-Collins: The minister is saying that it is not a common practice for these statements to go a year or more without being audited and without receiving the stamp of approval from the auditors. I would say that in the scheme of things, it makes it difficult to audit all of B.C. Hydro if the subsidiaries can't be audited properly and you don't have a sign-off from the auditor. If the subsidiaries aren't signed off, then the larger financial statements can't really be signed off either. Are there any of the other subsidiaries -- Powerex, for example. . . ? Does Powerex have its financial statements audited every year, and does Powerex have a sign-off from the auditors on its financial statements?

Hon. M. Farnworth: All of the subsidiaries have been audited and have received certificates of audit from the auditors, with the exception of the one I just mentioned.

G. Farrell-Collins: When was the last time B.C. Hydro International had a sign-off from its auditors?

Hon. M. Farnworth: I'll get the information for the member, but I will make the following points. One, in terms of the subsidiaries and the auditors, there is no legal requirement for them to be audited, but the fact of the matter is that they are. In most cases, they do receive the certificate of audit. In this particular case they haven't, in part because of the complexities of transactions in Pakistan. That's the case with this particular one. As I said a moment ago, all the others have been. In terms of the question the member asked, we'll get the information for him.

[1655]

Hon. M. Farnworth: It's just Pakistan.

G. Farrell-Collins: In these financial statements, there are a number of pages of projects here that are underway or at various stages. My understanding is that the Pakistan project is the only one where we have equity. There are lists of projects here that are underway in China and Nepal, others in Pakistan, the United States, Central America, Sweden, Venezuela and Brazil. The minister is telling me that in all of those cases, the information is available; there are no complexities that limit the financial statements. It's only at the project in Raiwind, Pakistan. Is that correct?

Hon. M. Farnworth: Yes, it's just Raiwind.

G. Farrell-Collins: The financial statements state that there is a. . . . In fact, it appears that there are numerous places where in fact there are a couple of loans from October 1995 that were outstanding, payable to B.C. Hydro International. They were due in October 1998. Can the minister tell whether or not they've been paid?

Hon. M. Farnworth: No, they have not been paid back.

G. Farrell-Collins: So there are several million dollars here -- two loans. There's about $5 million (U.S.) in loans that have not been repaid. They were due in October. Does the minister have any sense at all when the people of British Columbia are going to get their money back?

Hon. M. Farnworth: They're still on the books; they haven't been written off. It is still our intention to see that they get repaid. But at the current time, they have not been repaid. It is our hope that in the future they will be.

G. Farrell-Collins: So there are a number of loans that are out there. There's a $2.35 million (U.S.) loan. There's a $1

[ Page 13685 ]

Hon. M. Farnworth: That is correct. This isn't new information. These have been on the books for a while now, but they have not been paid back. It is Hydro's expectation and our expectation that at some point they will be paid back.

[1700]

Hon. M. Farnworth: Yes, the loans are out there. No, they have not been paid back. Yes, at some point we would like to see that we get the money back. The members are well aware of the complexities around the Raiwind project. It's not new information. I'd like to say that they have been paid back by now, but they haven't. We hope that in the future they will be.

G. Farrell-Collins: I would say that perhaps we don't understand the complexities quite as well as the government does. It would seem to me that it would have been nice to have known about these complexities before the money was invested. Clearly that wasn't the case. Now we're sitting here with this $8 million or so on the books and certainly no additional interest being paid, I think the minister said. I didn't quite hear that answer, but I thought I overheard it.

We've got these loans out there. They haven't been paid back. They were due in October. Can the minister tell me whether there is any penalty being applied to that? Is there anything written into the contract that ensures that when the payments for these loans are overdue, there will be surcharges or a penalty or additional interest? Is there anything there at all to encourage the people to repay these loans?

Hon. M. Farnworth: We do expect to be paid, as I said earlier on. And no, they are not accruing additional interest. Right now they are unable to pay, but they're still on the books.

G. Farrell-Collins: So we have roughly $8 million out there, more or less, which is due to us virtually interest-free -- no late penalties, no nothing. Can the minister tell me who wrote that loan up?

[1705]

G. Farrell-Collins: It was more a rhetorical question, I suppose, than a specific one. The fact of the matter is that I don't know of anybody who would write up a loan like that where it's: "If you don't pay, you don't pay. We'll lend you $8 million, and if you can't afford to pay, it's okay. We'll just keep it on our books forever, and we'll see what happens." What security does Hydro have on those loans?

Hon. M. Farnworth: Until such time as the plant is running, we are in the same position as everybody else. They are unable to pay the loans to us or to anybody else.

G. Farrell-Collins: So, basically, if push comes to shove, we get a chunk of a power plant in Pakistan that's not running and that doesn't have a likelihood of running, certainly in the foreseeable future -- that in fact is costing us money right now, not to mention the opportunity cost of the $8 million. I can't remember who it was; I think it was a minister who at one time said: "Those guys don't know business; we know business." I think this is perhaps another example of just how well this government. . . .

S. Hawkins: The Deputy Premier.

G. Farrell-Collins: Was it the Deputy Premier or the Premier? I can't remember.

S. Hawkins: The Deputy Premier.

G. Farrell-Collins: I think he was actually the minister responsible for B.C. Hydro at the time, if I remember correctly -- with a great business acumen. His predecessor is now the Premier. So it's an interesting history, I suppose. I can tell you, when I hear that B.C. Hydro is going to trade in derivatives, it is so encouraging to know that these are the kinds of contracts that we write up, this is the way we manage our money and everything's going to be fine: "Don't worry. Everything will be fine. You'll be reassured. We're going to have a committee that's going to oversee it, and there are going to be criteria, and we're going to make sure that nothing goes wrong. Trust us. It'll all be fine."

How is the public supposed to have any sense that the derivative process is going to be managed professionally, when a project of this size -- $8 million in this loan -- can't even be managed properly? How are they supposed to expect that there's going to be any level of oversight, competency or ability to manage the other risks, when this little risk, as the minister has put it and I think the previous minister put it -- "this very small amount of money that's at risk," to use the government's words -- is managed the way it is? If you can't manage these amounts of money, how can we expect the government to manage and oversee the larger transactions that are going to take place? It reaches a point, I think, where you just throw up your hands and stop. Where do you go from there? Where do you go?

I don't think it stops at $8 million. In fact, page 87 of Mr. Smith's report states that B.C. Hydro and BCHIL maintain joint and several liability with other sponsors for project cost overruns before project completion, and debt service and working capital requirements for three years after project completion. Can the minister tell us, now that the Raiwind project is buying power at $80,000 a day just to keep the lights on and is not due to come online until 2003 at the earliest, how fast is that clock ticking? How much money are we on the hook for right now?

[1710]

[ Page 13686 ]

I know that there has been some fudging around the word "investment," and it now means all sorts of things. It means spending, too. I just want to be clear about exactly what the additional costs are to the taxpayers. It says in the report and in the contract which is there that we're jointly and severally liable for any cost overruns, etc. -- any failures to perform. You now have a project that on a daily basis is taking in $80,000 (U.S.) in power just to keep its lights on. I would assume that as a shareholder that is jointly and severally liable for all those costs, we're as liable as the next people for the cost of maintaining that plant when it's not operating.

Hon. M. Farnworth: There's no money from Hydro going in; there's no money from the taxpayers going in; there's no $80,000 a day going in. There's no money going in. The only. . . . BCHI Power, of which Hydro is a 40 percent participant, has responsibility. We have said we will not be putting in a penny, so that is taking place. The only thing where there is expenditure is around lawyers. But in terms of any cost overruns, we're not involved at all.

G. Farrell-Collins: Unless the minister can tell me why his 1997 financial statements are different. . . . They state: "Through its investment, the company may be subject to maximum additional funding of up to $8 million (U.S.) in the event of cost overruns and non-performance on the Raiwind power project." Perhaps the minister can tell me why that says one thing, when he's telling me something else.

Hon. M. Farnworth: If there's a call on any cost overruns, it would go to BCHI Power and the Pakistani partners. We have said that we will not be putting in another dime.

G. Farrell-Collins: That's great; tell that to the courts. I mean, you can say that you're not going to put more money in, but if there's a default and you're jointly and severally liable for those costs, the contract's there; you're going to pay whether you want to or not. That's what the financial statements say. The government may not want to pay more money -- I'm glad to hear that. But the fact of the matter is that BCHIL's 1997 financial statements agree with Mr. Smith's report when it says: "The company may be subject to maximum additional funding of up to $8 million U.S. in the event of cost overruns and non-performance on the Raiwind power project." I would suggest that in fact there are some performance problems and that it's not up and running; whether that's the fault of Raiwind or Hydro or not, the fact is that the project isn't going ahead. It's having to draw power from the grid in order to just run itself, so clearly there's some costs there. They're building up somewhere. Somebody's got a line of credit on that, and it's building up, but at the end of the day BCHIL is jointly and severally liable with all those other investors as part of it. So is the minister going to contradict what's in the financial statements from 1997?

[1715]

G. Farrell-Collins: We'll wait and see. I don't know. . . . I'm reading from the 1997 BCHIL financial statements. And I'll read it for the third time for the minister, and maybe the minister can tell me why the financial statements are wrong then. It says the following: "Through its investment, the company may be subject to maximum additional funding of up to $8 million (U.S.) in the event of cost overruns and non-performance on the Raiwind power project." Is the minister telling me that that's not the case now?

Hon. M. Farnworth: If there's a call on the $8 million, they can go to BCHI Power, and they can ask BCHI Power. BCHI Power could ask us, but we would say no, and then it goes to SNC-Lavalin; they're the majority partner in there. As I said earlier, there is not a dime from Hydro or from the province going into it, nor will there be.

G. Farrell-Collins: I'm not a corporate lawyer, but it seems to me that if the company, BCHIL, is jointly and severally liable for those cost overruns and the owner of BCHIL is B.C. Hydro, at some point down the line B.C. Hydro and the ratepayers of British Columbia are going to end up footing the bill. That's what the whole issue has been about.

If the minister has some other way of getting around that, I'm glad to hear it, but it seems to me that now, three and a half years into this deal, there still seems to be a whole series of unanswered questions. There is still no revenue stream. In fact, there is $8 million that's sitting out there with no interest being paid on it -- very little likelihood, I suspect, at this point, of ever having it paid back. The power is not needed in Pakistan at this point; there is no great, huge desire for it -- that is my understanding.

[1720]

I think it's unfortunate that the government doesn't see fit to acknowledge that, and perhaps we're reaching a point where B.C. Hydro and BCHIL should look at writing this off and be honest about it. Maybe we're there. Unless the minister knows something that we don't know, unless a deal is just around the corner or unless there is some minister in the Pakistani government trying to create a Power for Jobs initiative to put snow on the ski hills or aluminum plants in Pakistan, there is a problem, and I don't see it changing any time in the future. Maybe they're going to use the aluminum to build fast ferries.

I mean, who knows what they're doing in Pakistan, but clearly there is no demand for this power; at this point there's

[ Page 13687 ]

[H. Giesbrecht in the chair.]

S. Hawkins: We'll go back to Powerex, if we can deal with that. I'll just confirm that the minister told me before that Powerex pays absolutely no taxes in the U.S. -- no U.S. taxes. Is that correct?

Hon. M. Farnworth: I said no U.S. federal government taxes. There was the state tax in Oregon.

S. Hawkins: The state taxes that are paid. . . . I believe the minister did commit to getting me a breakdown of those. Did he?

Hon. M. Farnworth: There's only one state, and that was Oregon. I said it was in the order of about $200,000.

S. Hawkins: Thank you. In 1998, 8 percent of purchases were made in the U.S. for resale in the U.S., and in 1999 this grew to 46 percent. That sort of increased the public risk, obviously, when the sales increased by that much. The sales doubled, but it appears that the contributions to Hydro are not changing. In 1997-98 the contributions were $179 million, and in '98-99 they were also $179 million. It appears, then, that the profits are declining -- or the minister can explain to me what that means. Will the minister tell me what percentage of Powerex's purchases for resale in the U.S. will be made in the U.S. in the year 2000 -- the upcoming year?

[1725]

S. Hawkins: I'm confused. Will the minister be patient and perhaps explain why the contributions were $179 million in both years -- '97-98 and '98-99 -- and if that means that the profit margin was shrinking? Will he explain that to me?

Hon. M. Farnworth: Yes, the margins get tighter, in part because the surplus here at home is smaller, and so we have to work harder to make the same amount of money.

S. Hawkins: Will the minister confirm that the risk increases as the percentages being traded increase?

Hon. M. Farnworth: No, it doesn't. We're dealing in buying and selling physicals, which is: we buy the power; we sell the power right away.

S. Hawkins: Can the minister tell me what the margins are for non-Hydro buy-resell transactions?

The Chair: We'll now take a short recess for the vote in the other chamber.

The committee recessed from 5:29 p.m. to 5:38 p.m.

[J. Doyle in the chair.]

S. Hawkins: Before we broke, I asked the question: what was the margin for the non-Hydro buy-sell transactions?

Hon. M. Farnworth: What we're talking about is power that's bought and sold within the U.S. system. It never enters British Columbia; it never enters Hydro's system. It varies, in part, on whether you buy at high peak or low peak -- on the time of day -- but generally the margin would be between, let's say, 5 percent and 15 percent.

S. Hawkins: Can the minister tell me if there are any U.S. employees of Powerex or Hydro?

[1740]

S. Hawkins: Can the minister tell me what arrangements. . . ? Is it agents, then, that Powerex would use?

Hon. M. Farnworth: We use no U.S. agents. All our sales are by 100 percent British Columbia employees.

S. Hawkins: Can the minister tell me how many brokers, then, Powerex has? And do they use any consultants in the U.S.?

Hon. M. Farnworth: The only people who make sales are in Vancouver. In terms of consultants, we do use U.S. consultants such as legal consultants or marketing consultants -- those sorts of things -- but we don't have consultants, for example, who would do sales or stuff like that.

S. Hawkins: Can the minister -- if he doesn't know right now, that's fine -- commit to getting me a number of what it costs to have these consultants, or of what they charge, and what services they provide within the Powerex budget?

Hon. M. Farnworth: Yeah, we can get you a breakdown.

S. Hawkins: Are travel expenses to the U.S. or anywhere else required for people that work for Powerex? And if so, can

[ Page 13688 ]

Hon. M. Farnworth: The information that I can supply in terms of actual expenses is limited somewhat by confidentiality, because then it becomes, I think, a question of which customers we're in contact with, and that has competitive implications. But in terms of the types of activities, they're standard business practices: visiting customers, doing market research -- those types of things. We're more than happy to sit down with you and give you a briefing on the type of stuff that they do, if that's what you want.

S. Hawkins: Thank you. I look forward to that. Hopefully, we can do that after the session.

Does Hydro provide any form of financial guarantee to Powerex transactions?

[1745]

S. Hawkins: If Powerex has 41 percent of its sales backed by the B.C. Hydro system -- that's what I understand -- there should be a firewall that exists between the two companies. I'm wondering what guarantee we have that that does exist and that there is some backing in case there are problems.

Hon. M. Farnworth: B.C. Hydro -- the generators -- generate the power. There's a firewall between it and all power suppliers on the wires -- okay? So there is a firewall, but it's further back than where the member is wondering if there's a firewall. But between B.C. Hydro and the suppliers -- the wires -- and Powerex, there is a transfer pricing agreement which adds another layer between Powerex and Hydro.

S. Hawkins: Can the minister tell me more about this transfer pricing agreement?

Hon. M. Farnworth: There's a set price paid by Powerex to buy the power from Hydro; it's a formula. They pay that up ahead of time. So they've paid for the power; they've paid for it by formula in advance of them selling it.

S. Hawkins: The minister said the firewall was set back further. I thought the firewall was sort of a. . . .

Hon. M. Farnworth: In a sense there's two.

S. Hawkins: Okay, I'm confused. If you could detail that for the member, I'd appreciate that.

[1750]

I. Chong: I'd just like to follow up on some of the questions that our critic was asking in terms of the financial status of Powerex. I'd like to go back to the fact that I recognize Powerex is a wholly owned subsidiary. I guess I'll get the same answer as was given to the member for Vancouver-Little Mountain. Am I to understand that there are no financial statements available for Powerex as well? That's the first question.

Hon. M. Farnworth: There are financial statements for Powerex. They form part of Hydro's overall financial statements. They are audited.

I. Chong: I could hear some of the comments, and I'm presuming again that these are not statements that are available to the public -- that they are internal because they are used in the consolidated financial statements for Hydro. I see the minister and his staff nodding, so I'll accept that as a yes.

But can the minister, through his staff, advise whether this subsidiary has assets and whether it has liabilities, whether it has borrowing powers -- all those things that would be normal of a corporation, and a subsidiary corporation at that?

Hon. M. Farnworth: Yes, it has assets. It has paper assets in terms of receivables, accounts, those sorts of things, as opposed to physical plant assets -- compared to, let's say, Hydro.

Second, it has no independent borrowing authority, and its statements are used, as I said earlier, for the internal auditing process within Hydro overall. Part of the reason -- you know, the member asked about them being made public -- is that they contain a great deal of commercially confidential information in terms of who we are dealing with in contracts and those sorts of things.

I. Chong: I can respect the requirement for the confidentiality, but I suppose it would be helpful, though, if we were at least able to generally see even the schedule that forms part of the financial statements. All we're able to see in terms of financial information from Powerex is that the contribution to Hydro's net bottom line is X million dollars -- which is what the critic was trying to ascertain earlier in her questions to the minister.

[1755]

[ Page 13689 ]

Interjection.

I. Chong: I see from his gestures that he is prepared to answer them now, so I'll yield to him.

The Chair: Noting the time, I recognize the minister.

Hon. M. Farnworth: Very quickly and very briefly, Hydro is a regulated company; Powerex is not a regulated company. Powerex does a specific function. Within B.C. Hydro's overall statements, there are schedules that deal with the electricity trade. They don't specifically relate to Powerex, but there is a great deal of information there. Finally, we are more than happy to sit down and give the member a briefing on the questions that she wants answered.

Noting the hour, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 5:57 p.m.

The committee met at 6:42 p.m.

[E. Gillespie in the chair.]

ESTIMATES: MINISTRY OF EMPLOYMENT AND INVESTMENT AND
MINISTRY RESPONSIBLE FOR HOUSING
(continued)

I. Chong: Just before the recess for the dinner break, we were talking about Powerex. I just want to confirm that the minister has stated that he would provide some. . . . Or perhaps he didn't confirm. He mentioned that contained within the financial statements of B.C. Hydro was information in regard to Powerex financial revenues and expenditures. The difficulty, of course, is without having those financial statements, we still are prohibited from having a clear review or scrutiny of that. I'm wondering whether or not the minister can commit to providing that information regardless of whether the Hydro statements are completed in the next little while or not. I heard him state earlier, in response to questions from the member for Vancouver-Little Mountain, that the Hydro statements could not be completed due to complications of some other subsidiaries -- that's what I understood it to be. If that's not the case, then perhaps the minister can commit to providing the revenue and expenditures figures for Powerex, so that we can have a look at the comparisons for the last three years of operations.

Hon. M. Farnworth: The statements for Powerex are out here. That's not a problem. The issue that I said I would try and do is to get the member. . . . There are the electricity trades that take place. Those are in the appendices in the annual report. That we can get for you. We will commit to giving you a briefing on the corporate operations of Powerex, and you can see the corporate issues around there -- financial issues -- and we will arrange that for you at your convenience.

I. Chong: I suppose that probably would be the most expeditious way to deal with Powerex. But before I leave them, on the questions of the accounting and the financials for Powerex, I do recognize from a briefing that was provided for the critic last week that for the three fiscal years '96-97, '97-98 and '98-99, the gross sales of Powerex and then the contributions to B.C. Hydro's net income were provided. In 1996-97, gross sales were $165 million, with a net contribution of $73 million; '97-98, $341 million in gross, $179 million net; and '98-99, $740 million in gross sales and $179 million in the contribution to Hydro.

[1845]

Hon. M. Farnworth: It's complicated in the sense that it depends on the amount of surplus within the province and, as I explained earlier, that has shrunk somewhat. Then it also depends on the margin in the United States. And it depends on the price. So that plays a part in it. It also depends on the water conditions. So it depends on whether we're having below average water conditions or above average water conditions; it depends on whether we're having below-average or above-average water conditions. All those factors come into play. In some years it may be under $179 million; it could be higher. It really is very. . . . It's hard to give you an exact figure. I think that is probably a realistic figure, but if it's under, it may just be a reflection of any one of those factors that I have mentioned to you.

I. Chong: I would take it that perhaps the best way to understand the situation, with all those complexities and variables, would be to take advantage of the briefing that the minister has offered. Of course, we will undertake to do that.

The next area that we want to move on to involving B.C. Hydro and Powerex, which I know the critic from Vancouver-Little Mountain also would perhaps like to question on, is commodity derivatives. I know the minister is aware that changes were brought forward recently by the Ministry of Finance to deal with the handling of derivatives. My understanding is that for the past two years Hydro has in fact been carrying on derivatives trading. Can the minister confirm that it has only been for the past two years, or has it been longer than that?

Hon. M. Farnworth: On commodities, we have not; on debt, we have.

[ Page 13690 ]

Interjection.

I. Chong: With the minister nodding his head, I take that as being an incorrect statement that was given to us with the Ministry of Finance briefing. If that's the case and it has been. . . . Just again to confirm with the minister, it has strictly been financial derivatives that Hydro and Powerex, or any of its other subsidiaries, have been trading in, and in no other forms of derivative. Is that a confirmation that I can get?

Hon. M. Farnworth: That is correct. With the exception of some greenhouse gas credits, with a value of about $100,000, there have been no other. . . . The only derivatives trading was the debt. There has been none in commodities.

I. Chong: Can the minister confirm. . . ? Was that small amount of trading under B.C. Hydro, or was it under one of the subsidiaries? Again, I asked whether this involved all the subsidiaries of B.C. Hydro.

Hon. M. Farnworth: The greenhouse gas credits were done through Powerex.

[1850]

My concerns are that we have a government that has been for the past two years, through B.C. Hydro, trading in financial instruments. The difficulty, of course, is that where there may be some gains in one area, we're certainly going to suffer loss in others. It's important that if B.C. Hydro is going to continue in financial derivatives and eventually move into commodity derivatives -- which we understand it can now do -- there is a type of risk management strategy that's in place. Whether that's done by outside consultants or internally, we certainly have to have the people who are best able to provide that expertise. But more importantly, we have to identify the risk that will exist. Again, these are not risk capital dollars, as in the private sector; these are taxpayer dollars.

I would like to ask the minister, firstly: where there has been trading in financial derivatives for the past two years, what strategy was in place to address the idea of risk?

Hon. M. Farnworth: We haven't been engaged in derivatives trading with commodities at all.

I. Chong: What I did say was: recognizing that Hydro could possibly move into commodity derivatives, which is an expansion of the kind of trading they're doing now. . . . In the past two years it has engaged in financial derivatives trading, and I'm wondering: for those past two years, where we have perhaps not had a close scrutiny of this, what risk management strategy was in place? It would be, I guess, great to hear that we didn't suffer any loss and that that happened by chance. But certainly Hydro should be obliged to ensure that it's not by chance that we don't lose money and that our capital -- our taxpayers' dollars -- is in fact protected. So if the minister could give this committee an idea of what was in place for those two years. . . .

Hon. M. Farnworth: Hydro's been involved in derivatives for debt for over a decade -- probably closer to 15 years. So there's a risk management committee in place. It reports to the financial committee of the board, and the work is done within our financial administration at Hydro. We've got, I think, a very competent financial administration in place.

[1855]

Hon. M. Farnworth: It's currently made up of people such as the chief financial officer and legal counsel and vice-presidents, and it reports to the finance committee of the board. As we move into the future, we are looking at bringing in outside people as well.

I. Chong: You mentioned various positions, but how many actual people are on this risk management committee, and what will it expand to?

Hon. M. Farnworth: There are seven currently. They report to the finance committee, which is chaired by Gordon Green, who is past vice-president of RBC Dominion Securities.

I. Chong: I also asked the minister whether he could advise as to what numbers the expanded committee may grow to.

Hon. M. Farnworth: It will probably expand by at least a couple -- probably to about nine, I would say.

I. Chong: Since B.C. Hydro has had a pattern of derivatives trading for the past 15 years, do the staff at Hydro have those 15 years itemized and in a schedule for comparisons, to see how well we've performed in the last 15 years?

Hon. M. Farnworth: We're happy to give you as much information as we can, and we're also happy to sit down with you and brief you on what has happened over the last number of years and the fact that, from this year forward, there are new accounting standards that come into play which require a lot more disclosure. So that will also be taking place. We are more than happy to bring you up to date on that as well.

I. Chong: I thank the minister for his suggestion that we have another briefing on the past performance and looking at the future. I can appreciate that there will be a requirement to have more disclosure, because there certainly is risk there and potentially a contingency that needs to be accounted for. So that would be appropriate treatment of that.

I'd like to ask the minister what specific risk management strategy will be utilized due to the potential expansion into commodity derivatives trading. Is that being developed currently -- a risk management strategy -- or will that be developed? And when do we expect to see that in place?

[ Page 13691 ]

[1900]

The key elements of the commodity risk management infrastructure are as follows. On risk management oversight, B.C. Hydro's risk management committee has responsibility for the oversight of Hydro's commodity risk through approval of new products or changes in risk management strategies, defining risk parameters through policies and limits and periodic review of management reporting to assess performance and compliance with those policies. Day-to-day activities associated with the commodity risk management oversight function are the responsibility of the commodity risk management treasury. That's the individual who's just been hired from the private sector.

Policies and limits. B.C. Hydro has established policies and limits, which articulate Hydro's risk tolerance by defining authorized products and locations where Powerex may transact and by establishing market risk and credit risk limits, measurement methodology and reporting standards which must be complied with to deal with the major categories of commodity risk.

Quantitative modelling capability. B.C. Hydro has committed funds to the development of appropriate capabilities to model prices and risk in energy markets. These capabilities support effective transaction pricing through price-forecasting methodology as well as sophisticated measurement techniques to facilitate monitoring, assessment and reporting of risks.

Processes, internal controls and systems. B.C. Hydro is implementing processes and controls to ensure appropriate levels of control over transaction execution and administration, as well as risk measurement and reporting on a basis consistent with defined standards. The backbone of the infrastructure is the trading risk management system, which integrates the trade capture, trade administration, scheduling and risk measurement and reporting functions.

I. Chong: I think that was very helpful for the minister to sum up, so that we can refer back to it in Hansard as well.

One question that I have, which I don't believe was addressed. . . . I'll phrase it like this. In a private sector environment, where the stakeholders, the shareholders can make decisions on the progress of the company, when they can decide what amount of risk capital they are prepared to put up, they will generally have a plan as to the maximum trading amount, I suppose. I didn't hear, within this risk management strategy, whether Hydro has considered a maximum limit in terms of derivative trading -- whether in financial or whether in commodities. As I stated earlier, these are B.C. taxpayers' dollars at work; they're not risk capital. Surely, we would want to ensure there is a maximum cap if this were to continue to take place.

Hon. M. Farnworth: We're not using derivatives to speculate, and we're not putting up capital for derivatives trading. What we're using derivatives for is to reduce risk -- okay? So there is a difference there. We're not in the business of going out to speculate on this; we're using this to reduce risk on long-term contracts.

[1905]

I apologize if I'm asking questions that were asked previously, but on page 2 of that -- No. 2 -- it talks about the risk management policy. Throughout this briefing note, it seems. . . . Perhaps I'm confused, but it talks about financial derivatives. We've been talking about financial derivatives and commodity derivatives. In this briefing document, they're talking about financial commodity derivatives. Perhaps the minister can explain to me what's meant. Are we talking here about financial derivatives or commodity derivatives? They're using them interchangeably.

Hon. M. Farnworth: All derivatives are financial in nature. In terms of how it's used in this context, it could apply to either one. There are pure financial derivatives, which are basically on interest rates and currency, for example, and then, in terms of commodities. . . . That's where the term applies. They're both caught in that terminology.

G. Farrell-Collins: I apologize if I'm just really stupid here, but it seems to me that what I've been hearing -- what I've been told by government, certainly in the other House -- is that Powerex has been trading in the energy market for some time, not merely selling its own product but in fact purchasing and reselling power. Can the minister tell me if that's correct: Powerex has in fact been reselling power and gas?

Hon. M. Farnworth: Powerex buys and sells real electricity all over the place. That's what they've been doing. That's not derivatives. They have not been doing derivatives in commodities.

G. Farrell-Collins: Has Powerex been selling forward contracts?

Hon. M. Farnworth: Right now Powerex would make a contract with you, let's say, to purchase power in November at a fixed price. That is a real, physical sale. It's not a derivative.

Interjections.

The Chair: Through the Chair.

[1910]

Hon. M. Farnworth: Futures are traded on exchanges. What Powerex does, in terms of a contract, is not traded on an exchange. What Powerex does, as I said, is agree to sell you

[ Page 13692 ]

G. Farrell-Collins: Is B.C. Hydro buying forward contracts?

Hon. M. Farnworth: Here's what we do. Here's an example that will, hopefully, put this in perspective. Every year Bonneville Power has to flush its dams and lower the reservoirs because they're required to for fish protection. The result of that is they create a great deal of energy that comes onto the market all at the same time. That's cheap power. They have to sell it. Hydro agrees to buy power, let's say back in January. We know they're doing it in May, and we buy the power in May at that set price. We take delivery of the physical asset, of the physical power. That is delivered to us; that's not a derivative.

G. Farrell-Collins: Would B.C. Hydro then take that power and resell it?

Hon. M. Farnworth: That power comes into our system. We're able to turn down our generators and then turn them on at a point when we want to and sell power back to the Americans during their peak period. In that sense, it's similar to what we do with buying power from Alberta thermal plants in the middle of the night when they're not using the power. That enables us to use it here in B.C. to meet our needs and to store up the water behind the dam for us to release it when we want to sell it during peak periods.

G. Farrell-Collins: So B.C. Hydro, through Powerex, enters into a contract to purchase an amount of power at a fixed price at some time in the future and can either choose to store that power and resell it at a later date or resell that power at exactly the same moment in time. In fact, if you were to look at the sheet, it doesn't matter one way or the other whether you're putting power amount X -- so many megawatts -- back into the dam through storage or whether you're selling it out the other line to somebody down in the United States. The fact of the matter is that the power is being sold. It seems to me that there's not a lot of difference at this point between that and trading, other than the fact that the government's not going through an exchange. Can the minister tell me whether or not Powerex has ever purchased power through an exchange or sold power to an exchange?

[1915]

G. Farrell-Collins: B.C. Hydro has essentially been doing what it's proposing to do for some period of time, the difference being that it will now funnel those sales through an exchange as opposed to a pool and will buy and sell the contracts to deliver as opposed to the actual power. It seems to me that the same risks exist. Whether you're selling the actual power or not, you're still taking price risks.

If the government is going to use the commodities and wants to enter into the exchanges just to sell swaps or futures or whatever at some other point. . . . If they're going to do that to manage the risk that's inherent in what B.C. Hydro and Powerex have been doing for, as the minister says, 25 years, that's one thing. We can have a discussion about that.

Can the minister assure me. . . ? Let me put it this way: will he tell me whether or not the only types of contracts that will be sold -- purchased and sold on the exchange -- will be to hedge the purchases and sales that Hydro has been involved in previously?

Hon. M. Farnworth: Yes.

G. Farrell-Collins: Can the minister tell me whether any of the other partners in the power pool currently are trading on exchanges?

Hon. M. Farnworth: Yes, many in fact do.

G. Farrell-Collins: What risk is there to us, if any, of being partners in those pools when our partners in those pools are trading in the derivatives market?

Hon. M. Farnworth: We're not partners, in the sense that everyone has, you know, a portion of it. And we have no risk.

G. Farrell-Collins: It's my understanding from the various briefing notes that I've seen on this issue that B.C. Hydro and Powerex intend to expand the types of products that they're providing to the market. Can the minister give us some idea of what some of those products might be?

[1920]

G. Farrell-Collins: My understanding is that's called a "swap." When somebody is setting a price with an industrial consumer and fixing that price relative to the price of another commodity -- whether it's the price of aluminum or the price of copper or whatever you're dealing with; it could be the price of wood chips with the pulp mill. . . . In either of those cases that's a swap. In my opinion, that's not managing to hedge your risk; that's assuming some of the risk of the consumer of your product, the person you're selling your product to. You're helping them manage their risk by taking a risk yourself on the future price of those products. Can the minister tell me if that's part of what's planned?

Hon. M. Farnworth: I guess, following through on the example that we were talking about, in terms of tying it to the price of the commodity, you don't have to assume the risk of

[ Page 13693 ]

[1925]

I'm referring to the briefing note again -- the same one that was on tab 26, I think, in the book. No. 1, partway through that paragraph, says that B.C. Hydro financial commodity derivatives will be used conservatively, with the intent of protecting earnings and providing customer and shareholder value and that financial commodity derivatives will be substantially backed by the ability to physically deliver. Can the minister tell me what that means -- "substantially backed"? Partially backed? Totally backed? What does that mean?

[B. Goodacre in the chair.]

Hon. M. Farnworth: So we would then have the ability, for example, to go to the NYMEX exchange, buy an energy contract at a fixed price on that exchange, and then have the physical capability to deliver that power at that price at the time it is required, regardless of the fluctuations that have taken place in the price of electricity during that period or at that time.

G. Farrell-Collins: I'll rephrase the question, or I'll repeat the question, because I think that somewhere in the debate the answer ended up quite segregated from the question. Let me just state my question again. It says here that financial commodity derivatives will be used. . .substantially backed by the ability to physically deliver. It's the adjective that I'm asking about: "substantially." Does that mean "completely," "partially"? What does it mean?

Hon. M. Farnworth: We can physically back up all of our deals with actual, firm power if that's what we want to do on the contract. Or, for example, if it's cheaper for us, we don't have to do that; we could in fact buy the contract out.

[1930]

I said earlier to the minister. . . . I asked the question whether or not he could assure me that the only way that these derivatives were going to be used would be to reduce our risk. Can the minister assure me that there will not be an attempt to generate one penny of profit in the commodity market, in the derivatives market, using the trading facilities that come into place and come into being at Powerex -- that this will be strictly used to hedge our risk and not in any way, shape or form used to generate revenues?

Hon. M. Farnworth: We are not doing this to speculate. There will be no speculation by Hydro with these tools. What you may find happening, which is. . . . Why you use derivatives is to smooth out some of the volatility in electricity prices, for example, and over the long term that may in fact result in a more stable rate of return and an added value to the power that we do sell. That may result in a better return. I think that is acceptable, and that's what we want to see happen. But in terms of whether we are going to be going out and speculating to generate revenue, the answer to that is a definite no.

G. Farrell-Collins: I'll be interested to see how it works when it gets up and running.

Could the minister tell us when Hydro expects to be entering into the derivatives market?

Hon. M. Farnworth: The legislation still has to be proclaimed. We still have to return to Treasury Board. We have to finish all the planning that's taking place in terms of implementing the programs. Those sorts of things still have to be done, and then Hydro will ease into it. So they're not going to go out tomorrow and rush into it.

G. Farrell-Collins: Six months? A year? A year and a half? Three months?

Hon. M. Farnworth: Probably by September or October you'll start to see Hydro move into the area. As I said, we're going to move in very slowly.

[1935]

I'd also appreciate receiving copies of the risk management plans -- the limits and the strategies -- in any way that can be made public -- or made public to the opposition, if the

[ Page 13694 ]

I'm looking for some assurance from the minister that he will keep us abreast of the developments and those other issues which I asked him about as far as the strategies and the limits, etc., that are in place; that once they come into force through Treasury Board and the act and whatever processes Hydro chooses to take, we'll be advised, and he will personally keep an extremely close eye on this as it progresses.

Hon. M. Farnworth: I appreciate and understand the member's comments, and we will commit to giving him briefings and keeping him apprised of developments. I have no trouble in saying that. I understand where the member is coming from. He points to some regrettable incidents in Hydro's history, and that's fair enough. It's his role to critique and to raise those issues. But I as minister also want to give him the assurance that we have professionally trained, competent staff at Hydro who know what they're doing, and I have a lot of confidence in them. Where he wishes to raise. . . . That's fair enough.

I also want to look to the precedent that we have had in terms of the issue around financial derivatives that we have been working with for well over a decade. The same people who have been involved in that are involved in the changes that have taken place to legislation and to the ability to manage the issues around commodity derivatives. We have said that there are risk management structures in place, and we intend to follow through with them. I've made the commitment to the member to give him the briefings that he has asked for, and we're happy to do that.

I too am watching this and will monitor it closely, because there is a lot of interest out there, and I think it is incumbent on me as minister to do that. But at the end of the day, I also have confidence in the staff and the corporation that we have at Hydro -- that they will bring the same due diligence to this as they have done to financial derivatives and to the work that they've been doing over the past decade.

[1940]

S. Hawkins: I have a few more issues to briefly canvass. Those who bet on the pool on estimates for Hydro ending now obviously didn't win. I have some questions on Fording Coal, and I want to know if the minister can inform me of his government's plans through Columbia Power Corporation to develop the Fording coal-fired generation plant.

Hon. M. Farnworth: That's not my portfolio.

S. Hawkins: I understood that B.C. Hydro had information and was having discussions regarding Fording Coal, so I wonder if the minister can tell me what B.C. Hydro's view is of this project.

Hon. M. Farnworth: Hydro has received a proposal -- as we receive many proposals. We've looked at it, examined it, but it does not fit Hydro's portfolio at this particular time.

S. Hawkins: Does it fit the government's portfolio? And can the minister comment if the government has any plans to go into development of a Fording coal-fired generation plant?

Hon. M. Farnworth: That's Columbia Power and Fording Coal; it's outside my ministry. What I can talk to the member about is from Hydro's position, and as minister responsible for Hydro, what the view is on that. In terms of that proposal, it doesn't meet with Hydro's portfolio requirements at this time.

S. Hawkins: It will be raised under the appropriate ministry, I'm sure, in next year's estimates if we hear there are still plans to go forward, because I understand that there might be a memorandum of understanding that's close to being signed. I wonder if the minister will commit to supplying us with the environmental impact assessment that was promised by Hydro, I believe, to the Suzuki Foundation in a letter to them dated April 15, 1999.

Hon. M. Farnworth: Can you just clarify. . . ? Was that letter of April 15, 1999, written from Hydro to Suzuki, or was it written from Suzuki to Hydro?

S. Hawkins: I understand that Hydro promised the Suzuki Foundation, in Hydro's letter to the Suzuki Foundation, dated April 15, 1999. . . .

Hon. M. Farnworth: How about if I agree to look into the matter for the hon. member?

S. Hawkins: Yeah, that's fine. I have the letter downstairs, I believe, so I'll provide the minister with a copy.

With respect to right-of-way maintenance costs, I have the costs in a table here, and the maintenance costs have actually been decreasing over the past several years. It looks like there has been a 20 percent decrease over the past six years. I'm wondering why we're seeing this trend of decreasing maintenance costs.

[1945]

[ Page 13695 ]

S. Hawkins: I'm also wondering about not only right-of-way maintenance costs but also hydro lines and transformer maintenance. I understand that private contractors' contracts have been decreasing and have been cut back, and I know there are internal or in-house contractors or maintenance people that do look after those. I wonder if the minister will comment on that: why outside contractors' -- private contractors' -- contracts are being cut and if this does pose a safety concern.

Hon. M. Farnworth: There is reduced construction activity within Hydro. We are now using people who were on construction activity before to do this work. They are Hydro's own people, and they are fully trained in that sense. Safety is not an issue because they are all well-trained and received the appropriate training.

S. Hawkins: I understand that there have been some incidents in the past year or so with regard to transformers and lines falling. I wonder if the minister can outline some incidents that Hydro is aware of that have resulted in maintenance being stepped up, or some causes for concern, because of Hydro lines falling or transformers rotting and falling. Is the minister aware of any of this?

Hon. M. Farnworth: We're not aware of any transformers or poles that have fallen because of low maintenance. We had significant windstorms this past winter which were highly unusual for our area of the province.

S. Hawkins: So the minister is telling me he has absolutely no knowledge of any of those kinds of incidents. Okay.

Moving along to Keenleyside Dam, I'd just like to canvass a couple of questions there. Can the minister tell me what it will cost to produce electricity at Keenleyside? And how does this compare, then, with the average production rate from some of Hydro's other dams?

Hon. M. Farnworth: That's a Columbia Power project. It's not a Hydro project, so it's not within this ministry.

S. Hawkins: It's kind of hard to keep track of what's in one ministry and what's in another, since things kind of keep shuffling down. Can the minister give me some guidance on where I would get this information? Perhaps he could help facilitate a briefing for this.

Hon. M. Farnworth: We will facilitate a briefing for you.

[1950]

I'd like to just ask a couple of questions on the B.C. Utilities Commission. I want the minister to comment on the minister's order No. M-22-9801. I wonder if the minister can tell me how his government justifies the heavy-handed action that's in this ministerial order.

Interjection.

S. Hawkins: Sure. If we can wait for staff to answer that question, I think the member for Oak Bay-Gordon Head has a couple of questions.

I. Chong: On a different subject, I just have this one question before I leave this committee and attend another.

A Voice: Yes, go!

I. Chong: Thank you, hon. colleague, for your support.

Two years ago, I asked some questions regarding B.C. Hydro's corporate donation policy. I was pleased to have a briefing at that time. I asked those questions in the context of the fact that I understood the Crown corporations secretariat was requiring all Crown corporations to revise their corporate donation policy. But to this day, every time I pose questions to the various Crowns as to whether they've developed a policy or revised a policy or where they are with that, I'm still finding there's a bit of hedging. I know B.C. Ferries has a distinct policy. I met with Hydro staff, who advised that they were in that developmental stage, and that was two years ago. The last brochure that I have has Mr. Laxton, as chair, indicating that that was the policy. I'm wondering if a new brochure has been developed, where we are with that, whether there's still a difficulty in proceeding with completion on that, and how soon there might be revised final policy on corporate donations for B.C. Hydro.

Hon. M. Farnworth: It's exactly the same policy as the last time you were briefed.

I. Chong: Well, that's not too comforting. I hope the minister can appreciate. . . . I believe that at the last briefing it was being revised to meet the objectives of the Crown corporations secretariat, and as I say. . . . I'll defer to the minister. He looks like he would like to answer.

Hon. M. Farnworth: It was being reviewed, okay, not necessarily rewritten. It was reviewed by the Crown corporations secretariat and they approved of the policy, so the policy is still in place. We're happy to sit down and to give you a briefing if you want to refresh yourself on the different aspects of the policy, because it hasn't changed.

I. Chong: I appreciate that the minister and his staff are being clear on that. I wish some of the other Crown corporations would be so clear to at least state that they have not revised -- that they have just reviewed and confirmed or affirmed -- the policy they have.

I do want to thank the members of B.C. Hydro, who've been helpful -- and the minister as well and his staff -- for providing me information during this debate. I thank you.

D. Jarvis: I wonder if I could ask a couple of short questions here and a couple of simple questions with regard to different things.

First of all, there is one about Hydro's advertising budget. I think you were giving the information to my colleague, or sending it to her. Could you include the '94 and '95 budget in there? Thank you. The minister can signal by nodding his head up and down, or. . . .

Hon. M. Farnworth: Yes.

[ Page 13696 ]

I understand that an ERP. . . . Do you know what an ERP is? An ERP is "excellent results pay," and that's where the sort of lower job groups in B.C. Hydro. . . . I understand that they get bonuses up to, say, a maximum of 6 percent. Then you have your IPs, which is incentive pay for sort of the middle class, or the. . . . What does Mr. Costello call them? Something about. . . . They're the professionals in the middle management level, and they get up to about 8 percent, I think. Then we get up into the VPs, who have. . . . The bonuses are in their contracts, and they get up to 20 or 30 percent -- it pays to be up at the top.

[1955]

Hon. M. Farnworth: Yup. We'll get the information for you.

D. Jarvis: I assume that is going to be quite soon, is it not? I remember that when the minister was running ICBC, he didn't reply to me when he promised he would, and I was really hurt. I was wondering if the minister could confirm if we're going to have a long delay in this, or if you can get it to me next week, maybe, or something along that line.

Hon. M. Farnworth: I would hate to disappoint that hon. member, but we will get it to you in as timely a fashion as we can.

D. Jarvis: That's open-ended.

I was wondering if I could get some information or get some explanation of what the. . . . There has been no mention of the unfunded pension payments made to those employees in the pension plans that exceed their maximum allowance. What's that rule? The $1,722 rule, which equals approximately about. . . . For pensions you can only take in about 2 percent of your earned income per year for a year of service. I was wondering if you could tell us the total unfunded payments made by Hydro to their staff in each of the last three years. How many recipients received unfunded payments from Hydro in, say, the last two years -- you can probably get this all for Hansard -- and what is the projected bonus, if any, for next year? It will remain the same, because there are several hundred. . . . It amounts to a lot of money, as you're aware, because there are several hundred employees that will benefit from this.

As of June 1 Mr. Costello sent out a memo that said that all bonuses paid by Hydro to its employees will be pensionable and that they'll constitute part of the plan's earnings. Will the existing pension funds be used to pay for this -- the cost of the benefit enhancement? And what is the estimated cost of that?

Hon. M. Farnworth: We commit to getting the numbers for you. The main plan has a $200 million surplus, as opposed to being underfunded. There's a small supplementary plan for a small group of employees, but we will get the numbers for you around that quickly -- okay?

D. Jarvis: Previously, only members of the supplemental pensions for vice-presidents had their bonuses pensionable. I look back and think of the days when I looked after Hydro and Mr. Marc Eliesen was in charge there. He ended up with a $156,000-per-year-forever pension, which is kind of nice. Remember: forever. I've always thought that if I ever get defeated in this job, perhaps I could be appointed as a fired vice-president of B.C. Hydro. You'd be set for life, I think. The taxpayers are still on the hook for that.

I am wondering if the minister can tell me the total for all bonuses paid at Hydro for the fiscal year of '96-97 and up to now.

[2000]

D. Jarvis: Could the minister tell me how many dollars Hydro spends annually on its consultants?

Hon. M. Farnworth: We will get that information for the hon. member, but he could assist, as well, by being maybe a little specific as to the type of consultants so that we could help him further. We could do it globally or break it down -- whichever. We aim to please.

D. Jarvis: How is that interpreted with B.C. Hydro? What do they interpret anyone. . . ? Someone that's not a full-time employee, I would assume.

Also, I would ask if they could tell me how many of these consultants are past the normal retirement age of 65. Seeing that none of this information is available, I'll keep asking questions. Now that they're going into Hansard, you can respond to them.

How many were former employees? I just want to make a little comment on the side here, because Ken Peterson, who is now back at Powerex, as you're probably aware. . . . He left voluntarily, as you probably recall, and within a few weeks he was back as a consultant for the legal department. He received $169,000 for retiring voluntarily, or quitting. Now that he's back on full salary and is considered an employee of B.C. Hydro, I am wondering: did he ever pay back the $169,000?

Hon. M. Farnworth: I can't confirm any definitive numbers, but I can tell the hon. member that the individual left Hydro and was gone for three years, when he did consulting work. Then he subsequently came and was employed by Powerex.

D. Jarvis: Well, Mr. Peterson was actually hired on as a consultant for B.C. Hydro while he was gone those three years and received in excess of $110,000 each year -- one year, $142,000. Then he was brought back in at Powerex.

I want to ask a couple of quick questions here on. . . . Several years back there were two strategic partnerships announced by B.C. Hydro. One was with Central Maloney, and one was the upgrading with General Electric. I was wondering if you could tell me what actually occurred in that. Did those come to fruition? How do they stand at this point?

[ Page 13697 ]

[2005]

D. Jarvis: Sorry to be rushing these questions, but there are a lot of people lined up that want to ask questions.

I understand that GE was to upgrade at Revelstoke, Seven Mile and Stave Lake. But what I was also inquiring about is that part of the agreement in which GE was going to invest $150 million into British Columbia for about 1,800 man-hours. I wonder if you could tell me what did occur with their investment into British Columbia.

Hon. M. Farnworth: GE has met its commitments in every case, in terms of work that they identified and in terms of offsets that they would do here in British Columbia. Not all the projects that were identified initially have come through, but they have met their commitments. We can get further information for the member.

D. Jarvis: Central Maloney operate out of a warehouse up in the Chilliwack area. I've driven by there, and it looks like a barren place. I wonder if you would tell me what's going on there at this point.

Hon. M. Farnworth: It's a transformer plant, and that is hydro transformers, as opposed to the television show "The Transformers."

A Voice: He doesn't get it.

D. Jarvis: I get it. It's just about as bad as the fact that Hydro has nothing to do with proposed gas plants -- coal-fired -- in the Kootenays.

Could you tell me about customer days again? That was brought up earlier. You mentioned something to the effect that you have customer days other than a track day, which was brought up by my associate here. How many customer days do you have? And what will be the costs?

Hon. M. Farnworth: We do hundreds of customer appreciation events. They range in everything from the track event that the member talked about to bringing aboriginal kids down to visit Science World, for example. There's all kinds of things. And as I said earlier, there's a policy in place. . . . We look at these events as a one-off basis and see if they fit in with Hydro's core values around protecting the environment, education. Sometimes we do work in partnership with the private sector. We approach them; other times the private sector approaches us, and we evaluate the proposals accordingly. We're more than happy to give you a briefing in the same manner that we said we would work with my colleague the opposition critic.

D. Jarvis: I assume you're sending this information to my colleague. But really, all I want to know is the total cost of all your customer days. How much does Hydro spend on that? So if the minister can. . . . I hear him nodding his head, so we'll assume for the record that he'll send us that information.

Those are all the questions I have at the moment. I'll turn it over to my colleague.

S. Hawkins: I assume that staff that can answer questions about the B.C. Utilities Commission are here. My question is with respect to the minister's order No. M-22-9801. I understand that this order put into force amendments made by this government to the B.C. Utilities Commission Act, which basically enable the minister to exempt virtually any energy supply contract from an independent public review. I understand that under these sections, the minister is also free to set the terms, conditions and price of the power project as well as order details of the project.

I guess the part that's repugnant is that it can be, or is, hidden from public scrutiny. Certainly the B.C. Utilities Commission usually gives ratepayers protection from -- how can I put it? -- political mismanagement and interference by government. Now under this ministerial order, they've basically been stripped of that protection. I'm wondering how this minister can justify the heavy-handedness of this ministerial order and -- if not the actual -- the perception of gross interference with a public commission.

[2010]

S. Hawkins: Well, what the minister's trying to tell me is that the ministerial order is in place to cut red tape. That's what I understand him to say. But I'm just wondering what scrutiny, then, the B.C. Utilities Commission is giving these projects -- what jurisdiction they have to exercise discretion in reviewing these projects -- if the minister can do it all on his own. Is there any way that any of these projects are reviewed by the Utilities Commission, or is this something that they're cut out of? If the Utilities Commission is cut out of that and is not able to give it scrutiny and attention, I'm just wondering how that is an example of open government.

Hon. M. Farnworth: Since 1980, when the Utilities Commission Act was introduced, ministers have had the power to exempt projects from the review. What's in place is that projects must go through a review. Whether it's the Environmental Assessment Act, for example, the project is undergoing a full review. So the idea that somehow things have changed and that we're now exempting things and not subjecting them to review is incorrect, because: (1) if they're already going through a review, they don't need to go through a second one; and (2) when the original act was introduced back in 1980, ministers had the power to exempt projects from going through a review to begin with.

S. Hawkins: If the minister can give me a brief list of what's been exempted under this order since it was enacted last year, I will cease and desist with this line of questioning, and I'll get a briefing on this ministerial order just so I understand it more clearly. I hear him nodding, as my colleague says, so when he stands to answer the next question, he can let me know if he will make that commitment to me.

[ Page 13698 ]

There is an engineering reorganization, I understand, taking place right now at B.C. Hydro. Can the minister confirm that, and can I get details of that? A briefing note would be fine.

Hon. M. Farnworth: We will be happy to deliver a briefing to you, and we will also, on the other issues that you raised, deal with them as well.

S. Hawkins: Just with respect to Power for Jobs, I did write to the minister back in October '98 and asked for a shortlist of the Power for Jobs initiatives. The RFP for Power for Jobs initiatives stated that the shortlist proposals were going to be announced June 1, 1998. There was no announcement; there was no shortlist made available. The minister sent me a press release, and I'm just wondering why a shortlist wasn't released -- a shortlist of proposals. If the minister can explain that to me -- how many proposals they did receive and how many projects are on the shortlist in both the 180-megawatt and the 20-megawatt categories -- I'd be interested in that information.

[2015]

S. Hawkins: That would be appreciated.

Not to end on a low note, but for all the polling that B.C. Hydro does and for all the customer satisfaction comments they get, I did receive a letter from a very frustrated group. The minister's smiling; he's probably aware of the Burton water users. They have written a letter to the Hydro chair and cc'd the letter to myself, and I would just like to raise their issue and ask the ministry to perhaps set up a meeting with this group. They write: "Dear Sir. Re: Burton water system" -- this is dated May 28, 1999 -- "we are writing to you from a feeling of great frustration. We have had many meetings with B.C. Hydro over the years, and still you do not show any regard for decisions arrived at as a result of these meetings." They do say that B.C. Hydro made a commitment to Burton water users, but the commitment wasn't followed through on.

It's about a four or five-page letter; there's a great deal of frustration. The letter ends: "We have lost faith in B.C. Hydro. We want answers. We want action. We want better communications. We want consistency in management." They say they've had seven water system supervisors in the last six years. "We want a new water system. We deserve the best treatment from B.C. Hydro. Because our townsite went under water, we sacrificed for all of B.C. Respectfully submitted, the Burton Community Hall Association, for the residents of Burton."

I'm just wondering if the minister would commit to at least having someone meet with this group and hear their concerns. It sounds like they're awfully frustrated, and they haven't really had the kind of communication that they expect from their power company.

Hon. M. Farnworth: Hydro has met with them on numerous occasions in the past, and they are willing to meet with them again. In fact, they met with them as recently as last week.

S. Hawkins: That wraps up the Hydro estimates for this year. With a caveat on all the briefings and documents and commitments that were made, I want to thank the staff for being very, very helpful in providing us with information, albeit a little late. Hopefully, next year's briefing will come a little earlier than estimates, but I want to thank the staff. We're prepared to proceed with the trade section of estimates.

B. Penner: Earlier today I asked the minister about a publication produced by his ministry, entitled "Investment Climate." I asked the minister to get me some figures as to how many of those had been printed and at what cost, and how many have been successfully distributed. As well, I think I asked the minister as to the frequency with which this document is revised and updated. I believe he now has those figures and would like to read those into the record -- at least, that's what one of his assistants told me earlier.

[2020]

B. Penner: Yes, the gentleman who relayed that information to me is just walking in now. Again, just to repeat, I'm curious as to the cost of producing the "Investment Climate" publication. I'm also wondering if the minister could tell us how many have been successfully distributed out of the total number produced.

Hon. M. Farnworth: We don't have a breakdown on the exact cost of that particular publication, but I can tell you that for the four publications, which include the publication "Fast Facts" and two inserts that went into different publications, the total cost came to $40,000. In terms of distribution, I think that over half of them have been distributed.

B. Penner: Can the minister tell us how the ministry distributes these publications? Are they typically given away at trade shows? Is that where the majority are given away? Is it through direct mail to various contacts or distribution through Canada's embassies around the world?

Hon. M. Farnworth: It's in a variety of ways. It includes things like embassies; it includes missions that are coming through; it includes people that we're regularly in contact with; it includes trade shows; and it includes our web site, where people can contact us and request information. Then we send it out to them.

B. Penner: It's my understanding from the briefing that I had last week, I guess, that the ministry doesn't have to produce quite as many anymore with the advent of the Internet. Increasingly, people are accessing the same information via the Internet, thereby saving the provincial government the printing costs of producing as many of the documents.

I've compared the latest version to a similar document, also entitled "Investment Climate" -- produced, I believe, in

[ Page 13699 ]

Again, referring to the older document, it notes that "British Columbia has the lowest ratio of tax-supported debt to gross domestic product and the highest credit rating of any Canadian province. The provincial government remains committed to deficit reduction and prudent fiscal management to foster sustained economic development." Of course, since that publication came out, the facts have changed, and the new document says: "British Columbia has the second lowest ratio of tax-supported debt. . .and its credit rating is matched by only one province." Of course, even since this has been produced, I believe our credit rating has been downgraded, and this year alone we're incurring about $1.5 billion in additional provincial debt directly, not including Crown corporation debt.

So I know that there have been some subtle and/or not so subtle changes. One thing, however, that's remained consistent between the older document and the new one is disappointing to me, and I'm sure it'll be disappointing to others, particularly on the north coast. On page 13 of this year's document, entitled "Investment Climate," there's a reference to shipping times to Asian ports from the west coast of North America. Again, a comparison is made between Vancouver and Los Angeles. In the earlier document there was also a comparison between Vancouver and Los Angeles.

The reason I mention that is that two years ago I raised this with the minister's predecessor, the member for North Coast, and pointed out that the document failed to mention the port in his own riding, which is the port of Prince Rupert.

[2025]

The document that the minister's office produced does stress the advantage of shipping from Vancouver over Los Angeles but neglects to mention the additional advantage of shipping from Prince Rupert, which is even quicker and closer and cheaper than shipping from Vancouver. I raised this matter two years ago with the previous Minister of Employment and Investment, and I'm a little bit disappointed that it hasn't been corrected. I know the port facilities at Prince Rupert are underutilized and that Vancouver at times experiences backlogs. You can see the ships waiting in the harbour, and I know that there's congestion on the docks as well as problems with the rail transportation links that the port depends on.

In contrast, Prince Rupert is underutilized and is anxious to find additional customers to help offset some of the job losses incurred in the forest industry in that area, and in the fishing industry. So I ask the minister to provide, not just to myself but to the people from Prince Rupert, an explanation about how it was that their port was overlooked in this publication.

Hon. M. Farnworth: I am sorry. I ask for forgiveness and absolution that there is something that I have yet to be able to fix. There are lots of tasks in this ministry -- in this diverse portfolio -- and if I have sinned against Prince Rupert, I ask for forgiveness. I will endeavour to ensure that Prince Rupert is mentioned appropriately. . .

A Voice: Forever more.

Hon. M. Farnworth: . . .forever more in the revision documents that take place. It was not an intentional oversight; it was not an intentional slur against Prince Rupert. This government values Prince Rupert highly. We do a lot for Prince Rupert. But I will endeavour to correct it. I think the reason why it may have happened -- this oversight that is unforgivable on my part -- is because we were talking to and targeting containers. And containers do get shipped out of Vancouver, as opposed to the bulk commodities which get shipped out of Prince Rupert. But it will never, ever, ever happen again, and I stand before you humbly chastened and contrite.

B. Penner: Leaving aside the subtle note of sarcasm in the minister's response, I will hold the minister to that commitment, and he can count on us to check the next issue of "Investment Climate" to make sure that Prince Rupert does get prominent mention as an alternate port, because it does provide North America's quickest link to Asian ports. I know the people in Prince Rupert get frustrated, particularly the authorities at the port, when the rest of B.C. and North America forgets about them. So they do have something to offer us, and there's been plenty of public investment in the port facilities there, which we should take advantage of.

To move to a different topic, I note in yesterday's Globe and Mail that there's a reference to an upcoming meeting of western Premiers this week. It's taking place in Jackson Hole, Wyoming.

A Voice: It's western Governors.

B. Penner: Pardon me. I'm told that the western Premiers are planning to head south to meet with the western Governors, who are meeting at that location. According to the newspaper account, there are a number of topics on the agenda, including agricultural trade, the future of energy, reliable air service and improving government services through technology. That was in a Globe and Mail article dated June 14, 1999. I'm wondering why there's no mention of the softwood lumber accord and if the minister can tell us what strategy his government is pursuing to deal with the ongoing frustration and irritant of American protectionism as manifested through the softwood lumber quota.

[2030]

[ Page 13700 ]

B. Penner: Perhaps the minister could enlighten us about the details of this government's strategy in addressing the threat that the Americans' ongoing resistance to B.C.'s lumber exports poses to people employed in this province. Could the minister tell us in some more detail what strategy the province has for addressing the softwood lumber quota?

Hon. M. Farnworth: Well, it's twofold. One, we have said that we do not want to see another softwood lumber agreement -- particularly one that's like the last one, because B.C.'s penalized with that. Two, we work through Intergovernmental Relations, which has the responsibility for dealing with Ottawa on intergovernmental relations in carrying forward B.C.'s concerns. Three, in terms of the forest sector, the Ministry of Forests is also very much involved in being in the lead on that particular issue.

B. Penner: Am I correct, then, in understanding that the Ministry of Forests takes the lead role on behalf of the B.C. government in addressing the softwood lumber issue?

Hon. M. Farnworth: Yes.

B. Penner: I'll come back to this matter indirectly when I talk about the issue of foreign offices, but I'll move on right now.

What benchmarks does the ministry use to determine that its policy objectives are being met? We talked earlier about the mission statement in terms of encouraging private sector investment as well as employment in British Columbia. What specific benchmarks does the ministry employ to determine whether or not its objectives are being met?

Hon. M. Farnworth: There are a number of ways in which we have benchmarks. They range, depending on the type of activity that's taking place, from the number of missions coming in, the timeliness with which they're dealt with and them getting to meet the people that they need to see -- we can measure that; that's a benchmark -- in terms of trade. This is what I'm focusing on: the number of first-time exporters that we are able to see taking advantage of opportunities in the province. . . . The number of companies or firms that become export-ready is another set of benchmarks. Then again, in terms of sectoral strategy, the number of jobs that arise out of agreements that take place or partnerships that take place within the ministry or when a specific government initiative has taken place. . . . There are a number of benchmarks.

[2035]

What portion of the ministry's budget is devoted to trade in international services, and does this represent an increase or a decrease from previous years?

Hon. M. Farnworth: The total budget for B.C. trade is about $10 million. The budget for foreign offices is about $1.25 million, and that does represent a decrease.

B. Penner: Again, part of the draft business plan that we were provided with provides an organizational chart. I want to ask the minister if he could tell me about the functions of the international services branch of the B.C. Trade and Investment Office. What are its functions, and what has it accomplished in the past year?

Hon. M. Farnworth: They supplement and help coordinate the work that takes place within the missions -- our foreign missions overseas, our offices overseas. They do a lot of work in terms of coordinating the Team Canada missions and receiving, in terms of the incoming missions we receive from overseas -- the activities around there. They do a host of work with associations. For example, there is a Canada-Japan association; there is the Kansai-Canada West Business Forum. They've been doing a lot of work there, and they work in different sectors in terms of Asia-Pacific or Europe, for example. There is a host of activities, and they try as much -- not only in terms of service delivery -- to play a coordinating role. I think they have been doing a very effective job.

B. Penner: Here is a tough question: how does the minister know that they've been doing an effective job? How do you measure that?

Hon. M. Farnworth: I think it's a question of bouquet letters versus brickbats. I think the response that we've had from people coming to British Columbia has been very positive. I can tell you that in terms of when British Columbians are dealing with firms from overseas, they have been very -- I think, from my own experience -- well briefed by the ministry and the trade office, in terms of issues that are likely to arise or that we need to be aware of and B.C.'s interest, for example -- our objectives and what we're trying to accomplish. As I said, it's measured by bouquet letters, which far outweigh any brickbats.

B. Penner: I believe the minister earlier answered a question as to how many incoming trade delegations British Columbia hosted in the past year. My colleague from Oak Bay-Gordon Head asked that question. I wonder if the minister could repeat the answer here and put it on the record again.

Hon. M. Farnworth: The past year it was about 165, and this year, right now, we know of 150. That may in fact increase, but last year it was 165.

B. Penner: I wonder if the minister could tell us how much was spent by his ministry hosting those incoming delegations and arranging for their visits here in British Columbia.

[2040]

[ Page 13701 ]

B. Penner: Looking at the organization chart, I note that there are a couple of entities that seem to have an overlapping responsibility -- at least to an outsider -- and I'll name those. We've got the strategic business unit -- Asia-Pacific; we've got the international services branch, which the minister has just been talking about; as well, we've got the Japan trade unit.

Presumably, from what the minister told us, if we have an incoming delegation from any part of Asia -- even Japan -- it would be the international services branch that has responsibility for arranging that visit. That leads to the next question: what is the responsibility of the Japan trade unit, given that the international services branch seems to take the lead role for visiting delegations from any part of the globe? To my mind, it seems interesting that we have an Asia-Pacific unit, a Japan trade unit and something called the international services branch, but not a specific unit dealing with U.S. trade, which does comprise the majority of B.C. exports -- about 55 percent, I think, of the total exports from British Columbia. That amount of exports is not reflected, at least in terms of a title, in the organizational chart.

Hon. M. Farnworth: I'll deal with the U.S. question first. In general, we find that most businesses can deal with the U.S. on their own initiative. There is not as much requirement for government to assist as there is outside the U.S.

In terms of the Japan desk, their focus is very much on trade initiatives, strategies, investment and liaising, for example, with the Japanese Businessmen's Association of Canada, here in Vancouver, which is primarily linked to the big trading houses in Japan. In part it's also a reflection of the size and importance of Japan to British Columbia's economy, because it dwarfs all other Asian economies together in terms of their relationship. So that's one of the reasons.

B. Penner: I'm getting very close to moving to the issue of trade missions, but before I do that, I'd like to introduce that topic by asking the minister: what markets and/or trade links is the ministry trying to develop? What would the minister say is his ministry's number one priority, in terms of a geographic area that we're attempting to establish or strengthen our trade links with? Perhaps the minister could give us an explanation for that priority.

Hon. M. Farnworth: I want to look at it in a global context. I've commented on this publicly outside these buildings, and I've also commented in estimates on what I see as B.C.'s priorities. Clearly the United States is our most important trading partner. By and large, that manages to take care of itself, because there is a great. . . . I mean, we're right next door; we're neighbours. We by and large know each other. Unless there's specific help required, that pretty well manages to help itself. There are specific initiatives that we can undertake around, let's say, high-tech and film and those sorts of things.

But in the global context, where do I think our priorities are? I'm going to say that, in a sense, I don't think there's any one that's more important than another. I think they're equally important, and I think they're important for different reasons. Clearly there is Asia, with a key focus around Japan and China. Second is Europe, where we have traditional links. I have said that I think previous governments have been remiss in not cultivating these enough and that we need to spend some more effort on them. Third, we need to focus on emerging markets, particularly in Latin America, South America and especially Mexico. We have the North American Free Trade Agreement, and we have to start to take advantage of the opportunities that exist around there. If you were asking me as minister, those are sort of the three areas that are my priorities. Clearly we do exist in a global marketplace, and we must be prepared to take advantage of opportunities as they arise.

[2045]

I'd now like to turn the floor over to my colleague the member for Matsqui, as we enter the issue of trade missions.

M. de Jong: Well, this is one of those areas that traditionally, of course, governments have to deal with from the perspective of a skeptical public who see ministers, members of the government and sometimes members of the opposition benches gallivanting around the world. The question they ask is: at what cost and to what effect. . . ? So maybe, as a result of an exchange I had with one of the minister's colleagues during another estimates debate, the minister could explain to the committee how this government is set up to manage the budgeting of trade missions. When I say trade missions, I'm referring not to the establishment of permanent missions in offices and cities around the world. I'm talking about those travelling road shows that governments have embarked upon for a number of years now.

I was surprised to learn, as a result of discussions in other estimates, that when a governmental team heads overseas, the costs associated with those travels are largely covered by the Ministry of Employment and Investment. Maybe the minister could explain how that works and how the ministry is able to ascertain -- or whether they do -- whether a particular trip being planned and executed by another minister fits in with the overall strategy that is partially articulated in the draft business plan and that the minister has alluded to during the course of these estimates.

Hon. M. Farnworth: I guess I'll approach this with a two-pronged approach. One, the budget is handled within the ministry. They're reviewed, and we pay, for example, for the minister and the minister's staff to go on the mission. In terms of our objectives, what we're trying to achieve in overall trade and the fact that we live in a large world, so to speak, this ministry is only able to undertake a limited number of missions each year.

For example, let's say it's to India. India is a large potential trading partner for us. There's a large Indo-Canadian community here. We have the potential to establish significant

[ Page 13702 ]

[2050]

We are dealing with the budget for the year '99-2000. I presume the ministry has set aside X number of dollars. I'm interested to know what those dollars are for travel, for the costs associated with trade delegations for the government. As part of that process, has the ministry now, as part of its pre-budgetary planning, determined where those moneys will be spent, which trade missions will be sent and where they will go? Or is it on more of an ad hoc basis? I'm curious to know how that works.

Hon. M. Farnworth: No. We have an extensive plan in place, and we try and plan these well in advance. They form into a number of categories. Asia gets a particular focus, and there is work done there on an annual basis. For example, almost every single year there will be a mission to Japan. Likewise, we also try and focus on. . . . For example, in recent years we've been focusing a lot on China, so that work will continue.

There are Team Canada missions, which are an annual event, that are also included in the plan. The destination varies from year to year, in part with the priorities of the different provinces and the federal government. For example, when I was at the ministers' trade meeting, there was an effort and a desire by the prairie provinces to have a Team Canada meeting that covered the Ukraine and Russia. You know, there are large eastern European populations from those countries. And there was the desire to try and take advantage of some of the changes that have taken place there -- for them to take advantage of.

Other times we try and give input, in terms of wanting to go where our interests are. We have defensive-activity missions, where we try and identify particular issues that we're trying to advance. An example there will be Europe and such things around lumber -- Greenpeace, for example, and the boycotts. Those are issues where we will take missions out to. Second, there are international events that take place, quite often in the context of a sectoral strategy, for example. Aerospace is a good example of that. We will lead with our industry to work on ensuring that events here in British Columbia are a success.

So there are a number of approaches that are taken, but it is not done on an ad hoc basis; it is something that we do work on. We currently have a plan that is under development and an idea of what will be happening and taking place in the coming year.

[2055]

Hon. M. Farnworth: Very briefly and noting the hour, I can give the member some examples of some of them. For example, this fall we have the Kansai-Canada West Business Forum, which last year was held in Winnipeg, in western Canada. This year it will shift to Japan, so that will be one. Team Canada is expected to go to Japan and Australia. Those are two examples. We'll probably go on a mission to Taiwan, and we may try to somehow tie that in with Japan.

Noting the hour, I move the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 8:57 p.m.

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