Whitehorse, Yukon

Thursday, February 1, 1990 - 1:30 p.m.

Speaker: I will now call the House to order. At this time, we will proceed with Prayers.



Speaker: We will proceed with the Order Paper.

Tribute to Brian Booth

Hon. Mr. Penikett: I rise today to acknowledge and to mourn the tragic and untimely death of Brian Booth, Chief Executive Officer of the Workers Compensation Board. Mr. Booth came to the Yukon with his family in 1974 to be Assessment Administrator of the Workmen’s Compensation Board, then a branch under the Territorial Secretary. He was soon promoted to Workmen’s Compensation Administrator and oversaw the move to an independent Crown corporation, the Workers Compensation Board, in 1978, and has administered it ably since then.

He was, for 16 years, an outstanding public servant and he will be missed by all of us in this government, and, I am sure, all of us in this House. Our deepest condolences go out to his family.

Mr. Phillips: It is with a very heavy heart that I rise today to pay tribute to Mr. Brian Booth, the Chief Executive Officer of the Workers Compensation Board. Our condolences go out to the bereaved family, his wife Jean, his son Jeffrey, his daughter Christine and her husband Mike.

Brian was a constituent of mine. He was a friend and he was a neighbour. He lived only a few doors down from my house on Klondike Road. I will always remember him for his friendly nature, his sincerity, his selfless dedication to service to young people, and to his job and the betterment of his community.

Brian served 14 years with the St. John Ambulance Association, and was one of the initiators in the establishment of a Yukon chapter. He was recently installed as an officer of the Priory of the Most Venerable Order of Hospital of St. John of Jerusalem. Brian was a serving officer, one of the highest honours that can be bestowed by that worthy association.

Brian was also involved with Yukon’s young people. He was actively involved with the Air Cadet League of Canada, and was the president of the northern region in 1988-89. Many kids received their flying training and exchange visits thanks to the dedicated efforts of Brian Booth.

Many young people will experience his loss today. Brian was also instrumental in the establishment of the Whitehorse Cadet Camp. Many people, of course, know Brian because of his years of dedicated service to the Workers Compensation Board. To many people, Brian was Workers Compensation and he devoted countless hours to his job. Unfortunately, Brian’s untimely death takes much of the history of the Yukon Workers Compensation Board with him. Brian was regarded very highly by his colleagues all across Canada, who are paying tribute to him today just as we are in this House.

Our heartfelt sympathy is extended to his family. Brian Booth will be sadly missed by all Yukoners.

Speaker: Are there any Introduction of Visitors?

Are there any Returns or Documents for Tabling?

Are there any Reports of Committees?


Introduction of Bills.

Are there any Notices of Motion for the Production of Papers?

Are there any Notices of Motion?

Are there any Statements by Ministers?

This, then, brings us to the Question Period.


Question re: Yukon Pacific Forest Products

Mr. Phelps: I have some questions for the Minister responsible for the Yukon Development Corporation with regard to the Watson Lake sawmill. We were told last Thursday that a tentative deal had been reached with regard to the lawsuit for a receiver, but we also understood at that time that Yukon Pacific had to meet certain conditions this week. My question is whether Yukon Pacific has met these conditions?

Hon. Mr. Penikett: As of the moment I came in the House, I had no information that the conditions had been met. Let me anticipate a further question from the Opposition Leader and say that, should the conditions be met by tomorrow or should they not be, I would, in any event, extend him the courtesy of a briefing as to the facts prior to my making any public comment about the outcome of the negotiations.

Mr. Phelps: I appreciate that courtesy. I am wondering if there is a deadline imposed on the tentative deal, beyond which if the conditions are not met the deal will fall apart. If so, what is that deadline?

Hon. Mr. Penikett: Forgive me, I do not have the precise information at hand, but I believe it is the end of this week, as I indicated. If I may share this with the Opposition Leader: there have been a couple of other deadlines in this process, which have slipped, but not by much. I therefore cannot be precise as to the moment of the guillotine.

Mr. Phelps: When the lawsuit was commenced three or four weeks ago, the government said that the management problems were urgent and that immediate  action was needed regarding a receiver. Can the Minister tell us if T.F. Properties is still managing the sawmill?

Hon. Mr. Penikett: Nothing will change formally until the matter reaches a conclusion in the courts or by negotiation. I am hoping that the change or consequence of either of those two steps is imminent.

Question re: Yukon Pacific Forest Products

Mr. Phelps: I am concerned about the secrecy surrounding the sawmill. I have said this on numerous occasions. The president of Yukon Development Corporation has said that one of the conditions of the agreement with Yukon Pacific is that none of the other conditions be released to the public. Can the Minister verify this?

Hon. Mr. Penikett: I do not know what statement the Leader of the Official Opposition is referring to, whether or not it was a comment in the press. If we reach a negotiated settlement of this matter, I should be able to outline immediately the broad terms of those arrangements to the Leader of the Official Opposition. I am not in a position to do that until such time as an agreement is reached. That will not happen until we have the money that is associated with that agreement in our hands.

Mr. Phelps: Perhaps I have not made my concern quite clear enough. On one hand, the president of the Yukon Development Corporation is telling the Public Accounts Committee how important it is that the public know what exactly is being done with its money and promising full cooperation and full disclosure to that committee. On the other hand, he seems to be more than willing to enter into deals to settle court cases. The deals are conditional upon total secrecy. Will the Minister direct his officials not to enter into arrangements that involve and require secrecy, that require conditions that would not allow the Public Accounts Committee to get to the bottom of how the public money is being spent?

Hon. Mr. Penikett: I have never directed officials to do otherwise. There is no hesitation at all, on our part, to disclose matters that are in the public interest. The issue between the Leader of the Official Opposition and I has been the constraints under which we operate as to the disclosure of information about the private business of third parties.

Mr. Phelps: My concern is the use of such vehicles as court cases to invoke secrecy with regard to the history and the dealings of the Yukon Development Corporation. Will the Minister assure this House that these various lawsuits that are suddenly coming forward, one of which commenced just as the Public Accounts Committee was to commence its hearings, are not being used for the purpose of hiding the facts regarding Yukon Development Corporation’s business dealings?

Hon. Mr. Penikett: As you well know, I cannot discuss the content of the lawsuits in this House. I believe the Leader of the Official Opposition knows that one of them is taken in order to see to it that the commitments made to us and the trade creditors in the community of Watson Lake and the Yukon Territory are met. Our efforts are to see those people satisfied, as well as the Government of Yukon.

The second matter involves the management of the sawmill operation. Suffice to say that I think there is a radical difference of opinion between the board of the corporation and this government and the side opposite as to exactly who is responsible and accountable for that entire situation.

That will be resolved, and we have every intention of providing all the information at the conclusion of these matters to the responsible body of the Public Accounts Committee, in addition to what we have already provided, which has been considerable.

Question re: Yukon Council on the Economy and the Environment

Mr. Phillips: I have a question for the Minister of Economic Development with respect to the recent announcement of the Yukon Council on the Economy and the Environment. Prior to this new council, the government had what they called an Economic Council. During the life of that council, several times we on this side insisted that the agricultural community be given a position on it. Unfortunately, that did not happen.

This new Council on the Economy and the Environment appears to have a broader scope. In light of the fact the agricultural industry is growing, and that its growth will have an effect on the environment, would the Minister consider appointing a member of the Livestock and Agricultural Association to that new council?

Hon. Mr. McDonald: The Member has identified a particular problem that has always been faced by governments when they are appointing people to broadly representative groups on any particular subject matter, this being the economy and the environment. The issue is whether or not all legitimate industry groups can be represented, or whether one wants a smaller board in order to conduct business and make recommendations.

As the Member can note from the makeup of the board, we have opted for a board that we feel is of the right size to be able to conduct its affairs efficiently. It meant that tough choices had to be made with respect to the persons we would ask to be representative on the board to ensure the broadest range of interests could be covered. There was a recognition that certain smaller industry groups could not be covered. Nevertheless, that could not prevent us from proceeding with a body such as this.

We made those tough decisions and, consequently, could not see our way to providing a representation for the smaller industry groups, including the agricultural community, but took the broadly representative business groups ...

Speaker: Order please. Would the Member please conclude his answer.

Hon. Mr. McDonald: ... and renewable resource groups that are located in the territory.

Mr. Phillips: I am not sure whether I got an answer or not. The Minister and I have a difference of opinion. The agricultural industry, just by the nature of the business, occupies large tracts of land and will have a major impact on the environment, a major impact on the environment.

Would the Minister reconsider his decision not to have the agricultural industry on the new council he has established?

Hon. Mr. McDonald: I do know the agricultural industry very well. I am very familiar with not only the goals and aspirations, but also with many or most of the individuals involved. I think they may take issue with the Member’s assertion that the agricultural industry will have a major, major impact on the environment. They have made a number of briefs to this government and to me, as an MLA, in the past that run quite counter to that particular perspective.

However, as I indicated before, some choices have to be made. The most broadly based industry groups have been invited to sit on the Council on the Economy and the Environment. That was the decision made in order to ensure there was an effective and efficient board that did cover the basic industry interests in the territory.

Mr. Phillips: The Minister is having trouble interpreting what I said.

I said the agricultural industry will have a major impact on the environment, and it will have a major impact on the environment that is both positive and negative. They clear large tracts of land and they require large tracts of land for their type of activity.

I would like to direct my last supplementary to the Minister for Renewable Resources who is also a Minister responsible for the environment and the Minister responsible for agriculture. He knows the importance of the agricultural community and its impact on the environment.

Will that Minister make representations to the Minister of Economic Development and ask if such a person could be appointed to a committee? Does he feel that it is important that someone from the agricultural community be on that new council?

Hon. Mr. Webster: My response is the same as when the question was asked of me two months ago.

Question re: Health services transfer

Mr. Nordling: I have a question for the Minister of Health and Human Resources with respect to the transfer of health services.

Has the Minister begun the recruitment process for the chief executive officer for Whitehorse General Hospital?

Hon. Mr. Penikett: We have begun the process but obviously will not be concluding it until we are certain the transfer will be taking place.

Mr. Nordling: Can the Minister tell us what is being done? I have not seen any advertisements.

Hon. Mr. Penikett: A national firm was recruited to locate or identify, on a pro-active basis, the talent that may be available in the country and the candidates that may be interested in coming to such a challenging and important job.

Mr. Nordling: That is interesting. We are not using our own Public Service Commission.

One of the lines in the position description is that this chief executive officer would function as a change agent for the smooth transition of the hospital. I would like to know how far in advance of reaching an agreement we are looking to have this chief executive officer?

Hon. Mr. Penikett: Let me, first of all, respond to the preamble of the Member, as I must. As the Member knows, at this moment the position we are talking about is an employee of the federal government and the recruitment action we have taken has been done in concert with them. Obviously, the person we want to retain is someone who will be responsible for managing the hospital for us. We will obviously not be making a final recruitment decision until we have an agreement in principle with the federal government about the transfer; it would not make sense to do otherwise but since, at this point, we are talking about a position that is in the federal public service, we could also only proceed with the cooperation of the federal government and their processes.

Question re: Health services transfer

Mr. Nordling: On November 27, 1989, the Minister said, and I am going to quote from Hansard:, “The first chief executive officer would be recruited and hired by the Department of Health and Human Resources.

Obviously, that is not being done directly. I would like to know what it is costing us to hire this private firm, what firm it is, and why it could not be done by the Department of Health and Human Resources and the Public Service Commission. Obviously, we have a lot of time to search for this first class professional person experienced in the field.

Hon. Mr. Penikett: Nothing the Member or I have said today changes what I said on November 27, or whenever it was that the Member is quoting from Hansard. Obviously, this person is intended to work for us but the position we are now talking about, the position it will succeed, now exists in the federal civil service.

In answer to a question the Member for Riverdale South asked earlier, the job description and so forth was done in consultation with the federal government and that is properly so; the person is intended to be our employee. It is also the case, as we have come to learn through past recruitment processes, that simply placing an ad in the Globe and Mail to look for such a person may not always lead to a satisfactory result. We may not have people who would leave their present jobs in order to come to the Yukon. That is why a national firm with experience in this matter was retained to try to search out a suitable candidate or suitable candidates.

I will return to the House with the precise information as to the cost of that process and I will be happy to do so.

Mr. Nordling: The Minister did not tell us what target date he had for the hiring of the chief executive officer. I would like to know what steps have been taken by the government to appoint the board.

Hon. Mr. Penikett: Yesterday, in answer to some other questions, I think I indicated that in the next few weeks we will be reaching the decision point as to whether the transfer is going to go ahead or not. At the time when we are confident that the transfer will proceed and we are confident about where on the schedule we are, we would be in a position to make known the appointment of the executive director and also the first appointments to the hospital board. We are not at that point yet.

Mr. Nordling: I just have one more question about the firm that has been retained to find the chief executive officer. Has the Minister given any instructions that this firm should search for a woman for the position or is the Minister doing anything to encourage women to apply for the position?

Hon. Mr. Penikett: I cannot tell the Member whether we gave any instructions to seek out candidates of a certain gender. I do not believe such instructions came from the department, although I believe it is well known that if we had some attractive candidates and one of them was a woman, that would be seen very favourably by this government.

Question re: Rancheria cook shack

Mr. Devries: Several evenings during Committee of the Whole debate I asked the Minister responsible for Renewable Resources why three employees from his parks branch spent several days cutting up a cook shack at the government campsite near Rancheria. They used chain saws and burned the pieces when the Rancheria owners would have been happy to move the shack for use in their campground. They had obtained two cook shacks previously, but this time missed the tender notice in the paper. Does the Minister have an explanation for this mysterious waste of taxpayers’ money?

Hon. Mr. Webster: No. The department has not supplied me with an answer to that question.

Mr. Devries: Since the people with the chain saws spent three days destroying this cook shack that the Minister could have sold or given away, I would like the Minister to advise the House how much money was spent on destroying the shack on the lodging at Rancheria Lodge and the per diem expenses and travel expenses that were incurred on this project.

Hon. Mr. Webster: I have already made a commitment to supply that information on the legislative return on this matter. I will also include the information pertaining to the cost of the advertisements when we tried to put that out to tender.

Mr. Devries: Highway lodge owners and people who reside outside established communities do not always have ready access to Whitehorse newspapers. Consequently, they have little access to government tender notices. Would the Minister ensure that in the future a better effort is made to contact the people when government has some property to sell in their area prior to the assets going up in smoke?

Hon. Mr. Webster: It is a good idea to improve communications every way possible so that, as the Member puts it, everyone who has an interest in such matters is notified.

Question re: Government seeking legal advice

Mrs. Firth: When I asked the Minister of Justice a question regarding contracts for legal opinions that were sought with law firms outside of the Yukon, I requested a list of all those contracts. In the response that the Minister provided, she only included contracts from the Department of Justice. Could she tell me why other departments within government were not included on that list of legal opinions sought from outside the Yukon?

Hon. Ms. Joe: The Member seemed to be asking for only those contracts made by the Department of Justice, and that is what I provided. We checked Hansard to see if there was anything more that she was asking for, and we provided information based on that. If the Member is seeking further information on other contracts, I will look into it.

Mrs. Firth: The Minister has indicated that the general policy of her department is that all requests for legal opinions go through her department. Does the Minister not have a list within her department of legal opinions that have been sought by other departments outside the Yukon Territory? I would expect that that would be readily available and would have been included as part of the whole list from the Department of Justice.

Hon. Ms. Joe: There is probably a list somewhere. I have already made a commitment to bring information on other contracts back to the House.

Mrs. Firth: I am concerned about how the department is monitoring the use of its own legal advisors. I request that the Minister present me with a complete list of all legal opinions that have been sought outside the Yukon from all departments within the government. She has made a commitment to do that, and I look forward to receiving it.

Question re: School bus accident

Mr. Phelps: I have some follow-up questions for the Minister of Community and Transportation Services regarding the recent accident between a school bus and an ore truck on the Carcross Road.

On January 23, I raised the concern about the lack of enforcement of rules, including the spacing of ore trucks, and lack of enforcement of speeding by all types of vehicles. The Minister said he has initiated action with regard to enforcement. Can the Minister tell us what steps have been taken with regard to enforcing the rules for ore trucks and with regard to increased surveillance along the road?

Hon. Mr. Byblow: I can advise the Member that I directed that increased surveillance and enforcement take place on the route of the ore haul and, in particular, in relation to the routes of the school buses. The enforcement branch of the Department of Highways has conducted increased surveillance and enforcement. I am advised that the enforcement branch has been on the road on an increased frequency, particularly during school bus hours. Surveillance has taken place and tickets have been issued.

I can also advise the Member that we would be requesting the RCMP to do the same, and I understand that request has been extended. We have received every indication that the RCMP will be conducting increased surveillance within their capability.

I might note for the Member that the ore trucks have not been running since midday Tuesday, but should be resuming their runs this weekend.

Mr. Phelps: I have received complaints from parents along the road since the answer I got a week ago Tuesday that ore trucks continue to be bunched up, even during the school bus run. Has the Minister been receiving complaints from parents as well?

Hon. Mr. Byblow: Yes, I have received several complaints regarding traffic in general, which included ore truck traffic. These were complaints respecting speeding and bunching of the ore trucks. I should point out to the Member that the complaints have not been exclusive to the ore trucks. They have been with respect to apparent violations in general of all traffic on the road.

Mr. Phelps: Many parents and I view the Carcross Road as being a special situation because of the dangerous nature of the road. Will the Minister seriously consider stopping all ore trucks from travelling from Bear Creek to the cutoff during the morning when the school bus is picking up kids along the road?

Hon. Mr. Byblow: I am fully aware of the concern of parents regarding the issue of the ore trucks on the road. I am aware of a call by some of them for removing their presence during bus runs. I can advise the Member that I have received a preliminary report from my department. I expect a final report today or tomorrow. The issue of removing the ore trucks is a complicated one. I have not made a final decision on it, but I expect to be addressing it in the course of the next several days, and I can advise the Member I will keep him informed.

Question re: Snow windrows in driveways

Mr. Brewster: When the Department of Highways cleans snow from the Yukon highways, it causes a windrow to build up on the entrance to private driveways. People have been unfairly criticizing the road crews. I suspect this is the fault of a policy or regulation by government. What is the policy of this government in regard to removing these windrows that the highways department creates when they clean the highways?

Hon. Mr. Byblow: The issue has been raised in the past, and my understanding of the policy is that the highway crews do go back to clear those driveways. In times of high demand for road clearing that may not occur immediately. The policy does call for the department to remove the berms from driveways that are in use.

Mr. Brewster: Why is it, apparently, that some driveways are cleared and others are not when they are in the same area?

Hon. Mr. Byblow: I would appreciate if the Member could cite to me privately, or otherwise, where that is taking place. That would appear to be contrary to policy, contrary to the general direction the department has for keeping driveways clear of berms. They should be removing the berms systematically from driveways immediately following their main task, which is to get the road cleared.

Mr. Brewster: It seems to be a very confusing thing. The policy is here in this Legislature but not out to the foremen. Would the Minister assure me that he will issue orders that are published in every garage and office in the outlying areas to see that this is done?

Hon. Mr. Byblow: I will give the Member the undertaking that I will investigate the application of the policy with the department, and that everyone is made fully aware of it, and that it is applied.

Question re: Business incentive program

Mr. Lang: An outstanding issue that has been facing the Yukon for sometime is the business incentive program and government contracting. It is my understanding that the Department of Government Services has been having ongoing discussions with the Contractors Association and other associations on this matter, although there have been some disagreements in principle with some major principles in the policy, my understanding is that there has been some consensus on the proposed changes.

Can the Minister confirm that there is an agreement between the Contractors Association and the government on changes to government contract and regulations as well as policies?

Hon. Mr. Byblow: As I indicated to Members in previous debates, the business incentive policy has undergone considerable review in the past year. There have been considerable discussions between the Department of Government Services, myself and various groups in the community on that subject. The Chamber of Commerce has been involved, the Contractors Association has been involved, the Federation of Labour has been involved, the Whitehorse and Yukon Area Building Trades Council has been involved, as well as the Operating Engineers.

I can confirm for the Member that, yes, indeed, a new set of principles has been established and agreed upon, and consensus has been achieved among the groups. We are in the final states of refining the application of those principles to a policy and I will be making an announcement on the subject shortly.

Mr. Lang: In view of all the work, time, effort and taxpayers’ money that has gone on in this particular area, can the Minister tell this House why the government is hiring a consultant to review the contract regulations and policies further as they pertain to the municipalities?

Hon. Mr. Byblow: I will have to take notice of the question. I am not aware of what the Member is raising.

Mr. Lang: I was told the other day that the government is in the process of hiring a consultant to review this area pertaining to municipalities. Would the Minister check with his department to see how it is going about its business, and could the Minister also report back how much is being paid out for this service? It is my understanding that all of the work, for the most part, has been done, at least in relation to the first question.

Hon. Mr. Byblow: I will again take notice of the question. I will provide the Member with the detailed information.

Question re: Watson River subdivision

Mr. Phelps: We were told that 15 residential lots near Carcross would be released last July, and this did not happen. These lots were known as the Watson River development. Last December, we were told that the lots would be released this coming summer. Could the Minister for Community and Transportation Services tell the House if the government is committed to the release of the lots this summer? Will it happen this summer?

Hon. Mr. Byblow: The Watson River subdivision is destined to continue. Some final discussions are taking place within the community. The plan is to have it developed this coming summer.

Mr. Phelps: Does that mean that residents in the Carcross area can bank on that and can expect to be able to build homes on these lots this summer?

Hon. Mr. Byblow: The Member’s understanding is quite accurate at this point in time. We were going to proceed with that development last year. That did not happen. Some concluding discussions are taking place. Hurdles have been overcome, and the project should proceed this summer. The Member is accurate in his assumption.

Question re: Chooutla subdivision

Mr. Phelps: The Chooutla subdivision was developed five or six years ago by the government; however, no lots have yet come up for sale. When will the Chooutla subdivision lots be put on the market?

Hon. Mr. Byblow: I cannot anticipate that. Discussions between the band and this government have taken place regarding those lots. They are continuing, and when they conclude, we will be in a position to advise the Member of any development that may occur.

Mr. Phelps: The issue about the Chooutla subdivision has been going on for some time. In what forum are the discussions taking place? Are they part of the land claims discussions, or are they separate?

Hon. Mr. Byblow: The discussions have taken place both within and outside the land claims discussions. My department has had discussions. Land claims people have been involved. The land is still federal land. We put in a requested for the transfer, but it has not taken place. We are not in a position to direct anything specific to happen other than to cooperate and assist.

Question re: Education act

Mr. Devries: I have been hearing several concerns regarding the draft education act and the potential restrictions the act could place on the general public regarding their constitutional rights to educate a child in the way they feel they have been instructed, whether it be through their religious beliefs or just due to a lack of confidence in the government’s educational system.

Can the Minister of Education tell me if there are any changes being proposed in the education act that would allow the home educators and the church private schools to operate within their own parameters?

Hon. Mr. McDonald: I presume the Member is making something of a representation. Of course, the act, in its current form, is a draft, and we are seeking public input from everyone, including the Home Educators Society, on the various provisions of the draft act.

I have asked that department officials have meetings with the Home Educators Society. I have scheduled meetings with the Home Educators Society myself. I have met with a number of members of this society, as well as some people who may or may not be members of the society but who are educating their children at home.

We have as yet to give full consideration to the concerns they have raised. When the opportunity arises to give their concerns full consideration, I will be in a better position to determine what recommendations I might make to the government and, ultimately, to the Legislature with respect to home education itself.

Mr. Devries: I am quite aware it is only a draft act. These people wanted to make sure their representations would be heard.

The Department of Education seems to have built flexibility into the system for the French and aboriginal needs. Just from reading it thus far, there do seem to be some restrictions to the needs of the home educators and the church schools. Would they still be restricted to operate within the parameters of the curriculum, for example? Would they still have to use the government’s curriculum and, possibly, just be allowed to have 20 percent of their own input?

Hon. Mr. McDonald: I can only remind the Member that, under the current legislation that we are operating under, all home schooling situations require supervision by a superintendent. While they do not necessarily need to follow the government curriculum, the curriculum must be approved by the department.

As every Member knows, there is very little in the way of monitoring of home schooling situations in the territory. Nevertheless, it is still a provision that is in current legislation. What I am understanding from the Home Educators Society is that they wish the status quo to be changed to better meet their aspirations. As I say, that has yet to be determined. I have not yet had an opportunity to give that particular feature of the act the fullest consideration.

Speaker: The time for Question Period has now lapsed. We will now proceed with Orders of the Day.


Speaker: Government bills.


Bill No. 77: Second Reading

Clerk: Second reading, Bill No. 77, standing in the name of the hon. Mr. Penikett.

Hon. Mr. Penikett: I move that Bill No. 77, entitled Child Care Act, be now read a second time.

Speaker: It has been moved by the Minister of Health and Human Resources that Bill No. 77, entitled Child Care Act, be now read a second time.

Hon. Mr. Penikett: It is trite for politicians to say that children are our greatest resource. It is trite because it is undeniably true. As the well-known wit and raconteur, Leslie McCullough, is fond of saying: as the twig is bent, so is the tree inclined.

I am confident there is no person in this Legislature who does not think that child care is a vital issue for all of us, for the whole community. This act is the product of that concern: the concern of caring Yukoners. I think it is also clear to all here that quality child care is a necessity if we are going to continue to strengthen our society both economically and socially. Available, affordable, quality child care is a prerequisite to equality for women.

No matter what we see as the ideal child bearing situation, the truth is that, in most cases, women are still the primary care givers. Until they are confident that their children are in quality child care situations, they will not be able to take their full and rightful role in our workforce.

Numerous studies have indicated that day care may be an excellent long term investment, in that the early preschool environment of children shapes the quality of the eventual adult workforce.

I was fascinated to read the transcript of the evidence given by a very well known Canadian thinker, Dr. Fraser Mustard, before a Canadian Senate committee on science and technology. In his evidence before that committee, Mr. Mustard talked about child care as an investment in the context of the kind of investments this country must make if we are to participate in the new economy that is emerging the world over, an economy based on technology and information, but also an economy that will require people who are socially adept and well integrated into the community.

He cited studies from the United States where children who were able to take part in programs such as Head Start showed as young adults a much greater ability to do well in jobs and in the education system. In addition, they seemed better able to cope with social pressures, exhibiting lesser percentages of teen pregnancies and drug abuse.

As a government, as a society, we owe it to all Yukoners to ensure that quality child care - child-care situations, which are beneficial for the child, the parent and the care giver - is a reality.

For the past two years, this government has been undergoing a process of consultation with Yukoners to develop child care policies and programs that meet the real needs of Yukoners.

At this point I want to pay tribute to the excellent work done by my predecessor in the Department of Health and Human Resources, the present Minister of Justice, and the work done in the consultation process by the Member for Whitehorse South Centre.

The process I am talking about began in earnest in 1988 when the principles of child care endorsed by this government were tabled in this Legislature. These principles: quality, parental choice, affordability, accessibility, comprehensive service, government responsibility, accountability, and non-profit versus profit, were approved of by Yukoners time and time again during the consultation process. They continue to guide our legislation and policy.

In January 1989 we tabled Working Together, A Child Care Strategy for the Yukon in the Legislature. That document outlined the commitments and priorities of this government for the next several years in developing a system of child-care services. This government, working together with parents, care givers and the communities, has made significant progress in carrying out the strategy.

During 1989 a number of goals were achieved. One hundred and forty nine new licenced child-care spaces were created including 57 new spaces in communities outside Whitehorse. Three community-based preschool programs for children of stay-at-home parents received funding. A 36-space school age program was established at Whitehorse. The child-care subsidy program was enriched, recognizing the variances in the cost of living between communities. The ceiling on financial support for infant care and special needs spaces was increased. The social assistance program was revised to allow parents to receive assistance if they choose to remain home to care for preschool children. Child development services were extended to provide outreach programs in three communities. These services will include speech and language therapy, occupational and physical therapy, individual assessments, and programming and follow-up services.

Initiatives to promote integration of special-needs children into licenced child-care services has been developed. In January of 1990, an introductory early childhood development course will be offered in Dawson City and in Faro. Since January 1989, a full-time early childhood development course has been offered by Yukon College, and a new child-care services unit was established to further support the growing child-care system in the Yukon Territory.

The cornerstone of these initiatives is the development of new legislation to support and regulate the provision of child-care services. The act now before the Legislature is the product of consultation with interested Yukoners, and reflects, we believe, the needs and wishes of all Yukoners in all communities that we visited.

The bill contains some of the following features: child-care services will be expanded to cover children 12 and under, and children 16 and under having special needs; programs will be expanded to include preschool programs, school-age programs and child-development services, as well as family day homes and child-care centres. A new Yukon child-care board will be established, selected from persons nominated by Yukon first nations child-care groups, licences child-care services and parents.

The board will be constructed as recommended by a motion passed in this House. The board will advise the Minister on all aspects of child care and will act as an independent appeal body for licensing and subsidy decisions made by the Department of Health and Human Resources.

Enforcement provisions in this bill have been strengthened so government officials can ensure compliance with the act and regulations. Child-care professionals will be required to report any cases of suspected child abuse, and provisions are made for the Minister to enter into agreement with a Yukon first nation or municipal council to transfer responsibility for administration of this act.

The passage of this act will provide the framework for the development of child-care services that are responsive to the needs of Yukon families. The consultation process will continue with the development of regulations. Regulations now in place will continue until they are superseded by the new ones.

I have to say that development of comprehensive, affordable, quality child-care services continues to be, and will always be, a priority of this government. On a personal note, it is a matter of great satisfaction for me to be able to say that, since I entered this House, I have fought for better child-care funding. When we had the first child-care standards, which came in 1979, or around that time, I fought for funding to assist child-care centres in meeting those standards. In the last 10 years, I think we have come a long way. In the next three or four years, we should go much further.

As a government, we are committed to doubling the number of spaces in the Yukon, to seeing child-care centres in every community that wants one. We are committed to seeing pay parity for the workers in the child-care system. I know Members will remember that we indicated in the child-care strategy that, in the life of this government, we would do that. I believe that because the government recognizes the low salaries paid to child-care workers in the Yukon, as well as in every jurisdiction in Canada, is a very serious situation, the Department of Health and Human Resources is committed to implementing wage enhancement programs this year. We are now discussing options with various interest groups and resolving the differing advice we are getting from different quarters on that subject. That is something I think is necessary and probably overdue, and we intend to act on that this year.

We sincerely believe the passage of this piece of legislation is good for Yukon’s children. It is also good for Yukon parents. It is good for the single parents in the Yukon, of which there are a great number. It is good for Yukon employees, particularly women who wish to become participants in the workforce. For that reason, it is also good for Yukon employers, the economy and Yukon society.

I recommend its passage to all Members in the House.

Mr. Nordling: The Child Care Act is important not only to the operators of child-care services, but to all those parents who use those services. The numbers of families utilizing child-care services is growing, and their needs must be met. Our position is that parents have the right and the responsibility to choose the child-care option that best meets the social and economic requirements of the family.

We are pleased to see that a Yukon child-care board will be established. This board will encourage the development of child-care services to meet the needs of parents and children in the Yukon and it will also advise, and make recommendations to, the Minister on virtually all aspects of child care. The establishment of such an advisory board was a motion introduced in this House by the Member for Riverdale South and reintroduced by me when I became critic for Health and Human Resources.

We will have a number of questions and comments on the provisions contained in this act when it is moved into Committee of the Whole and discussed clause-by-clause.

In general terms, it is interesting to note that specific limits and ratios are set for family day homes and enshrined in this act, while this is not done with respect to child-care centres. What that means is that, in order to change the numbers of children allowed in family day homes, it will require that a new act be brought before this House. With respect to childcare centres, these ratios will be set by regulation - and regulations can be changed by Cabinet on very short notice.

The true value and effect of this act will not really be known until the regulations are drafted and until we have had a chance to review them. The regulations will not only deal with the ratios for child-care centres, they will also deal with licensing requirements, age and qualifications for child-care workers, specifics about programs, space requirements, as well as other specific components in the delivery of child-care services.

Several concerns that have already been identified to us are that, under this new act, infant spaces may drop or fees may have to increase. There has also been a concern about after-school spaces - the fact that they may become more limited or parents may have to either pay for that space on a full-time basis or send their kids home alone.

We will also be asking the government about the logic and reasoning behind the penalties contained in the act and the power of the inspectors. Another aspect we will be discussing and that we are interested in is the financial implications of this act. It is always important that when an act is brought to this Legislature for passage we, as Members, know what the financial impact is going to be and what the effect is going to be on Yukon taxpayers. We will also be interested in the effect this will have on the person year establishment in the government.

As we debate this bill in Committee of the Whole, clause-by-clause, we will be bringing forward some suggestions that we think will improve the act. We recognize that there will be new people providing child care services in the territory and that there are new and innovative techniques in child care being developed every day. One of our thoughts is that there be a resource person provided to assist and advise child-care givers in everyday requirements to provide quality child-care services.

We are pleased that this child-care act is finally being introduced. It has been a long time in coming and we look forward to discussing it in detail and making recommendations, which, it is hoped, will result in the provision of options needed for parents and children in the Yukon and the smooth delivery of quality child-care services.

Hon. Ms. Joe: In the summer of 1988, when I became responsible for the child-care program, I had a meeting with a number of individuals who had been working within the day-care system for a number of years. They had many concerns and were very frustrated with what was not available for day care at that time. I was not surprised that they had come to me. We had been hearing for a number of years about what was not available in the Yukon and about the inadequacies of the Child Care Act and the regulations.

It was very enlightening for me to be able to listen to their similar concerns. Each was, I believe, either on the board of a day care or working in one. In the first meeting that I had with them, I learned a lot about what was not available.

As a result of that meeting we looked at the regulations and the Day Care Act, which were a concern of theirs at that time. We wanted to find out the kinds of things that were necessary to improve the quality of child care in the Yukon. We proceeded then with our first consultation with people involved with day care in the Yukon. We consulted with some groups and organizations regarding the kinds of changes they wanted to see. In a very small way at that time, we were able to change some of the regulations to meet some of their needs.

As we proceeded through our term as a government, we found that there was a great need to change the Day Care Act. We decided to develop a consultation plan to talk to all Yukoners to find out the kinds of changes and improvements to the quality of day care they would like to see. It was a refreshing experience for the people who went out to meet with the organizations to find out the kinds of things that were of concern to them.

As the process continued, I received a weekly report. It was good for me to have an update on what Yukoners were saying. Everyone had the opportunity to sit with the group or to make a written or verbal presentation. We found out a lot about child care in the Yukon.

During the process, there was a lot of criticism about the day-care system. We heard it daily in the House, but we defended the improvements we were trying to make. In January of last year, we introduced the Yukon child-care strategy. We were very proud of that. We were very proud that we were able to improve child care in the Yukon. It was so good that the Leader of the Official Opposition actually supported it in the last election. He told Yukoners that they would do the same thing. Unfortunately, it was not supported by all Members of the side opposite.

The people who were involved, right from the start of my involvement, are those who should receive credit. They worked in the department to try to improve child care in the Yukon to make facilities more available to people who needed them. That was done through the implementation of capital funding to build and improve existing facilities so that they could be used as day-care centres and as family day homes.

There was also an increase made to the operating and maintenance subsidies they were getting at that time.

I would really like to commend those individuals who, throughout the years, continued to lobby me, and other Members of the Legislature, to try to improve day care in the Yukon. I got to know Carol Christian very well. She was the hardiest lobbyist I had ever seen. She did her job very well. There are many individuals who were also involved in that, and those were the day-care boards, as they changed over the years.

We have before us today a child-care act that we can all be proud of because we did listen to Yukoners. I look forward to hearing the debate in the House and Committee of the Whole in regard to the changes that we are looking at. I am very proud to be a part of a government that took the time to listen to Yukoners to find out how we could improve and enhance quality child care in the Yukon.

Ms. Hayden: I, too, would like to take this House back a couple of years to the beginnings of the new Child Care Act. In April, 1988, the child-care consultation panel embarked on what would prove to be one of the most comprehensive public consultation projects since Yukon 2000. Literally every community in the Yukon was visited. I had the honour of chairing that panel, and I had the honour of working with two caring Yukon citizens, Michael Nelson and Mary Caine, and a committed support staff. I can now stand proudly in this Legislature, knowing the Child Care Act we are considering today is a reflection of all the comments we heard.

At the outset, we dedicated ourselves to being open and to listening to what Yukoners had to say about child care. We promised not to interpret information delivered during the public consultation process. We confirmed that our job was to bring in suggestions of all Yukoners and report our findings to the Minister. We acknowledged that what works in the big cities across Canada would not necessarily work here. We accepted that what works in small southern towns would not necessarily fall into place in our northern communities.

At the time, our statistics indicated that 72.3 percent of Yukon women were in the labour force, compared to a national average of just 55.9 percent. Today, the Yukon figure has increased to a full 73 percent of all women over the age of 15 who work outside the home. Clearly, child care was and is an economic necessity.

We started out knowing that there were 1,105 Yukon families with children under the age of six. We knew that fully 155 of these were single parent families headed by women. Effective, responsive child-care legislation was long overdue in the Yukon. This government responded to that need. How true it is that we cannot please all the people all the time, so, we negotiate compromises along the way and, as in the case of the Child Care Act, we work toward developing laws that fairly represent what people are saying.

The Minister of Health and Human Resources has already outlined the eight principles of child care that are the foundations of the Child Care Act. These principles were also used as a focus for discussion and questioning during the community consultations. Time and again, we heard that Yukoners want accessible, affordable and quality comprehensive child-care services. Time and again, we heard from parents who want the choice of child care to remain their responsibility.

One mother told the panel that she often has no choice but to take her three children to work with her. She called this a far-from-ideal situation, and she was one of the lucky ones.

There are not many women who even have the option of being able to take the children to work with them. We also heard, time and again, from these same parents who said, yes, we want the government to make it possible for a complete network of child-care services to be implemented in the Yukon. We heard from parents who said, “Yes, we want basic standards.” Parents want a way to be sure that standards in programming, staff/child ratios, staff qualifications, health, safety and nutrition are maintained.

We asked people in our communities - and I include Whitehorse here - to think about what quality care means to them. We asked for suggestions on how the government can support the right of parents to choose child-care services and how government can help make child care available in communities. We asked for opinions about profit centres and non-profit centres. We asked and we listened. What we heard is that most people, by far, want basic standards that can be met even in the smallest of communities. Parents and operators want health and safety standards. Licensing is the way to ensure these standards are met. Parents and care givers want established child/staff ratios, not just for reasons of safety, but also because they want the best possible individual attention and care available for their children. Unlicensed care givers may indeed meet basic standards, but parents are much more at ease leaving their children with someone who meets the criteria accepted, not just by government but by care givers as well.

We heard parents say that they do not want their children to be a means to profit. They do not want their children used that way. Only with well planned, well defined, care criteria can non-profit centres and family day homes respond to the concerns of these parents. The process of the child care consultation panel was one of public record. After each community visit, a press release was issued and meetings were taped to guarantee accurate reporting of comments.

The principles were on the record, interest groups were consulted, parents and even the children themselves were given the opportunity to comment on what child care should be in the Yukon. What we have before us today is a uniquely Yukon act, one that has considered the concerns of rural Yukon and urban Yukon. We have an act that will go a long way to preventing exploitation of children for profit. We have an act that addresses the health and safety concerns of parents and care givers. We have an act that is the foundation of good, solid child care.

When the child care consultation panel finished its report, again the material was readily available to all interested parties. Every person who attended a consultation meeting was sent a copy of the report, as were interest groups. A child-care strategy was developed and the final step is this new Child Care Act. Parents should not be put in the position of having to choose between quality care for their children and their overall quality of life.

This Child Care Act is the mechanism through which the children of the Yukon will be protected. No one can argue that anything less would be acceptable. In all this, I believe that clearly Yukon kids are the winners. I recommend passage of this act.

Mr. Phelps: Given the remarks from my good friend, the Minister of Justice, I feel I should make a few comments.

We are very pleased to see the act come forward at last. I, too, would like to acknowledge and indicate appreciation for the work done by so many people in moving the important issue along to this stage. We view the act as a very important and progressive step that is being taken and look forward to discussing the details of the act and the policy implications in Committee of the Whole.

Motion for second reading of Bill No. 77 agreed to

Hon. Mr. McDonald: Mr. Speaker, I move that you do now leave the Chair and that the House resolve into Committee of the Whole.

Speaker: It has been moved by the Government House Leader that the Speaker do now leave the Chair and that the House resolve into Committee of the Whole.

Motion agreed to

Speaker leaves the Chair


Chair: I will now call Committee of the Whole to order. We will have a break at this time.


Chair: The Committee of the Whole will now come to order.

We will continue with the Second Appropriation Act, 1989-90

Second Appropriation Act, 1989-90 - continued

Yukon Housing Corporation - continued

On Operation and Maintenance Expenditures

On Gross Expenditures

Mr. Lang: Are the prices that was given to us for joint-venture program firm prices? Are the overruns taken up by the contractor? Does the government have any responsibility for these? I am thinking about the units being built on Centennial Street.

Hon. Mr. Byblow: There may be some minor confusion on the programs involved. The Centennial Street project is the turn-key project that we have undertaken - the contractor has made a commitment on his own hook to provide the financing for the construction of 24 units. We have committed to buy those at a firm price when the construction is complete. It has no relationship to the joint-venture program, which is a separate one. That involves the construction of five units in Granger for the private sector.

Mr. Lang: I apologize for the confusion. Approximately $1.7 million has been committed to that project. Can the Minister assure the House that that amount of money is the bottom line?

Hon. Mr. Byblow: Yes. That is the firm price that was agreed to prior to the project being started. It is now the contractor’s responsibility to bring those units in at whatever price he chooses to maximize his profit. We are committed to buy these units at the prices I stated on the record yesterday. We have a firm deal. We have no interest or desire to change that figure. That is the amount we are committed to buying those 24 units for.

Gross Expenditures in the amount of $586,000 agreed to

Operation and Maintenance in the amount of $586,000 agreed to

On Operation and Maintenance Recoveries

On Cost Shared Recoveries

Chair: Are there any questions on the recoveries?

Cost Shared Recoveries in the amount of an under expenditure of $123,000 agreed to

Operation and Maintenance Recoveries in the amount of an under expenditure of $123,000 agreed to

On Capital Expenditures

On Joint Venture

Hon. Mr. Byblow: We have debated the joint-venture program at some length. The line item in the budget is a fallout of those discussions. The Quiniscoe venture consumed a portion of the $1 million that was allocated in the original budget. At the time that this budget was put forward, there were two additional applications that were in progress. They are still in progress. They have not received approval. They are under negotiation. Therefore, based on that information, the corporation held back $400,000.

The $400,000 is inclusive of two active applications and one concluded one, being the Quiniscoe one. Under the parameters of the program, we cannot exceed $10,000 per unit. Members have copies of the agreement with Quiniscoe. It is $9,500-something. Of the outstanding $400,000, nearly $50,000 is committed on the Quiniscoe deal, and $150,000 may be committed in the two agreements under current negotiation.

Mr. Devries: My understanding is there is $400,000 in a revised vote. He said $150,000 for the proposed ventures and $50,000 spent. That comes to $200,000. Where is the other $200,000?

Hon. Mr. Byblow: Could the Member restate the question? I was preoccupied while he was asking it.

Mr. Devries: I believe the Minister said $200,000, and my book says $400,000. There was $150,000 for the anticipated ventures, and $50,000 was given to Quiniscoe. That makes $200,000, and it says $400,000.

Hon. Mr. Byblow: I should have said $250,000, not $150,000 for the amount respecting the two active applications. I should have said $350,000 for the amounts considered in the two active applications, and $50,000 has gone to Quiniscoe. I was out by $200,000. I correct the record.

Joint Venture in the amount of an under expenditure of $600,000 agreed to

On Home Ownership

On Lease/Purchase

Hon. Mr. Byblow: I believe we have had some discussion on the lease/purchase program previously. Again, it is the program where applicants lease their homes from the corporation for a period of up to five years. At any time during that five years, they can exercise their option to purchase.

As of the end of December of 1989, all 30 units budgeted for under the lease-purchase program had been committed. If the Member looks, the original vote was $3 million. In terms of what we calculated to be costs related to lease-purchase, we had a full commitment. Twenty-one of those applicants were in their homes by Christmas and the other nine applications were at various stages. The actual cost of acquisition is coming in slightly under what we had anticipated, slightly under the amount budgeted and, as a result, the Corporation is turning back $250,000 of the capital budget provided for this. In short, out of the 30 units, the net result is that they will come in under the budgeted $3 million, so the balance is being turned back in.

Mr. Devries: Could the Minister possibly indicate how many, if any, of these people have made the decision to purchase? I understand it is lease-purchase and that, within five years, they have the option to purchase. Have any of them made a commitment to purchase their homes up to this point?

Hon. Mr. Byblow: The most accurate answer is that all persons who undertake a lease-purchase have made a commitment to buy under the terms of the agreement we establish. They go into a five year period of rent, during which they build up their equity and at some point during that five year period they will exercise their option to refinance with the bank and get completely out of Yukon Housing.

I am advised that one person has exercised that right already. The Member knows that the program was introduced the year previous; this budget year now is the second year of the program. There were 17 units that kicked in under a lease-purchase arrangement in the first year of the program; 30 units have kicked in this year. Of that total, one person has exercised their right and the other 46 can exercise that right any time up to five years from the date of entering into the agreement.

Lease/Purchase in the amount of an under expenditure of $250,000 agreed to

On Owner/Build

Mr. Devries: From looking at the figures, I assume this program up to this point has not been terribly popular. Are there any changes in that program from what there were several years ago?

Hon. Mr. Byblow: I do not want to take issue with the Member’s determination of the popularity of the program. We do have three people currently in the program and we did, in the original budget, budget for five people to do so. There are two additional cases in progress where the clients’ applications are being reviewed and the financing arrangements are being struck; they may proceed, they may not. The full subscription is potentially there for this year. We have three actual owner-build applicants currently building their homes and two applications are being reviewed.

The Member asks why we are turning back $200,000. The problem, as the Member realizes, is that it is a two-year program and this is the first year it has occurred. As a result, because it is a two-year program, you do not disburse all your funds in the first year. We originally budgeted to do that total disbursement in the first year; that will not now occur. Because it is over a two-year period, we are turning back half of the funding, which will be brought forward next year for the second year of the program.

Mr. Devries: I do not want the Minister to misunderstand me. I think it is one of the most innovative programs you have developed. It surprises me. Since this is a two year program, I can now see that, yes, we could have run out of money in the first year.

Owner/Build in the amount of an under expenditure of $200,000 agreed to

On Central Services

On Furniture Acquisition

Furniture Acquisition in the amount of $10,000 agreed to

Capital Expenditures in the amount of an under expenditure of $1,040,000 agred to

Chair: Are there any questions on capital recoveries?

On Capital Recoveries

Capital Recoveries in the amount of an under expenditure of $1,225,000 agreed to

Loan Capital and Loan Amortization

On Loan Capital

On Expenditure

On Loans to Third Parties

Hon. Mr. McDonald: The loan capital referred to in this line item are the loans anticipated to be provided to municipalities. As of period 5, it was felt that $1.3 million in potential loan funding would not be needed and, consequently, we are proposing that this be deleted and that the recovery show a similar $1.3 million change. The loan capital here is funds to loan to municipalities. As Members know, as we have been through this a number of times in the past, on behalf of municipalities, we lend them money at a particular interest rate and they pay us back. This is not for government operation, but for municipal operations.

Loans to Third Parties in the amount of an under expenditure of $1,300,000 agreed to

Chair:  Are there any questions on the rest of this page?

On Recovery

On Loans to Third Parties

Loans to Third Parties in the amount of $1,300,000 agreed to

On Loan Amortization Interest

On Expenditure

On Interest

Interest in the amount of nil agreed to

On Principal

Principal in the amount of nil agreed to

On Loan Amortization Principal

Mr. Phelps: Perhaps we could have a brief description on what loan amortization interest and principal is all about.

Hon. Mr. McDonald: The loan amortization expenditure and recovery funding shown here is that which we could expect to expend and receive in a particular year. The reason why the expenditure and recovery numbers are different is that the period for the loans do not meet perfectly at the beginning and end of the fiscal year. The terms of loan repayment are sometimes a little offset from the fiscal year, as well. That is the reason the recovery shows a slightly different amount.

The reason for the $22,000 change is simply that there was a cancellation made when the main estimates were done, that was revised after period 5. It does not reflect anything other than the fact a mistake was made with respect to the calculations, and they are showing a correction.

On Recovery

On Interest

Interest in the amount of nil agreed to

On Principal

Principal in the amount of an under expenditure of $22,000 agreed to

Chair:  May we go back to the bill, Schedule A?

On Schedule A

Schedule A agreed to

On Schedule B

Chair: Are there any questions on schedule B?

Schedule B agreed to

On Clause 1

Clause 1 agreed to

On Clause 2

Clause 2 agreed to

On Title

Title agreed to

Hon. Mr. McDonald: I move that you report Bill No. 13, entitled Second Appropriation Act, 1989-90, out of Committee without amendment.

Motion agreed to

Chair:  We will now go to the main estimates.

Bill No. 19 - First Appropriation Act, 1990-91

Chair: Is there any general debate?

Hon. Mr. McDonald: Members have eagerly been looking forward to hearing my main estimates speech once again. It only takes 40 minutes, so I ask Members to sit back and enjoy themselves. Here it comes.

I would like to bring Members up to date on what has happened since the main estimates were tabled. The estimates predicted a reduction in the formula financing grant of $5 million from what we would have otherwise received, were the current formula to continue unchanged. As we know now, the figure is understated by approximately $4 million. We will now receive $9 million less in 1990-91 than we would have received under the existing formula.

The additional $4 million shortfall will be addressed in supplementaries later in the year, should it be necessary to modify the expenditures. At the present time, as I have indicated in the House in Question Period, we believe the increases in the provincial escalator and operation and maintenance lapses, primarily from the current fiscal year, will cover the shortfall. This $9 million is a large reduction for the Yukon’s population to bear. It roughly equates to $300 for every person in the territory.

To put the figure in its proper prospective, a similar per capita cut by the federal government for Canada, as a whole, would be about $7.8 billion in one year. That is an expenditure cut that Members will be aware they have never been able to achieve before. It is interesting to note that a reduction of this magnitude would lower the annual federal deficit by approximately 27 percent. In future years, we are going to have to lower our expectations, and budget accordingly.

As I said in the budget speech, and still believe, despite the decline in available funds, we have developed a budget that allows us to maintain essential social and economic programs through careful priorization and allocation of funds. In some areas of special importance, we have been able to introduce new or enhanced programs.

The combined operation and maintenance and capital estimates before you total $342 million, which is, as the Members know, a decline of 2.7 percent from the forecasted expenditures for the current fiscal year. As compared to the main estimates for 1989-90, the budget for 1990-91 is only four percent higher; in other words, there is no real increase in spending because the apparent increase is entirely eaten up by inflation.

It is, for all intents and purposes, a balanced budget because the surpluses shown will ultimately be required for normal supplementaries - principally, negotiated wage settlements - during the course of the coming year. As a result, we are projecting, at March 31, 1991, an accumulated surplus roughly equivalent to the one we project for on March 31, 1990, which is $33 million. The level of accumulated surplus is sufficient, I believe, to meet our expenditure needs for about a month, should we have to, and it is the level we intend to keep on hand for emergencies.

The budget speech did announce a number of initiatives, which I might be able to comment on now, in very general terms; otherwise, I will be referring the subjects to various Ministers who will be asked to respond when we reach their departments.

Members will also note that I did pass out a person year reconciliation that incorporated not only the supplementaries but also the main estimates for the government, and they should have that in hand, also.

Mr. Phelps: One feature of the budget is that we have a situation where, as the government gets ready for the constraints imposed by worldwide economic conditions and the facts of life about the deficit in Ottawa, the impact of cutbacks and fiscal restraints - to use the charitable description utilized by the Minister himself - is primarily on the capital side. So we have a decrease showing up in the capital budget this year and, depending on which figures you use, if you go from the main estimates for the previous year to the main estimates for this year, they are rather significant; I worked it out to a nine percent increase in the O&M side.

I wonder whether or not it is going to continue to be government policy that the impact of any cutbacks in government spending is going to be directed and targeted at the capital side and that the government feels the O&M budget is of necessity going to continue to expand from year to year.

Hon. Mr. McDonald: The Member correctly characterizes the situation now as one where the capital budget was more affected than the O&M budget. The thinking had been, as the previous Minister of Finance and the Premier had been saying in the past, that the fact that we had increased the capital budget significantly in previous years was something we may not be able to maintain.

We anticipated a day such as this, where we would have to consider a reduction in capital expenditures. As Members on both sides have pointed out, the increase in capital expenditures has been a subject of some concern in certain quarters, for those people who feel the construction industry has been over heated and would like to see a trailing off of capital expenditures. It is not coincidental that it is happening now. We are in a position where we are more than encouraged to cut back, but it also happens to meet with the desires of those persons who wish that the capital budget be toned down to some extent, so a dependence on capital spending is not bred within the private sector of the territory over the long term.

In future years, it is difficult to say what the impact is going to be. A focusing of both capital and operations expenditures is going to be required. It would be impossible for me to say now whether the capital budget, as a portion of the overall budget estimates, would go down even further, perhaps at the expense of operation and maintenance estimates. It would be premature because we have not come to final conclusions on that point.

However, as a general proposition, it would be fair to say that further focusing of expenditures is going to be required on the capital side and operations side in order to accommodate the cuts we feel fairly sure will be coming as part of the new formula arrangement.

Mr. Phelps: As government grows and the operation and maintenance commitment grows, we are placed more and more in a similar situation to the federal government. The analogy of their discretionary spending being severely curtailed by the accumulated deficit and the interest commitments to service that debt on the one hand, and by the commitments with regard to transfer payments to provincial and territorial jurisdictions on the other, is that the flexibility is being eroded. My submission, and I wonder if the Minister would agree, is that the flexibility of this territory seems to be reduced in a general manner by the increase in the operation and maintenance costs. There does not seem to be much likelihood that that aspect of government is going to be curtailed, which means the discretionary monies shrinks. I submit the discretionary monies can be broadly categorized as those monies that appear in the capital mains.

Hon. Mr. McDonald: As a general proposition, the Member is correct. I think the Member would agree that capital expenditures quite often breed certain operation and maintenance expectations that we have to live with, as well. A clear distinction cannot be made between the capital and operations side with respect to the kind of entrenchment in expectations that those expenditures might encourage.

When we build buildings, we maintain them. When we build new roads, we maintain them.

As Members on both sides of the House have pointed out, the capital budget drives operations as well. For that reason, one has to keep a careful eye on capital expenditures.

I would not want the Member to think that those operational expenditures will be absolutely immune from consideration for more focussing in the future. I think the Member will accept the proposition that services to people are much more difficult to reprofile than are capital expenditures. Nevertheless, the operations and capital budgets will have to be scrutinized if we are to meet our target of a balanced budget, which we are determined to do.

Mr. Phelps: Nonetheless, the impact of a significant reduction, or even if the government expenditures stood still, will be seen on the capital side, if this budget is any indication. That is going to have an impact on the private sector; it is going to have an impact on a lot of person years, because when contractors bid on government work, they are not basing their estimates on person years, but the length of time it takes to construct capital projects.

Would the Minister agree that the decrease in this budget and future budgets will be felt in the capital side and, therefore, in the private sector?

Hon. Mr. McDonald: I will agree entirely with half of the proposition. That is the capital budget has seen the most significant reduction. It has certainly been impacted more than the operations side. I still maintain that the clear distinction between operation and maintenance and capital - that O&M affects the government and general services of the people, and the capital affects the private sector - is not a distinction that would bear any rigid test of scrutiny. If the government were to reduce expenditures even on such things as wages, there would be an impact on the private sector. The service or retail industry would feel that impact. Anyone who sells goods to people who work for the government would feel that impact.

The reduction of expenditures on goods and services in the Yukon will have an impact on the Yukon public, and will have an impact on the private sector. If we reduce expenditures on the capital side in the building construction area, then that will have an impact on the building construction industry. If we reduce expenditures in terms of employee wages - and I do not want anybody to think I am advocating that or that this budget is saying that - it will have an impact on the service retail industry. It is very difficult for the government to do anything at all that does not have an impact on the private sector of this territory.

It is correct that the capital budget is being impacted more this time around, but that may not be the same in future budgets. There will certainly be a desire to maintain essential services to the public, but it is too early to say whether or not the difference in treatment between the capital and operations will be as significant next time as this time.

Mr. Phelps: One area of expenditure that seems to have increased dramatically in terms of total commitment from the government has been the total amount spent on service contracts. Our researchers did a calculation of the total for 1984-85, 1985-86, 1986-87 and 1987-88. It is interesting to see the dramatic increase over that period of time. In 1984-85 the contracts totalled $10,700,000. In 1985-86 they went up to $15,674,000. In 1986-87 they went up to $21,532,000. In 1987-88 they went up to $60,977,000. In 1989-90 they were at approximately $54.6 million.

Has the government looked at this aspect of its expenditures? Can they give us any reason for the remarkable climbs in this area of spending? Is this seen as something that will continue at present levels? It looks as if it it is up to around the $50 million to $60 million level per year.

Hon. Mr. McDonald: I do not have the Member’s analysis in front of me. I would be interested in seeing it to clarify what is incorporated in the $10 million figure in 1984 and what is incorporated into the $60 million figure for last year. I would like to determine if they are comparable. It is difficult to answer the question as a general proposition. If the Member is asking if there is a general response, but one that has meaning, I can only say that the capital budgets have increased significantly since 1984.

If the Member wants to share his information with me, I can have a further analysis made so that I will have a better understanding of it.

Mr. Phelps: The actual calculation is very straightforward and simple, almost embarrassingly so. The figures are from total costs from the year-by-year books that were presented to this House by the former Minister of Government Services, Mr. Kimmerly. The practice has been ongoing since the first three or four years that were given to us. The total amount of the contracts in the bound books in each year was calculated. That is just the start of analyzing what is going on.

I am concerned if there are a lot consulting kinds of services that are really disguised person years. I say that without meaning that there is any evil intent on the part of anyone. In our legislative offices, we hire people on a service-contract basis from time to time, and I am sure that happens in the departments.

I wonder whether or not there is any increase in indirect person years that is inherent in this rather significant level of expenditure.

Hon. Mr. McDonald: I am sure the Member can appreciate that we have a fairly active watchdog right now, in the name of the union. Certainly, if there was a general public concern about that, we would probably have heard it at the first infraction we might have made. The rules for ensuring that ongoing services of the government are properly recorded by person year, if the service is being performed by somebody and it is an ongoing function, are fairly clear and, as a general proposition, I can only say it is my belief that we have been sticking as rigidly as we can to the rules with respect to person years and auxiliaries.

There may be cases in some departments where they test the limits of the policy but I would think those would be few in number. As a general proposition, again, I am going to wrestle with what might be the reasons for the difference between $10 million and $60 million, apart from the fact of inflation and increasing budgets. I can only think that there may be some more work done by service contracts as a general rule; it has certainly not been something where there has been a conscious corporate decision to do so. It may be that some things are included in the current year’s service contract estimates that were not included in previous years’. I do not know. I will ask that there be some more analysis done to see whether or not I can shed more light on this.

Mr. Phelps: I think there should be some analysis done because it is a significant increase - five or six times what was occurring back in 1984. Of course, we will be having a look ourselves and, if we have anything special to raise, you can be sure you will be hearing from us.

Looking at the issue of person years, one of the things that keeps changing over the years is really what we include in the base of the person year complement. I notice now that Yukon College person years are out of the budget and I understand that, as well, of course, Yukon Housing person years are no longer in the budget. I am wondering whether or not the Minister would happen to have at his fingertips the current level of employees who have stepped into Yukon College and as well the current person year contingent for Yukon Housing.

Hon. Mr. McDonald: I did provide some person year reconciliation for Members, to give them a sense of what the case is with respect to person years. If the Members would turn to page 15 of the estimates, they will see the person year comparisons for the forecast for 1989-90 and the O&M budget for 1990-91.

The totals at the bottom show in 1989-90 a forecast figure of 1,741.52 person years, excluding the college. In that particular forecast year, 147 persons would be included for the college. If they were included the total would be 1,888.52.

If one considered 1990-91 estimates and considered 148 person years for the college, it would give a total of 1,914.80 person years. That would be the figure that would incorporate the college as well.

Now that the college is a separate employer, they are free to establish the person years they feel necessary in order to perform the functions given under the act.

Mr. Phelps: I understand the principle behind it, but I am just trying to get a handle on some of these numbers.

What is the current staffing of Yukon Housing? Is that something the Minister needs to bring back?

Hon. Mr. McDonald: The Yukon Housing Corporation do not show their numbers in their budget. Their operation and maintenance total for 1989-90 is 25.71 person years. That is the forecast for the current year. Estimated for 1990-91 are 26.48 person years on the operations side. They have two capital person years that are unchanged from current year to the estimates.

The Yukon Development Corporation has two person years and the Yukon Liquor Corporation has a total of 43.15 person years. Next year it will be a total of 44.30.

Mr. Phelps: Do you have the figures for Workers Compensation as well?

Hon. Mr. McDonald: I am sorry. I do not have it with me.

Mrs. Firth: The Minister just said on page 15 that out of the total from the 1989-90 forecast, 147 of those would be Yukon College employees, and from the 1990-91 estimates out of 1,766.8, Yukon College would be 148. On page 14 under the Education Operation and Maintenance Capital Person Years Establishment in the 1989-90 estimates, of the 636.72 person years, we were told that 118 of those were the Yukon College employees. There is a big jump from 118 to 147 in the 1989-90 forecast of Yukon College employees. Perhaps the Minister can clarify that.

Hon. Mr. McDonald: In that particular case, the college had a number of auxiliaries that were made permanent in the last year. Consequently, the person year count would formally rise. The figures on page 15 in the far right column include Yukon College. The figures for 1989-90 forecast and the 1990-91 estimates both exclude Yukon College. The 147 employees in the 1989-90 forecast should be added on to the 1,741.52 for comparative purposes, and 148 added on to the 1,766.80 for a total estimate of 1,914.80 for comparison purposes.

Mrs. Firth: Could the Minister tell us how many auxiliary employees were made permanent? A difference of 30 employees is quite a large jump. How many people did that actually translate into? What implications has it had on the payroll?

Hon. Mr. McDonald: In the person years reconciliation in the main estimates, the conversions of auxiliaries show 10.5. There were 29 college conversions. That is 39.5 persons on conversion.

Mrs. Firth: Could the Minister tell me where that is in the reconciliation? We were given figures for the schools, but I do not recall the Minister handing out a reconciliation for the college. I do not think we have the information to which the Minister is referring.

Hon. Mr. McDonald: I have what I passed out. Maybe the pages are not numbered. I have a person year reconciliation, 1990-91, main estimates, Department of Education, O&M. If the Member could cast her eyes down the page to mid-page to 1989-90 main estimates, there are conversions of auxiliaries. There is a teacher increase, and there are college conversions.

If the Member wishes, we can clarify this during the departmental estimates discussion at which time we can compare notes.

Mrs. Firth: I am prepared to do that but I still do not think that we have the information to which the Minister is referring. The information that I have is: new education department personnel, permanent, term and casual; a staffing deployment for the school; and a Government of Yukon person year reconciliation, 1990-91 fiscal year, main estimates. This does not have the college information in it. Maybe the Minister intended to give us the information but did not. I am sure I have all the information that was given to us in the House.

Hon. Mr. McDonald: During the break, we will compare notes; we will figure it out.

Mr. Lang: Could the Minister provide us with the person year estimate for the Yukon Development Corporation? Does he have that with him?

Hon. Mr. McDonald: There are two person years for YDC.

Mr. Lang: Does the YDC only has two people?

Hon. Mr. McDonald: There are two person years. There may be others working there on a contract basis. That is not known to me. Maybe the Member could ask the Minister responsible for the YDC.

Mr. Lang: In a number of cases, private agency employees have been seconded to provide services for, or on behalf of, the government. One that comes to mind is the one at Family Services.

Is that person year incorporated in the overall budget here? I would assume, in this particular case, that there would be somebody replacing him within the government. What happens in that case? Is it an additional person year, or how does it work?

Hon. Mr. McDonald: If the Member is referring to a secondment out of the Government of Yukon to an agency, that person year would still be counted in the government and, presumably, if there was still a need within the department, say Family Services, for a position like that, it would be backfilled.

Mr. Lang: I want to go to another area if I could. I would like to ask the Minister if he would undertake to fulfill a request here. The thing about the main estimates is that they not only deal with today; we have to look three or four years down the road. I notice the Minister never touched on this at all in his comments: the point that there are quite a number of significant major capital projects that are being planned or are in the process of being undertaken by the government. Some that come to mind are the arts centre, the archives building, the new residential quarters, the school at the Carcross Cutoff, the Granger School and the chronic wing that will be built and the sod turned this forthcoming year. I would like to ask the Minister to provide the projected operation and maintenance cost of these facilities once they are completed and actually providing a service to the public. I am sure the Minister must have taken this into account when he tabled this budget and also in conjunction with the Public Accounts Committee’s recommendations on life-cycle accounting, which is a very strong recommendation to the government that these things should be undertaken.

I am wondering if the Minister can provide us, not today but over the course of the budget, with the overall projected costs of what the proposed capital side is going to eventually cost the government on the O&M side?

Hon. Mr. McDonald: Certainly, as the Member mentioned, the greater proportion of the capital projects is in Education; there is no question but that we have projected O&M consequences of those projects. In Education, I will be more than happy to provide what will ultimately be a very rough estimate at this point for some of those that are well down the road, like the Granger School for example. There are some that are much more well defined, because they are closer to actual opening day - for example, the archives building, which is scheduled to open in the summer; the South Highway school - even though this was a relatively new project, we still feel we have a fairly reasonable projection of what it will cost. We will show, ultimately, that the O&M costs for those facilities that are coming on stream this year are incorporated in the Department of Education budget.

With respect to the larger projects listed, it would probably be most appropriate to get the department Ministers to explain what the project costs are expected to be, in their most recently refined state. I am sure they would be more than happy to provide that kind of information, and I will certainly do my best.

Mr. Lang: I assume all that information is available and was taken into account when the budget was put together and discussions took place on the future operation and maintenance costs of these facilities and the implications to the overall budgeting process of the government. Is that not correct?

Hon. Mr. McDonald: Yes, that is correct.

Mr. Lang: I want to get a few things straight. Could the Minister tell us exactly, in view of the announcement made on the question of transfer of payments in the federal formula - it is not clear to me, quite frankly, when I look at the summary on page 6 - just exactly what the transfer of payments are going to be. I understand this was predicated on a $5 million cutback from the federal government. Does that mean now that we can expect $198,044,000, or what does it do to this page now that the reality has come home?

Hon. Mr. McDonald: The new reality does show that the expenditure reduction will be a further $4 million, as I indicated in my opening remarks. So this budget is predicated on a $5 million reduction. The reduction is slated to be in the neighbourhood of $9 million. Consequently, the transfer payment from Canada will have to be reduced by that amount.

Mr. Lang: The impression that was given is that there was an overall cutback of $9 million from the federal government. We will be receiving $9 million less than we got the previous year. I see an increase in the recoveries of $7 million, and in the transfer payment, we have a $3 million increase from the 1989-90 forecast, even with the $9 million cut. That adds up to a total of $10 million. Is my assessment accurate? I realize the recoveries may deviate by $500,000 because you may recover some privately, but I assume most of those recoveries are from the Government of Canada as well, are they not?

Hon. Mr. McDonald: What I indicated is that we knew we were going to be experiencing a reduction from what was projected in the current formula. That would be about $207 million. We knew we would be experiencing a cut, so we planned for a $202 million grant. The reduction has to be further reduced by another $4 million for a total of $9 million in order to meet the full effect of the change in the transfer payment. We had already prepared for $5 million and now have to accept $9 million.

Mr. Phelps: The issue of the new formula financing arrangement has now been raised, and I have some questions about that.

Firstly, are we going to be given copies of the new arrangement? It is not an agreement if you have not signed it, but is there a document that shows what the position is? Can the Minister advise us if he will table that document, and in the meantime tell us what period of time the arrangement covers?

Hon. Mr. McDonald: The Member is quite astute in referring to it as an arrangement rather than an agreement. Thank you for that. It is much more appropriate. The agreement/arrangement has not yet been finalized, and until it is, it would be difficult to table it. We have background with respect to the formula arrangement that I would be happy to provide to the Members so they can better understand what is happening with the federal proposal. The federal proposal itself was basically in the form of a press release letter, and since then, officials have been working out details on what all the features mean.

Consequently, there is no arrangement yet to table it. I will provide some background for the Members’ information so they can better understand the government’s position.

Mr. Phelps: In the meantime, the period covered by the new formula financing arrangements is five years. Is that firm? It is not three years and a two-year option like the last one?

Hon. Mr. McDonald: This agreement is an arrangement much like the previous one of three years, with an option to review after three years.

Mr. Phelps: So, I suppose the analogy is that of a marriage. In a formal marriage, you get a divorce, and an arrangement is something different, I suppose. Perhaps we could break then.

Chair: We will now take a short recess.


Chair:  I will call Committee to order.

Mr. Phelps: When we broke we were discussing the formula financing arrangement. I understand it is of a five-year duration. From what has been said and what we have read I understand this year it has been acknowledged there is a decrease of approximately $9 million in what was anticipated. The anticipation was based on the previous formula. This year there will be an increase in the money that comes from the federal government by way of the transfer payment to the Yukon, but there is a reduction in the anticipated amount. Is that the case for the next year as well? Under normal circumstances will there be a net increase in the actual money transferred as a result of the financing arrangement?

Hon. Mr. McDonald: The Member is correct in that there will be a gain of a small amount this year and a lesser amount next year. We project the impact in 1991-92 to be probably in the neighbourhood of $12 million to $15 million. The gain we project will probably be in the neighbourhood of $1 million to $2 million in terms of the actual year-over-year net gain after reductions are made.

Mr. Phelps: That was for the second year. Would it be fair to say that after that the projections become a bit more wild and that the basis for the assumptions is less exact? Would that be a fair statement? The first two years you are relatively certain there will be a real gain in each year even though it is small. Is there any prognosis for the third year? Is there a high/low prognosis?

Hon. Mr. McDonald: In the first two years there will be small increases, both less than inflation, and one much less than inflation. Obviously the farther you go down the road the less accurate the projections will be. Nevertheless, under reasonable scenarios, the funding will be cut back even more and there is certainly a very good potential that the grant not only will not account for any inflation, but will be less than we get now.

Mr. Phelps: The scenario the Minister speaks of for the third year of this arrangement is predicated upon some concept of economic growth, and an increase, as I understand it on the revenues from the various taxes presently being imposed by the territorial government. Would it not be fair to say that, should there be a downturn in the economy, the net result would be an increase, not a decrease, in the transfer payment?

There are many factors to take into consideration, which contribute to the analysis that produces our expectation of what the grants will be. One is the provincial local escalator; another is the population of both Yukon and Canada. The population factor in the new formula does not kick in unless the growth rate in Yukon’s population exceeds the growth rate in the nation’s population.

It also depends on the volume increase in revenues and the gross domestic product. There are a number of things the formula will take into consideration to produce the model we have projected.

Mr. Phelps: What we heard from the officials in Ottawa when the announcement was made in December, was that the factors that make up the formula financing arrangement are more akin to the arrangements with the provinces, that they have moved closer to that kind of formula.

As I understood the argument, their position was that there may be some cuts if certain conditions prevail, i.e. a booming economy and no tax increases, but the steps they took were to make the package more equivalent to the formula they use for the provinces.

Hon. Mr. McDonald: I believe the federal position is that they would like to compare tax efforts in the various jurisdictions. They have introduced an arrangement called the representative tax system, which measures the tax capacity and tax effort over a variety of taxes in each jurisdiction. They have projected that Yukon has significantly more capacity to produce taxes than it is making an effort to do, taking as its indices their list of possible tax measures.

In Canada, there are 36 taxes, overall, but for purposes of the representative tax system capacity and effort in the Yukon, they have 18 taxes to project what should be the taxable income the Yukon government should be able to raise.

For example, if one were to take in all the various taxes - everything from personal income tax to business income tax, capital tax, sales tax, tobacco tax, gasoline tax, diesel tax, et cetera - they project that the tax capacity of Yukon to produce revenue is $116 million. They say the actual effort we are making to generate that revenue is $73 million. They say there is a shortfall of around $43 million from the Yukon’s potential tax revenue.

Consequently, the Yukon should get off its duff and collect this money. We feel that in each of those categories, they have overstated our capacity to collect those taxes in each of those areas.

They suggest that we can collect just over $25 million through a sales tax if we wish to implement one. We have indicated that, because the government is such a large portion of the economic activity in the Yukon and in the north, and because we do not tax ourselves, that the $25 million figure is grossly overstated as a potential revenue source.

They are saying that in order for us to make up the difference, we should raise our taxes by 59 percent. If we reduce it by a 15 percent factor we will produce a “catch up” factor of 136. That means that in order for us to meet our appropriate tax effort in their eyes, we must increase our taxes by 59 percent. Because they realize that 59 percent is a rather ridiculous figure, they have made an arbitrary reduction and suggested that we should raise our taxes by only 36 percent. That would bring us up to the base-line year of 1987-88. Tax rates have risen across the country, of course, and we are now edging up to a 40 percent increase instead of the 36 percent raise.

Basically, they are saying is that if one were to compare tax rates alone, and not the tax burden of the Yukon, which is what our take-home pay is, we should be paying a minimum of 36 percent more in taxes. To counter that argument, we have said that the system, however tried it is in the rest of Canada, has been constantly revamped and reworked because the provinces are unhappy with it. That is why it has undergone many complicated changes over the years. We have also indicated that what they regard as being our tax capacity in each of those tax areas is way overstated. We produced evidence to suggest that the tax burden in the Yukon is above national average now.

The RTS measurement that we have now indicates that the Yukon’s capacity is 18 percent above that of the richest province, Ontario, even though our personal income per capita is five percent below that of Ontario’s.

So, if the exercise is to roll us into the financing arrangement with the provinces, we are going to be faced with significant anomalies such as this, which not only produce some rather bizarre comparisons but also suggest, off the top, that our taxes should be raised by 40 percent. We have indicated, as I stated, that the tax burden in the Yukon is already very high and feel it that would be inappropriate for them to draw us into a system which, admittedly by the provinces, is not a happy marriage or situation between the provinces and the federal government. I guess the bottom line for us is that, while we did indicate that we were willing to participate - and I indicated this to Mr. Wilson myself - with the federal deficit-cutting exercise, we felt that the RTS formula was inappropriate and that, while we would be more than willing to take a cut without a peep, we felt that any cuts should be proportionally the same as the other provinces are expected to give. That is the genesis of the $5 million figure.

Perhaps that clears some things up for the Member?

Mr. Phelps: It probably should, but I will move very quickly away from it. I understand there are two different positions and two calculations on what the equivalency, I suppose, in tax rates would be, and that forms part of the basis for negotiations. I am more concerned, for this exercise at least, in getting a handle on the net amounts we can expect. We have a projection for next year that is a net increase in real figures but is $9 million below the previous formula. We have a projection for the second year, which again indicates a small real gain in the transfer payment but it is far below what the previous formula would have given us in terms of a gain.

Are there similar projections for the third year and the fourth year?

Hon. Mr. McDonald: The projections unfortunately do not show even the modest net increase the Member was mentioning. It is important to note that these net increases do not come close to accounting for inflation. This is an inflation rate we currently face, and we have to remember that the GST is going to be a reality for us in 1991 - that is the second year of this agreement. It will be a reality for the second calendar year beginning January 1, 1991.

A portion of it will have an impact on our budgets. Even though we do not pay taxes, our employees pay taxes and we project that the GST-induced inflation rate will be three to four percent beyond the normal inflation rates. While we project, perhaps, an increase - we might get a modest increase in the neighbourhood of $1 million or so - in the second year, we will also be faced with an inflation rate of seven to eight percent. Clearly, it does not take a wizard to discover that that is going to produce some budgeting problems for those people who are wanting to see things continue on even after the initial cut of $12 million.

Mr. Phelps: Once again we are looking at what this government was proposing in terms of their side of the negotiation, and obviously the $5 million cut for the first year was what this government felt was the bottom line, and it was actually $9 million cut from the old formula. What would this government have been projecting for the second year of a formula financing arrangement?

Hon. Mr. McDonald: We were projecting we would be taking the $5 million cut per year, times the provincial local escalator, which would make the second year 5.6 perhaps, or whatever the escalator would cause for an increase. We felt that would be a reasonable projection based on what the federal government was projecting to inflict on the transfers to the provinces. We did anticipate that kind of reduction and that is the reason why we are not more optimistic about our revenue projections in the main estimates. As I did indicate before, I did tell Mr. Wilson, face-to-face, that if the arrangement was fair in our view, even though we knew it meant a cut, the Yukon government would not react in any sort of negative fashion. That is on the record with Mr. Wilson.

Upon hearing of the arrangement, my remarks had largely to do with the upsetting fact that Dave Croft of the Yukon News was the vehicle for letting us know what the formula arrangement was. That was disturbing, not devastating, but disturbing. The method of delivery was sleazy and inappropriate. There are elements about this arrangement that I did indicate that I thought had some perversity to them in the financial sense, and I said so. At no time did I ever indicate to the federal Ministers that we were not prepared to take a $5 million cut, nor have I indicated since. We did, however, make the argument that because the rate of growth of the formula grant was less than that, in equalization to the provinces, we had already been experiencing some of the responsibility for the deficit fighting activity of the federal government. We did say that should be a recognized reality. We did indicate that the increase of 1984-85 was a significant jump from previous years, but we did recognize, too, that if the Government of Yukon was to provide services comparable to southern jurisdictions, it was deserving of that increase. We pointed out thoroughly to federal officials and Ministers that the increased grant that was received had been eroded significantly, given the dollar-for-dollar reduction that was part of the old formula. Because there was economic activity in the Yukon, our grant did not grow as fast as our economy, and we were expected to provide for services in a rapidly expanding economy.

Inflation has an effect. We indicated to them that was basically history. We were, and are, prepared to experience a $5 million cut and felt that to be a reasonable proposition for them.

In part, I was reacting not only to the method of the announcement, but also to the kind of formula they were projecting we should experience here - the RTS formula, which has some perverse elements to it - in part, we were reacting to the dollar figure itself, which we felt was beyond what was experienced by the provinces.

With respect to the last item, if Mr. Wilson and the federal government take some budgetary measures that inflict significant reductions on provincial transfers, that will change that equation and would make me, personally, if that matters at all to anyone, more willing to accept the $9 million cut. I am still somewhat concerned, and I think I have every reason to be concerned, about the formula itself. We have tried our absolute best to encourage them not to inflict this formula on us.

Mr. Phelps: We know the difference between the Minister’s concept of what he thought was fair and what came down. It was the difference between a $5 million cut projection and a $9 million cut. As I understand it, in the second year you are talking about $5.6 million to $6 million cut, as opposed to the cut from the old formula, which would be $12 million to $13 million. Is that correct? I am trying to get a handle on what the difference is for the next year in your rough calculations. I understood it to be about $6 million or $7 million for the next year.

Hon. Mr. McDonald: Yes. Our proposal was approximately $28 million over the period of the agreement, and theirs, as I have indicated, is about $80 million over the period of agreement. Theirs is roughly $9 million, around $12 million and around $20 million for the balance of the agreement. Ours would be between $5 million and $5.6 million increases in the cut, based on the provincial local escalator.

Mr. Phelps: My understanding is that, going very far into the future, your projections for the $20 million in the third year, is based on continued economic growth. If there is a downturn in revenues because there is a downturn in the economy - which does happen from time to time in the western world, I am told by historians - my understanding is that you would actually end up with a net benefit of federal funds coming in. There would be quite a change in your calculations.

In other words, if your base assumptions vary and there is a decline in revenues, assuming the same tax structure, there is a fairly significant net increase in the federal transfer payment. Is that not a fair proposition?

Hon. Mr. McDonald: The only way we are going to have a net increase under the formula is if the economy collapses and our revenues collapse. This perverse element will then work in our favour. For every dollar we lose, we get $1.40. It is rather remarkable. The economy will collapse and, suddenly, the Yukon government will get $1.40 for every dollar it loses.

That is rather an interesting proposition from the federal government’s perspective. I do not think anybody really expects that to happen. Consequently, I think they are more willingly accepting this particular formula. Any realistic projection at this point suggests we are going to be losing $1.40 rather than gaining $1.40.

The projections we have are in the $20 million range. If the full impact of the formula was felt now, we would be facing a $20 million cut. It was announced that there would be a phase-in period, so there is $9 million, then $12 million, then $20 million, then $21 million, $22 million, somewhere around that area, for the final three years.

Based on our projections, which show moderate growth in the economy, we are looking at a $20 million reduction in the final three years of the agreement. In my view, that is realistic.

Mr. Phelps: Without trying to defend the arrangement the Minister feels has been imposed, but to get to the point that he just raised that it is unusual or not understandable, in the event of a recession the formula would trigger the reverse situation - more money, rather than less - it seems to me that that is very much in keeping with Keynesian economic theory: when the economy is weak is the best time for the government to be spending more money. If any government in the western world followed Keynesian principles, the time when things are booming is the time when government should have a surplus.

I submit that the concept that if there is a downturn in the economy government should trigger additional funds is not only understandable, but a good aspect of economic planning.

Hon. Mr. Penikett: Would the Leader of the Official Opposition permit a question?

Mr. Phelps: Would I permit a question? I would prefer a statement.

Hon. Mr. Penikett: I am fascinated by the discussion that has gone on, especially the intervention by the Leader of the Official Opposition. Is the Member seriously advancing the proposition that Michael Wilson is some kind of unreconstructed Keynesian, and that is why he has imposed this peculiar formula on us? It provides a powerful disincentive for economic development, in that it provides us with a massive payoff if all our efforts to develop the economy fail.

Mr. Phelps: I am not suggesting that I know anything about the economic theories of Wilson. I am submitting that the normal textbook analysis of how governments ought to operate are that you prime the pump and spend more money when you are in a recessionary period, and you cut back and have a surplus - which is something you do not witness very often, federally  - in times of economic boom. In simplistic terms, that is in accordance with the theories that Keynes advanced.

Hon. Mr. Penikett: I take it that the Leader of the Official Opposition, having expressed support for that principle, and having recognized that having had an improving economy at a time when we are now restraining operating expenditures below the rate of growth in the economy and below the rate of inflation, we have been pursuing Keynesian strategy, and therefore, he is endorsing the strategy of this government.

Mr. Phelps: The flaw in that argument is that we have seen a massive injection of government funding, particularly on the capital side. That is a cause for concern about overheating the economy. We can go around and around with that type of argument. I am simply suggesting that the idea of large increases in money from the federal government at a time of economic downturn is not, of itself, either bizarre or necessarily bad. That is the point I am making.

Will the government, at some point in time, be making some kind of forecast showing various scenarios on assumptions that would show us what the variance might be in the third, fourth and fifth year of the financial formula? I know it has some, and I expect it is a worst-case scenario, but perhaps I am being a little sensitive to the fact that the government is just coming out of negotiations. Are those kinds of figures showing different levels of growth in the economy available?

Hon. Mr. McDonald: We have made a projection about what is going to happen in the formula agreement. It will be fine tuned, and only that, in the final negotiating period. In terms of our understanding, it is part of the background that I will be more than happy to pass over to the Member.

I am hoping we can get back to these concepts on Monday afternoon, because I would not want them to walk away feeling that this formula is somehow part of the grand design and is performing a perfectly designed role within the economic and financial framework of the government in the country. I think quite the contrary is true, and when we have an opportunity on Monday, I will pursue that further. I have a feeling the formula will do some things, but I think what it will do is engineer an economic downturn, which I do not think was the intent of what the Member is suggesting is part of Keynesian economics.

I realize we are running out of time and Mr. Speaker is itching to return, so I will move that Madam Chair report progress on Bill No. 19.

Motion agreed to

Hon. Mr. McDonald: I also move that the Speaker resume the Chair.

Motion agreed to

Speaker resumes the Chair

Speaker: I will now call the House to order.

May the House have a report from the Chair of Committee of the Whole?

Ms. Kassi: Committee of the Whole has considered Bill No. 13, Second Appropriation Act, 1989-90, and has directed me to report same without amendment. Further, the Committee of the Whole has considered Bill No. 19, First Appropriation Act, 1990-91, and has directed me to report progress on same.

Speaker: You have heard the report from the Chair of Committee of the Whole. Are you agreed?

Some Hon. Members: Agreed.

Speaker: I declare the report carried.

Hon. Mr. McDonald: I move that the House do now adjourn.

Speaker: It has been moved by the hon. Government House Leader that the House do now adjourn.

Motion agreed to

Speaker: The House now stands adjourned until 1:30 p.m. Monday next.

The House adjourned at 5:28 p.m.