Whitehorse, Yukon

Thursday, February 22, 1996 - 1:30 p.m.

Speaker: I now call the House to order. We will proceed at this time with silent prayers.

Prayers

DAILY ROUTINE

Speaker: We will now proceed with the new Order Paper.

Are there any introduction of visitors?

Are there any returns or documents for tabling?

TABLING RETURNS AND DOCUMENTS

Hon. Mr. Ostashek: I have a letter for tabling that was delivered to me on behalf of the employees of the Yukon Housing Corporation, which refutes the allegations made by the Member for Riverdale South. I believe that the Member for Riverdale South owes these individuals an apology.

Speaker: Are there any reports of committees?

Are there any petitions?

PETITIONS

Petition No. 6

Mr. Harding: I am pleased to present today a petition signed by over 200 of my constituents from my riding. The people who signed the petition are asking the Yukon Legislative Assembly and, obviously, the Minister responsible for the Yukon Housing Corporation to take some action to oppose the rental increases that were brought down by Faro Real Estate.

The people who signed the petition feel that these rent increases went beyond the scope of the mortgage agreement between Faro and the Yukon government, and they are asking that action be taken to pay people back for the unauthorized increases.

Petition No. 5 - received

Clerk: Mr. Speaker and hon. Members of the Assembly, I have had the honour to review a petition, being Petition No. 5 of the second session of the Twenty-Eighth Legislative Assembly, as presented by the Hon. Member for Mount Lorne on February 21, 1996.

This petition meets the requirements as to form of the Standing Orders of the Yukon Legislative Assembly.

Speaker: I deem Petition No. 5 to be read and received.

Speaker:

Are there any bills to be introduced?

Are there any notices of motion?

NOTICES OF MOTION

Mr. Harding: I give notice of the following motion:

THAT this House is totally and unequivocally opposed to oil exploration and development in the calving grounds and habitat of the Porcupine caribou herd.

Mr. Sloan: I give notice of the following motion:

THAT it is the opinion of this House that the government should abandon its appeal of the Taga Ku verdict to the Supreme Court of Canada; and

THAT negotiations between the Yukon Party government and the affected parties be initiated for an alternative First Nations' development project to benefit all Yukoners.

Speaker: Are there any statements by Ministers?

MINISTERIAL STATEMENTS

Metafina Chemical Spill

Hon. Mr. Fisher: I rise today to inform the Legislature about the chemical spill discovered at the Metafina chemical plant located in Faro.

The federal environmental protection service has undertaken the initial response in cooperation with the Yukon government and the Town of Faro. Air sampling has occurred at the site, and it has been determined that dangerous chemicals are involved in the spill. Fortunately, the air sampling indicates that the risk to Faro residents can be controlled through isolating the plant site and ensuring that public access does not occur. This has been done.

During the time these initial response measures were undertaken, officials from all involved agencies have been meeting to ensure:

1) the sharing of up-to-date information on the situation;

2) the expertise available in each of these agencies is used, as appropriate, to minimize the risk to the public and the environment, and

3) a coordinated response occurs.

Even though the Yukon has not often been faced with many spills of industrial chemicals of this nature, I am pleased to report that full cooperation has been received from the municipal, federal and Yukon government agencies involved.

The next step is to determine through chemical analysis exactly what chemicals remain at the Metafina site and how much of each chemical there is. This analysis requires specialized equipment to safely gather and test the samples, and arrangements are underway to bring this expertise to Faro as soon as possible. Once the chemicals have been identified, the plan for removal and disposal will be put in place.

In conclusion, the initial emergency response has been completed, and the site has been secured through the co-operative efforts of all three levels of government. Work is underway to effect the clean-up and ensure the continued safety of the public and the environment.

Mr. Harding: I am pleased to respond to this ministerial statement. I thank the government for bringing it forward. I asked them to do this this morning because I wanted my constituents and the people in Faro and Ross River to know that the Yukon government is working on this concern of theirs - a concern I think, environmentally, for all Yukoners. I know that it was not the intention of anybody to blow things out of proportion, but I simply feel that reduction of anxiety and the provision of information is important in situations such as this.

I have had a number of calls and constituents expressing concern. Last Saturday, I toured this particular site and spoke with the workers who were actually starting the job of taking down the old site, and it was a surprise to me, as to many others, how much chemical substance was still around. Certainly, the chemical that was in one of the tanks with a rupture in it was a concern and a surprise as well.

I have spoken to councillors and other citizens in the community and it is clear that some solid action is being taken. I certainly thank the people who are working on this.

I want to ensure that Faroites and others get the whole story about the chemicals involved so that they can be reassured of their safety.

I also want to express my disappointment at the loss of a potential business enterprise in the community. We always want to encourage business in the community and expand our economic base. I think that this is something all Faroites feel strongly about.

It is unfortunate that the incident has caught people by surprise. I hope that we can recover fully by ensuring public safety and comfort with the action taken by informing people about all of the details of the chemicals contained in the building that appear to be under control, and continue to reach out to those who wish to create economic activity and jobs in Faro.

Mr. Cable: I note that the chemical site is within the townsite of Faro. It would be useful to hear from the Minister what type of information he proposes to disseminate to the people living in Faro in the event that there are people living there with health problems or allergies, so that people can know what chemicals they are dealing with once they are identified.

I am also told that a stop-work order was issued on Sunday last, lifted on Monday and again reissued. It would be useful for us to determine whether or not the emergency response procedures are effective and whether the Minister is going to be looking into the response procedures.

Speaker: This then brings us to Question Period.

QUESTION PERIOD

Question re: Forestry, Watson Lake

Mr. Harding: I have a question for the Government Leader.

The weekend before last I visited Watson Lake and spoke to a lot of people about forestry issues. What I found

at that time was very disturbing.

Yesterday, media reports confirmed the sad state of the industry in that area. The blame for this has to lie in part with the Yukon Party government. Their backroom opposition to the proposed allocation arrangement by the people of Watson Lake caused, in part, the delays in the permits being issued this past November and in the fall.

Why did the Government Leader tell loggers and First Nations he was behind them publicly and then scuttle arrangements behind their backs?

Hon. Mr. Ostashek: Quite clearly, we did not do that. The record speaks for itself. I wrote an open letter to the chief in response to those allegations some time ago. I am sure the Member opposite read that letter. No such thing occurred.

Mr. Harding: The Government Leader has his facts incorrect. An arrangement was agreed to in September and October of 1995. YTG officials were present when that arrangement was reached. They never objected. It was only after we had logging protests and people pulling equipment up in front of the federal building and occupying offices in Watson Lake that we found out that the Yukon Party government had objected to the terms of the arrangement after the deal was reached.

Nothing this Government Leader ever told anyone publicly stated that position. Why did they wait until people were actually taking this kind of action into their own hands before they told us exactly what their position was?

Hon. Mr. Ostashek: Quite clearly, the Member has his facts wrong. We never had people of authority who agreed to anything at any negotiations with the industry and First Nations. We only had observer status at those meetings.

We were not there to agree to anything.

Mr. Harding: I do not believe for a second that the officials at those meetings had only observer status. How could they have raised the supposed concerns the Minister now says they raised if they only had observer status? He said they raised these concerns at some point.

On November 15, when the protests were underway, the Government Leader was trying to score some political points. He wrote a letter to the federal Minister, saying "Due to the inability of DIAND to expeditiously manage the allocation of timber resources, the Town of Watson Lake and the economy of the southeast Yukon have been placed in jeopardy." Those words are now ringing very true.

The part the Minister left out was that a deal was reached and the Yukon Party government objected - behind the scenes, in a backroom way - to the arrangement that had already been reached. We had a deal. Why did this government choose not to accept it?

Hon. Mr. Ostashek: The Member is blatantly wrong. There was no deal reached that involved the Yukon territorial government. The people at that meeting did not object. The objection was after the fact, when we were approached regarding our feelings on this. DIAND officials were told the Yukon government would have difficulty with this type of arrangement.

Further to that, I understand DIAND officials in Ottawa also had difficulty with that arrangement.

Question re: Forestry, Watson Lake

Mr. Harding: The deal was made. DIAND agreed to it, loggers agreed to it and First Nations agreed to it. When they were at negotiations, the Yukon government also agreed to it. Now, the Government Leader, after saying one thing publicly, is doing another thing behind closed doors and in secret. He is opposing the arrangements that led to this situation with the logging industry right now.

If the government was opposed from the beginning, why did they not let the people of Watson Lake know that as soon as possible?

Hon. Mr. Ostashek: We were not part of the negotiations. The Member opposite has his facts totally wrong. We were not part of any negotiations.

Mr. Harding: That is a preposterous answer from the Government Leader. He just told us that they opposed the deal. They sent a letter to the federal government; obviously he must have felt that he was part of the negotiations and part of the process. The federal government said that the reason for the delay in issuing the permits was because of the opposition and the contribution to the negotiations from the Yukon Party government. They wrote a letter to the federal government.

The logging industry representatives and the chief of the First Nations in Watson Lake wrote a scathing letter on November 19 to the Government Leader, explaining their concern with the backroom opposition to the arrangement that they had reached. Why, if they were opposed to the deal, did they say one thing publicly to the protesters, complaining about Ron Irwin and the feds, and then do something else behind closed doors?

Hon. Mr. Ostashek: The Member for Faro must have difficulty hearing. I have said that this government was not part of any negotiations and that we refused to participate in the negotiations. The ultimate responsibility for forestry is the federal government's.

This government had observers at the meeting, but we did not have people attend the meeting who were in a position to make a decision on behalf of the Yukon government. Those people attended the meeting strictly as observers. They were not asked for their opinion and they did not offer their opinion about the negotiations that were taking place among the loggers, First Nations people and the Yukon government.

The Member opposite waves around the letter that was written by those individuals and I am sure that he has a copy of the letter with my reply to their letter. My letter sets out quite clearly what we did. We did not take two different positions.

Mr. Harding: The Government Leader is not going to wiggle off of the hook on this one.

Ultimately, the federal government does have responsibility for forestry, but the Yukon government was an active participant in this arrangement of allocations. The Yukon government must have been because the federal government told us that the opposition of the Yukon Party government to the deal killed it and has led, in part, to the shutdown of the forestry industry right now in Watson Lake.

Why did the Government Leader oppose the consensus arrangement and why did they not tell the people of Watson Lake about it?

Hon. Mr. Ostashek: The Member opposite can make all kinds of allegations by saying that someone told him that we killed the deal.

I have stated quite clearly, in public, what happened. When were asked for an opinion on it, it never came to our level, but officials said that the government would have some difficulty with it, because it was not a level playing field for the industry.

I believe that all Yukoners are entitled to make a living in this territory, and all that this government was looking for was a level playing field for the industry. We did not change our position and I want to make that very clear.

Mr. Harding: The case is clear that this government said one thing publicly and politically, and another thing behind closed doors.

If the federal government could live with the deal, if loggers and the logging industry could live with the deal, if the First Nations could live with the deal, why did big brother Yukon Party government have to stop the arrangement that would have gotten the allocation permits out sooner - and we might not have the situation in Watson Lake that we do now?

Hon. Mr. Ostashek: The Member is clearly wrong. DIAND officials did have some difficulty with the deal and said so. It was not only the Yukon government that had difficulty with it.

Question re: Territorial Administration Building, air quality

Mr. Cable: I have some questions for the Minister of Government Services regarding the air quality in this building.

Last week, the Minister released a report from a Dr. Van Netton, an air quality specialist at the University of British Columbia. In his report, Dr. Van Netton stated that modifications to the ventilation system must be finished before the proposed environmental survey can be carried out.

What are the time lines, as the Minister understands them, for completing the modifications and the completion of the environmental survey?

Hon. Mr. Nordling: The time lines are as soon as possible. As I believe the Member pointed out, some of the problems with the ventilation were identified in the Van Hiep report. We did not want to start any major renovations/modifications on the ventilation system until we had received the report from Dr. Van Netton. Now that we have it, and there has not been found anything more serious than what the Van Hiep report recommended, the department has started immediately to draw up tender specs to improve the ventilation system in this building. As soon as they can get that done and the contract let, the work will begin.

Mr. Cable: At the end of the body of the report from Dr. Van Netton, he states, "The current conditions in the building are not necessarily reflected by the current health of its employees, as it takes time for a number of diseases to express themselves."

Is there any long-term follow-up on the health of the employees in this building anticipated by the Minister's department?

Hon. Mr. Nordling: Yes, I believe there is. That will be discussed with the department and the health and safety committee. I believe there has already been a commitment to do an evaluation after the improvements to the ventilation system are complete.

Mr. Cable: Back in the late 1980s, a sub-slab ventilation system was installed just back of the Hansard office, a few yards from us, to get rid of what was thought at the time to be benzine located under the slab. When the air problems surfaced again a couple of years ago, it was found that the motor in the sub-slab ventilation system had burned out.

Can we get a commitment from the Minister that the sub-slab ventilation system will be inspected on a regular basis and that if another motor has burned out, it will be repaired in a timely fashion?

Hon. Mr. Nordling: Yes, I will make that commitment, and I hope officials in my department are listening to this at the moment and will check on it and be aware of my commitment.

Question re: Forestry, Watson Lake

Mr. McDonald: I just want to follow up on questions asked by my colleague from Faro about the forestry policy matter in Watson Lake last fall.

The Government Leader indicated that he had officials at meetings that were to set the timber allocation for the area, and subsequently sent an expression of concern to the federal government about the consensus that had been reached by the people who were supposedly the decision makers at that meeting.

Can the Minister tell us why he did not express those concerns directly to the people of Watson Lake, the people who are setting the allocations - why he only expressed those concerns to the federal government quietly?

Hon. Mr. Ostashek: I am just trying to refresh my memory with the issue. It happened quite a while ago. I believe we were asked by DIAND about what our position would be, and that is when we delivered the reply.

Mr. McDonald: We have copies of the correspondence and certainly they were copied to the newspapers. The Minister at the time was slamming the federal government for its poor handling of the forestry policy in the same week, and indicating that the federal government was almost exclusively responsible for the catastrophe that was taking place in that industry in Watson Lake at the time.

Unbeknownst to the people in Watson Lake who were trying to salvage something from their operating season and trying to build a consensus, they did not realize that the new Yukon government shared concerns, or at least expressed its own concerns, about the deal that had been reached in Watson Lake.

Why would the Government Leader, if the government had concerns with this deal, not ensure that the people in Watson Lake were made aware immediately of those concerns so that the people in Watson Lake would know the Yukon government's exact position on the matter?

Hon. Mr. Ostashek: I recall what happened at those meetings. The people who were meeting here, in our opinion, were not representative of the industry in Watson Lake. They were a select few people who were in the process of trying to get the federal government to move ahead with the permitting process, which we wholeheartedly agree with. We did not participate in it.

When we were asked for our position, we said that we would have difficulty with it, as did DIAND officials in Ottawa - we were not the only ones.

I wish that I had half the power that the Members opposite think I have when it comes to dealing with the federal government.

Mr. McDonald: Did the Government Leader or the representatives at this particular meeting in Watson Lake indicate to the participants that it was the position of the Yukon government that they were not representatives of the industry in Watson Lake?

Hon. Mr. Ostashek: Someone has their facts wrong; it is either I or the Member opposite. I thought the meetings took place in Whitehorse, not in Watson Lake.

We had observers at the meetings - nothing else.

Question re: Forestry, Watson Lake

Mr. McDonald: The meetings that were taking place to set the timber allocation involved, by the Minister's own recollection, people from the industry, but people who did not represent the industry. They also involved observers from the Yukon government - by his own estimation. Did the Government of Yukon, at any time during this process, indicate to the people who were participating at that meeting - community people, such as the Liard First Nations and industry workers - that it was the Government of Yukon's position that they did not represent the industry interests in Watson Lake?

Hon. Mr. Ostashek: We were not participating in those meetings. I do not know how many times we have to say that on the record.

The allocation of the permits was strictly in the federal domain. We were there as observers. My understanding was that there never was a finished deal; DIAND never did agree to it. They asked for our opinion. We gave them our opinion.

I will point out again that perhaps the Members opposite do not think that all Yukoners should be treated equally, but I certainly do, and that is why we objected to it.

Mr. McDonald: First things first. I am trying to determine whether or not the government was being straight and honest with the people with whom they were dealing at the time. There seems to be a substantial body of evidence that they were not.

He was giving free public advice to the Minister of DIAND - the Liberal Minister - suggesting to him that he was completely screwing up when it came to forestry policy. My question for the Minister is this: was he telling anyone involved in this consensus process that they did not represent the industry or that the Yukon government did not like the consensus position?

Hon. Mr. Ostashek: I know what the Member opposite is looking for. I stated quite clearly what we did. How many more times does he want me to state it on the record?

I can stand here for the whole Question Period, if you like. He is not going to get a different answer from the one he already has. We dealt with this matter from an observer viewpoint. We did not want to get dragged into the negotiations. When we were asked for our opinion, we gave it, based on the fact that we as a government believe that the industry deserves to have a level playing field and that everybody who wishes to participate in the industry ought to have an opportunity to participate in it. We will continue to stand for the rights of Yukoners to be able to work in the forestry industry.

Mr. McDonald: The point that I am trying to get to, and the question that I am trying to ask, is legitimate. My question is whether or not the Government of Yukon was telling the federal government, through departmental channels, that they not only objected to the consensus position by these industry community people, but also felt that these industry community people did not represent the community of Watson Lake. Did anyone else in the government also publicly communicate that position? All that we were hearing at the time from this government was that it felt that the federal government was screwing up. That is all we heard.

We did not hear that it was having concerns with industry community people. We did not hear that they were having any concerns about the consensus until long after the fact. Were they coming clean with the community people at the same time as they were lambasting the federal Liberal government?

Hon. Mr. Ostashek: We have always come clean with community people. I want to point out again that they were not community people in those negotiations. They were not community people. We were not part of those negotiations. We have been clear from day one. The federal government screwed up, beginning almost a year ago, when they put a moratorium on forestry operations in the Yukon. That is when they first screwed up. The moratorium was not required. As much as the Opposition is going to try to make us wear this, we are not going to wear this one. This is clearly a DIAND responsibility. All that we were interested in was a level playing for the industry so that the industry could get back to work. That is all that we were interested in.

Question re: Forestry, Watson Lake

Mr. Harding: I have been listening to the answers from the Government Leader and I am more astonished than I was after yesterday's answers in Question Period.

The Government Leader just told us that the representatives of the Southeast Forest Management Coalition are not community people. He just told us that Chief Anne Bayne of the Liard First Nation is not a Watson Lake community person. At the same time, he was publicly out there lambasting the federal Liberals, which I also love to do when it is appropriate. He was standing behind closed doors with his officials telling people that they were opposed to this arrangement.

I want to know from this Government Leader why, if they were so opposed to this arrangement, they did not tell the people who were representing the industry that this government did not feel it was appropriately doing that, and two, why it did not make public objections to the arrangement.

Hon. Mr. Ostashek: I believe I told the industry on several occasions that we wanted to see a fair deal for everyone.

On one hand, they ask a question about representatives in the industry and next they change it to the representatives of the community. They do not know what they are asking. Can I quietly explain it to him? Maybe it should be at a grade 3 level and then he might understand it.

Here is an Opposition that hollered weekly in the papers for a session because they had all these questions they wanted to ask. It has been a pretty sorry affair in the first week we have been in the Legislature.

We stood up for the rights of Yukoners. We will continue to stand up for the rights of Yukoners.

Mr. Harding: That will be a first and it will be a monumental day when the Yukon Party government stands up for the rights of Yukoners and stops running around behind closed doors scuttling deals that would be for the advancement of the industry. I will not respond to the personal attack by the Government Leader because this is, after all, a kinder, gentler House.

The Government Leader is obviously not going to respond to the questions we have asked him. He is not going to tell us why they were saying one thing publicly and doing another thing behind closed doors, which has led to this problem in the forestry industry in Watson Lake.

After all was said and done, a new arrangement was reached with the Liard First Nation and the logging industry, the same people who do not represent the community or the logging industry, according to the Government Leader.

I would like to ask this government, so that we can get it clear for the record, what this government's position is with regard to this new arrangement between the Liard First Nation and the industry in Watson Lake.

Hon. Mr. Ostashek: We do not have difficulty with the new arrangement, because it was quite different from what the previous arrangement was. This is not a straight out allocation, this is for training purposes, and it is set out in blocks that have to be reviewed on an ongoing basis. I think it is a good arrangement, and we do not have any difficult with it at all.

I want to point out again that if the Members opposite think that it was our concerns that stopped the allocation of permits in the Watson Lake area, I think they are sadly mistaken. I do not think that DIAND puts that much emphasis on this government's concerns, but I will point out that I know that the federal DIAND officials in Ottawa also had great difficulty with that arrangement and were looking for a way around it.

Mr. Harding: On the issue of DIAND and the negotiations between YTG and federal officials about devolution, and as a result of this incident and what has subsequently happened in Watson Lake since that time, and as a result of the fact that no support for First Nations has been made by this government in the devolution discussions, could the Government Leader tell me if he realizes that there are a lot of people in the Yukon who do not feel that the Yukon Party government has the ability or the wherewithal to handle a touchy situation like the devolution of forestry resources?

Hon. Mr. Ostashek: I have heard the Members opposite come out with comments about devolution in the same manner that they comment on our budgets. One day they are on one side of the issue and the next day they are on the other side of the issue. One day they are saying that we should not be going ahead with devolution and the next day they are beating us up because devolution is not progressing fast enough.

I do not know what the Opposition wants.

Question re: Forestry, Watson Lake

Mr. Harding: Let us talk about this government's ability with regard to setting forest policy.

Looking through the annals of history in this Legislature, since the Yukon Party government took over, I have here in my hand a legislative return from 1993. In this return the government commits to having a complete forestry policy in effect by December of 1994.

After we had considerable discussions about this particular issue in the last legislative session, this document was tabled in April of 1995, entitled A Framework for Yukon Government Involvement in Forestry and is dated March 1995.

At that time, it was announced with all of this triumphant foofaraw about how, right now, in the Departments of Economic Development and Renewable Resources, the government was putting together a complete forestry policy.

Then we had a two-day weekend wonder in Watson Lake in November of 1995, where we were still talking about the first principles of forestry policy. The discussion had not been advanced one iota about where we wanted to go with this policy.

Now we have this compilation of comments from -

Speaker: Order. Would the Member please ask the question?

Mr. Harding: Yes, I will. We have the compilation of comments from that meeting in November. Where are we going with forestry policy? When we will see a forestry policy? Who is going to be involved, because so far the public has not been involved?

Hon. Mr. Ostashek: It amuses me to see the Member for Faro get indignant.

The Member for Faro was not around, but I believe some of the Opposition Members were. They started the forestry transfer back in 1987. Why did they not develop a forestry policy? They worked on it for five and a half years. They did diddly-squat on it.

All they did was cut down thousands of trees to feed their experiment in the private sector, because they could do it better than the private sector with their Watson Lake sawmill. They cut down thousands of trees; they did not worry about reforestation or anything else. That is their record on forestry management in the Yukon.

Mr. Harding: The Government Leader reminds me a lot of Brian Mulroney in his last throes, when he was still blaming Pierre Trudeau for all the evils of the country. It is not going to happen here in the territory.

Forestry has become a major issue in the territory as the conclusion to devolution hype over the last three years. The Government Leader can talk all he wants about before then, but it was not the issue then that it is today.

Now the expectations are that the Yukon government will have a forestry policy in place. I have run through this government's poor attempts -

Speaker: Order. Will the Member please ask his question.

Mr. Harding: What is the situation with the forestry policy? When will we have one in place?

Hon. Mr. Ostashek: That is the nice part about being in Opposition after being in government. Nothing mattered when they were in government. Things are different now; that is what they keep saying.

What is different is that we are not engaging in a Watson Lake sawmill to the tune of $14 million or $16 million of taxpayers' money. What is different is that we are not cutting down the forests without a silviculture program. That is what is different.

For a government that sat for five and a half years, dealing with forestry devolution to the Yukon, it did absolutely nothing toward developing a forestry policy.

Mr. Harding: Yes, the NDP government was doing other important things, such as the Environment Act and the Yukon Conservation Strategy. We talked about the Education Act, the Health Act, devolution, negotiating the health transfer, negotiating the Shakwak project and on and on. I do not want to engage in a silly sparring to-and-fro conversation with the Government Leader. He is obviously void of any response to the question about what they are doing in the here and now to develop a complete, comprehensive, made-in-Yukon forestry policy.

When are we going to get that broad consultation in the development of that policy?

Hon. Mr. Ostashek: The Member for Faro has become so excited attacking me today that he put his question to the wrong Minister. The Member should be directing that to the Minister responsible.

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

ORDERS OF THE DAY

GOVERNMENT MOTIONS

Bill No. 8: Second Reading

Clerk: Second reading, Bill No. 8, standing in the name of the Hon. Mr. Ostashek.

Hon. Mr. Ostashek: I move that Bill No. 8, entitled Fourth Appropriation Act, 1994-95, be now read a second time.

Speaker: It has been moved by the Hon. Government Leader that Bill No. 8, entitled Fourth Appropriation Act, 1994-95, be now read a second time.

Hon. Mr. Ostashek: I will be brief on this, the second reading of the Fourth Appropriation Act, 1994-95. This is the final appropriation bill for the 1994-95 fiscal year. It is necessary because one operation and maintenance vote and two capital votes were overspent in that year. The total of these three overexpenditures is $103,000.

At the same time, the remaining 27 votes were underspent by more than $28 million. As Members know, however, the Financial Administration Act controls spending by vote, and we must therefore seek retroactive approval for these small overexpenditures, despite the fact that the net underexpenditures were over $28 million.

Of this $28 million, over $19 million was for capital and was accompanied by a $14 million decrease in recoveries. About $11 million of this capital lapse is simply being revoted in the 1995-96 budget, and these funds appear in the supplementary for 1995-96, which we shall be discussing very shortly in these Chambers.

Of more significance is the operation and maintenance lapse of almost $9 million, since this largely represents a real saving to the government.

On an overall basis, our accumulated surplus at the end of the fiscal year was $31 million. This is very close to the estimate that I believe I gave to the Leader of the Official Opposition during the last sitting of the Legislature; I believe the figure I mentioned at that time was somewhere in the neighbourhood of $28 million. These monies will stand us in good stead, as can be seen by the 1996-97 main estimates. We must now bear the brunt of the federal cutbacks and, were it not for the cushion provided by the accumulated surplus, we would be facing a very difficult time.

The overexpenditures that are reflected in the bill relate to a computer workstation in the Legislative Assembly vote and to land claims and aboriginal language service expenditures in the Executive Council Office.

Mr. McDonald: I do not have a lot to say to this particular bill before us. I will have more to say about some of the comments the Ministers made today and last night later on, when we get into the supplementary general debate. I have quite a bit to say about that, but in the context of what is being proposed here, it is of a relatively minor nature, and the Minister is correct, in that I thought that when we ended the legislative sitting last year we were a couple of months into the new fiscal year and the Minister was able to give us a better picture at that time about what the accumulated surplus would be for that year. The fact that it is only a couple of million dollars out is of minor consequence and not worthy of much discussion here.

We will have a few questions of course when we get into line by line but they will not be significant.

Motion for second reading of Bill No. 8 agreed to

Bill No. 9: Second Reading

Clerk: Second reading, Bill No. 9, standing in the name of the Hon. Mr. Ostashek.

Hon. Mr. Ostashek: I move Bill No. 9, entitled the Third Appropriation Act, 1995-96, be now read for the second time.

Speaker: It has been moved by the Hon. Government Leader that Bill No. 9, entitled Third Appropriation Act, 1995-96, be now read a second time.

Hon. Mr. Ostashek: This bill seeks an additional $15,834,000 in appropriation authority for the 1995-96 fiscal year. We are asking the House to approve almost $2.6 million more in operation and maintenance spending and over $13.2 million in additional capital funds.

These monies are required for a variety of reasons. In operation and maintenance, the Executive Council Office is the largest recipient of supplementary funds at almost $1.5 million. These monies are required for land claims and self-government initiatives under the settlement agreement and are entirely recoverable from Canada.

The Department of Community and Transportation Services needs an additional $699,000 for operations and maintenance. While there are a host of increases and decreases within the department, the required funds are largely a result of additional maintenance costs associated with the Anvil ore haul.

The Department of Education is asking for $725,000 in its operations and maintenance appropriation. These monies are principally the result of increased school expenses in Faro as necessitated by the Anvil Range mine opening.

Several other departments require smaller sums of O&M money, while others will be giving up funds previously voted for them.

The capital requirement is much larger, but approximately $11 million of the total request is simply the revote for project monies that lapsed at the end of the previous fiscal year.

In addition to the revotes, there are several millions of dollars of new capital monies required by various departments for a variety of projects. Many of these expenditures are accompanied by increased recoveries.

As an offset to these additional expenditures, there are some capital reductions identified by departments, notably Economic Development, and the Yukon Housing Corporation.

On the other side of the ledger, our total revenue inflow is expected to increase by some $10 million. This is almost entirely due to the increased recoveries associated with the new expenditures, of which I have just spoken.

The sum of revenues, the established program financing and the transfer payment from Canada have, as a whole, remained static, although there are some relatively minor fluctuations in the components making up the total.

Our revenues are expected to decrease by a little over $3.5 million. This results from a number of changes in the various revenue sources, but can, in a nutshell, best be described as a result of the $5.5 million decrease in income tax revenue and a $2 million increase in our investment income.

The income tax yield is based on Revenue Canada estimates, and is down from previous estimates because of adjustments to prior years taxes, which were overstated. The decrease is also undoubtedly partly due to the Faro shutdown working its way into the figures and the weak national tax yields, which are a factor in Revenue Canada's estimating procedures.

Income investment is projected to be much higher than originally expected due to interest rates maintaining high levels until recently. Higher cash balances available for investment purposes as a result of a better-than-anticipated surplus in 1994-95 also play a part in the higher interest income we expect to receive.

Established programs financing monies have decreased. This figure is provided by the federal government. The decrease reflects prior years' adjustments and changes in income tax yields, which bear on the calculation.

The formula grant has been increased by some $4.5 million because the 1994-95 grant entitlement has increased. This occurs because, as Members will know, our grant in this year is frozen at the level of the grant entitlement of the previous year. The end result is that all the changes reflected in the supplementary is to increase our anticipated surplus for the year by $1.3 million from a previously projected balance between revenues and expenditures.

Members will recall that that projection included reserve for supplementaries of $7 million, which has, of course, by now largely been used up.

The small operating surplus for the current year will be added to our accumulated surplus and contribute to the monies we will be drawing down from that surplus in the 1996-97 fiscal year to ease the transition to lower federal formula financing grants.

I should mention that the expenditures encompassed by the special warrant, approved by the Commissioner in November 1995, are included in this supplementary, as has been the practice in every year but one since 1986-87. I look forward to the support of all Members in the passage of this appropriation.

Mr. McDonald: I have a few more words to say about this bill than the last, and some of my comments will result from a careful reading of comments made by the Government Leader last night in his response to the main estimates speech. I will only be speaking about those comments in the context of general budgeting practices. I will raise a few points with respect to some of the issues he raised at the time.

First of all, this supplementary does represent a little higher spending than we had expected in the coming year. We had been given to believe from the government's budget documents and their press releases of last year that they would be spending $489 million - perhaps another $8 million or so - in supplementaries, but would not be breaking the $500 million mark. At one point, the Minister objected to my claim that this would be a $500 million spending year.

If plans bear out, it will be a $500 million-plus spending year, so I do not feel that it is necessary to feel incredibly vindicated by the point, but only as to our credibility on this side of the House.

The change in spending proposals is not significantly different in total from that which was seen to be planned, although we do have a lot of questions about particulars, and I am certain the Ministers will be ready to answer them. I do not want to start off with the details for fear I will be accused of being picayune, but I really do not care.

There are some things that are of importance to Yukoners - and consequently of importance to us - that we will be raising with the Minister in Committee debate. The industrial support policy support to mining companies or to Loki Gold Corporation and the terms of development agreements will be something that we want to discuss, and we hope that the Minister will be ready to answer those questions.

Obviously, something incredible has happened to the centennial anniversaries program. It seems to have had the bottom drop out of it, and we would like to learn more details about that program.

We also want to know a lot more about how the Department of Education plans its capital facilities, because we were lectured at great length last year about how the planning process was well in hand and under control, even to the point that we felt somewhat beleaguered by the Minister of Education's attempts to tell us that any further questions were simply a waste of anyone's time and that he had all of the details figured out.

Based on our experience, I think that we have every right to explore the issue of capital planning in the Department of Education extremely thoroughly at this time, and we intend to do so. This will take up some of our time in Committee debate.

I am giving the government fair notice of that intention.

Of course, when we come to the debate on the main estimates in Committee of the Whole, we will want to talk about the formula financing negotiations, the perversity factor, Mr. Martin's intentions with respect to providing funding through transfer payments to the Yukon government, and we are also interested in the Government Leader's own positions taken at premiers conferences with respect to national programs and national standards for certain programs. We have heard some stories in this regard that we want clarified.

We have questions about land inventory, banking, lot sales, the government's position with respect to taxation, and in particular the harmonization of tax systems. We have heard stories that we would also like to have clarified. I am hoping that there will not be disagreement, but I suspect that there may be - between the Opposition and the Yukon Party government.

In his response to the main estimate budget, the Minister indicated that the NDP had not talked about lapses when they had in the past. He also indicated that the NDP consistently made the argument that there would be lapses and that the government should anticipate those lapses. He stated that the government should not be taking precipitious action in terms of ensuring that there be no further taxes and picking people's pockets until they understood or could detect lapses more accurately.

We have had a lot of evidence in the last three years and, in fact, in the last 13 years, to suggest that there have historically been lapses and that these lapses are of a certain size and predictability.

I have not talked of lapses until now, because the government has not; however, I certainly do intend to talk about them, because, once again, I hear that the government does not expect much by way of lapses, although their record on this has really not been any different from that of the previous government. In fact, it is virtually identical.

I am interested in that subject, but I am more interested in what the government is intending to do with their projections into the next year with respect to taking us close to what the NDP refers to as "the brink" when it comes to the magic zero surplus mark.

We do have a lot to say about this. We can reserve it for the mains Committee debate, but I will also save some of it for the taxpayer protection legislation discussion.

Clearly, we have to get some sense of what the government truly believes will be the case with respect to lapses in the coming year, and whether or not they believe that there will be, for example, in this coming year a lapse of $15 million or $20 million, or perhaps $20 million next year - whatever it happens to be. If they do not believe that these lapses will occur, I would like to hear the official position so that I know what the government's thinking is and how close to the so-called brink they are prepared to consciously take us.

If they do believe that there are lapses, they can soften any concern about taking people to the brink and ultimately, in concert with all previous budgeting history, acknowledge that such lapses will occur and be part of the accumulated surplus. I await the government's position on that.

The Government Leader has embraced this notion that somehow the NDP has taken a different position with respect to annual deficits, as opposed to accumulated deficits, and that we do not believe that savings accounts should be spent down for any purpose. He has apparently received this impression through comments made by the Opposition benches. He may have received it from the Member for Riverdale South, but he did not receive it from us.

Our concern about annual deficit spending is the degree to which the surplus will be drawn down to the threshold level of zero surplus coupled with the provisions in the taxpayer protection legislation which force an election. Should government, by even mere happenstance - actions by the federal Minister, for example - draw us below the threshold, this consequently causes an election to take place.

The Minister was quite right in one respect. It would not be wise to be sitting on a $30 million surplus, the next year to rise to $50 million, then to $70 million, then $90 million, $110 million, $130 million, $150 million surpluses, on the assumption that one should never spend a surplus simply because one wants to retain the notion that there should never be an annual deficit. Quite rightly, when people see such surpluses take place they may think a number of things: why are the tax rates so high; why are people being turned down when they come to the government for funding; why do people who want an extra teacher in the classroom get turned down on the grounds that there is no funding, if there are huge savings accounts. Quite rightly, if the government has something it wants to accomplish - we may disagree on the particulars, but if it has something it wants to accomplish, it should use the savings account to accomplish just that task.

To say that there is something inherently wrong with an annual deficit just because the word "deficit" enters the sentence is nonsensical, but when one couples that with the taxpayer protection legislation one realizes that of course we do enter the realm of the dangerous - when the surplus is drawn down to the zero surplus level. Consequently, the NDP has expressed concerns about precisely that circumstance.

The Government Leader made some nonsensical comment about the NDP's position that the Yukon NDP's economic policy is that every Yukoner should have a government job. That is patently ridiculous when one sees the growth in the private sector that occurred when the Yukon New Democrats were in government and the instance, for example, of real mines operating during that period - up to five mines in the area were operating during that period.

Many of those mines were assisted and aided by the NDP government to get started, through one mechanism or another, including road building and training support. Consequently, that suggestion was probably mere rhetoric - empty rhetoric at that.

When we were in government, we did face the criticism from at least the Member for Hootalinqua at the time, who felt the dependency ratio of the Yukon government to the federal government ought to be something that was deserving of significant debate. So, every budget we were treated to this ideological concern that, because we were so dependent upon the federal government for a certain percentage of our income, and because the economy was so dependent upon government expenditures, the NDP government presumably had something to answer for.

While everyone agreed that the private sector should be made healthier and that there should be more private sector prosperity, it is interesting to note that we did not hear much about that particular factor of dependency ratio from the government once it came into office, particularly as we became - by statistical account, at least - much more dependent upon the federal government, thanks to the private sector collapse in the mining industry.

I caution the Minister to read not just the bits and pieces of Hansard that he receives from the new computer program, but to read all of it, because there is a lot there. Some of us, even with imperfect memories, remember a great deal.

The Minister takes great pride in the fact that they were anticipating federal cuts and, consequently, required tax increases and pay cuts in order to ensure that there is a savings account. That argument would be credible if the spending pattern of government remained static. Instead, what has happened is the spending pattern, even accounting for devolution, has risen a lot. Whether one spends it on capital or operations, it still increased and created a certain measure of dependency on government spending into the future.

There are people in my riding right now who have bought homes, settled down, started raising kids, and are working for public construction, or Golden Hill Ventures, or some company working on the Alaska Highway. Anyone who does not think there will be some wrenching experience when those capital expenditures cease has another think coming. Of course something will happen to those families who depend on those jobs.

I am not saying we should subsidize those jobs forever, but the government is under the impression that only operation and maintenance expenditures create a certain sense of dependency, but that capital expenditures do not, and that is not true.

The Minister made the claim that the New Democrats did not know how to balance budgets. I find that absolutely incredible, given the fact that the Auditor General posted surpluses in every single year that we were in government.

It was a not small surplus; it was not a $7 million surplus. These were surpluses between $25 million and $70 million every year. Even when gross spending in this government was less than it is now by $100 million, these surpluses still existed.

I would say that that is a fairly respectable record. Even though there were annual deficit years, such as this year coming, there was still a healthy bank account maintained. We did not, of course, face the taxpayer protection legislation, which suggested that if something should happen, if we go below the threshold, we would face an election. We did not need to, because we simply believed that that was what was right. We made a virtue of it in the budget speeches that we tabled.

I have a lot to say about taxes, but I am going to reserve that discussion for the taxpayer protection legislation. I do not think the Minister wants to hear me dredge up recent history on taxes too many times in this Legislature. He has probably got more on his mind than to have to listen through that lecture.

There is, however, something that I would like to talk about right now that may come up over and over again, but I feel that it is important that we raise this issue, because it is an important matter, generally speaking, and that is the issue of Taga Ku.

The Minister, last night, once again, in his fantasy world, indicated that he believed that not only was the Taga Ku project a bad deal, which is something we knew he believed all along, but we also understood from what he has said that the Taga Ku deal itself was conducted in the final stages in secret.

This begs the question as to why we are even at the Supreme Court. If the Taga Ku deal was a deal, albeit in secret, which is a preposterous allegation, given the judgment of the court, if the deal was made why are we at the Supreme Court?

A deal made, consequently, would be a deal broken. The government alleges that the deal was made in secret, but it still acknowledges that a deal was made.

Why are we wasting time in the Supreme Court, if it is not that we are simply trying to delay the outcome?

I say that the suggestion that the deal was made in secret is preposterous, largely because all communications with the proponents were done through public servants in every case, not directly through the proponents.

The Minister is shaking his head; he obviously thinks that he knows better. There was no communication ever made between this Minister of the government and the proponents that was not made through public servants.

The Minister suggested that I read the reasons for the judgment of the Supreme Court of the Yukon Territory. Of course, this is something that I had done and have done again.

I will just read a few little quotes to give you a sense of what the judge who heard the case and people's testimony under oath said during that period. He said: "No one in government who was familiar with the project expected that the hotel could be built in conjunction with the office space." He said: "To assume that the project could be done without agreeing to waive the hotel condition is unrealistic and flies in the face of all that was known about the state of the affairs as of that date." He said: "Everyone in government who was involved with this project knew that the developer could not get the financing with the hotel as part of the project."

Here is a judge who, having heard all of the evidence and testimony of everyone involved, came to the conclusion that the corporate government did know that the deal was struck, that it communicated that to the Taga Ku, and that the Taga Ku operated under that assumption. In every case, all decisions made by the government were communicated not through the Minister, they were communicated through public servants - in every case, with no exceptions. So,

I can understand that the Government Leader and his colleagues are wallowing in the humiliation of the Taga Ku defeat, but they do not have to use that to create a fantasy-world explanation for what has happened.

Something has been made by the various Ministers about the fact that the NDP, when leaving government, did not warn the Yukon Party that rejecting the deal would constitute a breach of contract. Besides being a bone-headed political move, it would be wrong legally.

Our Leader of the Official Opposition at the time indicated to us that he had offered briefings to the Government Leader on any subject at any time. As far as I am aware from canvassing my colleagues, none of us were ever taken up on the offer to provide a briefing at any time, on any subject whatsoever. Obviously, there was an assumption by the Ministers of the Yukon Party that they were the victors and they knew it all.

There was an assumption, because of the statements made by the Government Leader, that everything was fine in every case, because the Government Leader indicated that he would be honouring all commitments and contracts. What cause for concern might have there been for anyone who was not on the inside of the Yukon Party or the Yukon Party offices?

Well, it patently obvious that not only did the Yukon government not ask for advice, it made the decision on its own, and they turned down any offers of help, generally speaking, when it was offered by the previous Leader of the Official Opposition.

The Leader of the Official Opposition at that time made the offer clear in this Legislature, and it has never, to my knowledge, been denied by the Government Leader.

If he denies it now, it will obviously be a matter of convenience for him to do so, because he thinks that this is a situation of someone already caught with -

Some Hon. Member: (Inaudible)

Mr. McDonald: I cannot say "with their pants down" because that was already ruled to be unparliamentary, so I will use the words "caught in an awkward position".

As if this mattered to the court case that was underway at the time - and subsequently appealed - the government indicated that, for some political reasons, I wanted to keep the subject of Taga Ku as quiet as possible. Apparently, if I had announced that there was a deal, it would somehow have cost the NDP politically in that election. I still have extreme difficulty understanding the political rationale of that statement. I do not understand it at all.

The situation was played out over a couple of years. If there was anyone who did not know that the New Democratic Party was associated with the Taga Ku project by the fall of 1992, they had not been living in this territory. If anyone did not know about the trials and tribulations of the Taga Ku proponents and the pile of dirt down the street with the plastic tarp over it, flipping in the wind, and did not somehow associate that with a project gone amuck or not meeting public expectations, and did not associate that with the NDP, they did not live in this territory. There would have only been one way for this government to extricate itself on the subject of this issue, and that would have been to announce a deal.

The problem was that every time the Taga Ku proponents came forward with the possibility of a deal, the deal did not take place. The instructions were clear: when one has a deal, then one announces. A deal where the government could have said yes, there will be a convention centre, hundreds of jobs, training opportunities, and the Yukon Development Corporation loan will be secured. What political imperative kept the government from wanting to announce a deal, if it thought the deal was secure? Why would any government refuse, at an election time, to announce an arrangement that signified economic prosperity in downtown Whitehorse, a good relationship with First Nations, a Northwestel head office and hundreds of construction jobs? Who, in their right mind, would avoid that if they believed it was there at the moment, with the financing in place?

Nobody would have, but what happens is that the Yukon Party now comes along and says, "You did not want to keep it in the public eye because somehow you felt that if you mentioned anything about Taga Ku you might have been associated with the project." Well, we were associated with the project. We were wearing the project. That was our project. For two years we went through this Legislature, Question Period after Question Period, talking about this project. We were even asked to see what we could do about levelling that hill over there - what was unkindly referred to as Birckel Mountain - and removing the plastic wrap from the mountain. This whole argument makes no sense from any strategic perspective at all. It is absolutely ridiculous.

The government can say all it wants to about the Taga Ku project. The reality is that the claim it made that this was not a deal, the claim it made that somehow this was all done in secret, has been refuted by not just one court, but by two courts. The government knows as well as I do that the chances of the Supreme Court hearing an appeal are nil; they know that. Every lawyer I have spoken to knows that. The Supreme Court would never hear a case like this. It has been decided. The facts have been established. The government can squirm all it wants, but it has something to answer for, and ultimately, unfortunately, the taxpayer will have something to answer for as well.

We made sure we had a motion on the Order Paper to explore this in detail, and I have my files ready. Seeing there is a real willingness on the part of the government, an eager desire to explore the issue in detail, we are going to give them that opportunity. We also have other information we would like to put on the table at the appropriate time on the same subject, when we raise the matter in motion debate. I am sure the Ministers will enjoy hearing that.

We have indicated that, in the coming main estimates, we feel the government is behaving in a reckless manner. We have expressed concerns in the past about the government's budgeting record. We have expressed concerns about the government's handling of its own financial state of affairs. I mentioned during the second reading speech of the main estimates that we have gone through periods of being absolutely broke, with the world coming to an end and people should start saving their money and worry about going bankrupt, to having millions of dollars for another project, and that all in the space of a few months. No reasonable person would believe that kind of budget messaging is wise or responsible.

I certainly do not accept it, and I think it has been incredibly irresponsible. In whatever time it has left, the government should do its best to repair its credibility on this front. The problem with its main estimates budget is it has not taken that tack. I am certain, in its little coterie of advisors, in the warm embrace of the deputies who support them, the Ministers think they have the world figured out.

As you go out on the street, read the papers and see what people are talking about, you will find that there is tremendous anxiety - and on the doorsteps of Whitehorse West. They should understand that there is tremendous anxiety and it is only they who can extricate themselves from the predicament that they are in.

As long as they continue to ignore the reality of the actions that they have taken or simply try to pass the buck and pass the blame to just about anyone else they can think of, people will not see them as being fit to continue another term in government. For their own Yukon Party supporters, I am sure that would be disappointing.

There will be more on that later; we do have other matters to get on with.

As I mentioned before, we do have many questions about the particulars of the supplementary budget and we will be asking those questions. We do want to get more deeply into the subject of taxation and tax procedures, and now we have that opportunity, thanks to the debate coming up.

Given that we only have a set amount of time for the budgets, we will have questions, but we will try and keep those questions as focused as possible so that the debate can be expedited.

Essentially, that is our position on the supplementary budget and on the government's budgeting record to date.

Mr. Cable: I am sure the expenditure side of the budget and the supplementary budget will be explored in great detail.

I would like to focus, in part, on the revenue side of the budget. The tax revenues, and in particular the income tax revenues, as projected and as forecasted and as calculated on an actual basis seem to vary quite widely - not on an absolute number basis, but on a percentage basis. During the course of the two debates, I would like to explore with the Minister of Finance just what sort of long-term forecasting takes place on tax revenues, in particular on the state of the economy.

We have had this short-term outlook document produced a few days ago, and I would like to find out from the Minister of Finance what type of long-term projections are made.

If I remember correctly, the other day the Minister of Economic Development stated that most people in the territory do not realize the size of our oil and gas potential.

I would like to get the long-term projections on oil and gas revenues. As devolution proceeds and as the territory takes over that particular resource, it would be useful to see what is going to happen at the end of the devolution story.

There are a number of mines coming onstream, or are projected to come onstream, which assumedly would create corporate tax revenue and of course the spinoff with personal income tax revenue. I would like to hear the long-term projections. As the Government Leader indicated yesterday, he does not have a crystal ball and neither do I, but I am sure his officials are doing a range of projections - at least I hope they are - on corporate and personal tax revenue that will spin off from these new mines. It would be useful to hear those range of projections so that we can formulate some idea as to whether or not we can handle the cuts that are coming down the stream from the federal government.

As I indicated, I would like to focus my questions on that particular aspect of the budget and the supplementary budget.

Hon. Mr. Ostashek: I guess the new rules are coming back to haunt us fairly quickly. Sometimes I wish I had an hour and a half instead of 20 minutes.

The Leader of the Official Opposition is very sensitive about the Taga Ku project and issue and well he should be. He made comments that they were wearing that project. They were and they will continue to wear it.

I will briefly touch on financial topics because I want to spend some time in answering his questions about Taga Ku and why we feel that he must bear sole responsibility for the Taga Ku project. We will get that message out to the public. He need not worry about that.

The Leader of the Official Opposition started out by putting some very intelligent issues into the debate and fleshed out areas where they were going to have questions and concerns. I felt quite good. I felt that we were going to have an intelligent debate on this. I hope we will, once we get this very sensitive issue for him behind us; namely, the Taga Ku project.

He spoke about higher spending. Certainly, there is higher spending. As the territory develops, budgets will continue to get bigger and bigger and bigger. I make the following point again - it is in the budget book and I will gladly debate it with any Member in this Legislature: we have generally held the operations and maintenance costs at a very stable level since we took office in 1992. With that, we have taken on substantial additional services. I believe that is an accomplishment that we have to be proud of. The Leader of the Official Opposition is absolutely right that it makes no difference whether or not we have people dependent on government jobs on the operations and maintenance side or on jobs with contractors who make their revenues from capital projects that we put out. I have no argument with the Leader of the Official Opposition on that. He is absolutely 100 percent right.

I do have difficulty with a different situation. We only need to go by the actions of the previous NDP government and see how the ranks of the public service swelled during their term in office. I do not believe that that is sustainable any more in any government - territorial, provincial or federal. We only need to look at what the federal Liberals are doing with their employees. Thousands and thousands and thousands are being turned out of the system. We have been sheltered in the Yukon and in the north. I think that is good. I do not think it is bad. However, we have to take this time to make a slow transition from government to private sector jobs. Capital spending by the government for those private sector jobs will not be there forever. We have to get truly private sector jobs: jobs in the tourism industry, in agriculture, in mining, in service industries. That is what we have to focus on. We have to get them away from government, because government dollars are going to get tighter and tighter.

We will speak about that, and we will be glad to debate those issues with the Members of the Opposition. We will be glad to try and give them some comfort, as well as some Yukoners, although I do not think most Yukoners are as worried about the balanced budget legislation as the Members opposite are trying to make out. Perhaps some of their supporters are, because they know that their Members do not have the ability to make plans when money starts going down; they just have to keep spending it. They have proven that.

The Leader of the Official Opposition can stand in this House, day after day, and talk about surpluses. The fact is that the NDP government came into office in 1985 with a $50 million surplus. They left office in 1992 with a $13 million debt. What happened in between is irrelevant. That is the trend they were on, and they really lost it in their last two budgets. Mr. Speaker, you were a Member of this Legislature then, and you know it. They were on a trend where they were spending money and had no control over it. That trend could not have continued for even one more year. If it had, our territory would have become the financial basket case that the Northwest Territories is today.

I really want to spend some time - it probably will not help the sensitivity of the Leader of the Official Opposition on the Taga Ku project - on why I and many Yukoners believe that he is solely responsible for any monies that the Government of Yukon may have to pay out in settlements on the Taga Ku project.

I said it last night and I will say it again: it is totally irresponsible for a Minister of Finance to make a decision of that magnitude, by which I mean the dropping of the hotel from one of the most controversial projects - perhaps the Watson Lake sawmill was the most controversial - that the NDP initiated. It is absolutely irresponsible that a Minister of Finance, who should know better, would make a decision to drop the hotel and not document it.

The Leader of the Official Opposition made much about why do we not just drop the appeal in the Supreme Court because we have nothing to appeal, it will be thrown out. Let us just look at what Judge Vertes ruled in the Taga Ku case, in my understanding of it. My understanding is that Judge Vertes found as fact that there must have been a private arrangement, even though there was no document or witness to the fact, but there must have been a private arrangement. That is what we are appealing. What we are appealing is the right of any government or any official to quietly, and for no apparent, legitimate reason, release a party from a major condition of their contract, and to do that without any benefit to the citizens of the Yukon. That is what we are asking the Supreme Court to rule on.

The Leader of the Official Opposition says they offered to brief us, and the Leader of the Official Opposition did brief me but he never mentioned the Taga Ku. I would have thought that for an issue that was so controversial in their regime and one that they had made major adjustments to, I would not have had to ask the question of Taga Ku but that, rather, the Leader of the Official Opposition would have told me about it. That is all it would have taken.

Even failing that, when the issue surfaced in public, the Leader of the Official Opposition, or the Minister who was responsible, could have done the honourable thing. They could have called me and said, "Government Leader, you are wrong. We have dropped the hotel." End of story.

Brian Mulroney did that, when the Prime Minister of Canada was refusing to pay, I believe, a $30 million bill to Quebec for the last referendum. The Prime Minister of Canada refused to pay it because there was no documentation. The former Prime Minister was very quick to write a letter to Prime Minister Chretien saying, "I am sorry, Mr. Chretien, we did make that commitment." That is all that the former Government Leader, Mr. Penikett, or the Minister responsible would have had to do. There would have been no court case, or anything else, because I had made the public commitment that I would live up to any obligations made by the previous administration, no matter how unpalatable they might have been.

For the Member to use the feeble excuse that we did not ask, just does not wash with the general public.

Why did the Member not make it public? Is he going to be proud of the fact that his government accepted the highest bidder of these two projects, not the lowest bidder - and we have seen the correspondence - I have seen it, you have seen it, Mr. Speaker, a lot of people have seen it - that has been written to other organizations in town and to the other bidder of the project, that the highest bid was accepted because of the economic opportunities that a five-star hotel was going to give to the project and to the Yukon.

I believe, and I know that many Yukoners believe, that for the now Opposition, which was the previous government, to drop a major proponent out of this tender, would have automatically left them open to a lawsuit by the other bidder.

I firmly believe that, no matter which decision we made - and if we had known and gone along with dropping the hotel - the Government of Yukon still would have been involved in a lawsuit with the other bidder, because of a major, major change to the tender documents.

The Minister's officials wrote letter after letter to the developers stating that very fact, that they could not compromise the integrity of the fair-tendering system. Yet, in the middle of an election campaign, we have a Minister who dropped the hotel from the project, does not tell anyone and expects that he can get away with it. It came out in court that the Minister did not tell anybody.

Mr. Justice Vertes found that there must have been a private arrangement and in his reasons for judgment he stated that officials ought to have known that the project could not have been built with the hotel attached.

I believe six or eight officials testified that they had never been given any indication that the hotel had been dropped from the project.

That is what this court case is about, and that is what this lawsuit is all about. It is solely the responsibility of the Leader of the Official Opposition. It need not have happened, had he done the honourable thing, picked up the telephone and said, "By the way, sorry, we did drop the hotel from the project." He had ample opportunity to do it but, for purely political reasons, he did not, and now Yukoners may have to pay a bill on account of it. I gladly look forward to debate on the motion.

I know that the Leader of the Official Opposition feels uncomfortable with this, as he well should. There was absolutely no reason for this lawsuit.

I am going to table a letter that was written to you, Mr. Speaker, on September 4, 1992, days before an election call, from the then-Minister Maurice Byblow, when you must have inquired about their position on Taga Ku. I want to read this into the record before I table it.

"Our position on additional funding for the Taga Ku project: we have not promised any additional financing or funding to the proponents of the Taga Ku project over and above those elements committed to and the awarding of the space tender project.

"We have recently communicated to them that we are not prepared to alter the tender from the form that was originally awarded." I think everyone in this Legislature understands English. "We have communicated to them that we are not prepared to alter the tender from the form that was originally awarded. We have not received any additional requests for funding from the proponents and when and if we do, we would consider such a request on its own merits, taking into account our firm and clear position on the project to date."

That is one Minister. There is another letter in circulation, and when we get into debate on the motion, I will table that. The letter is from the now-Leader of the Opposition to the Member for Riverdale South. This one is dated September 4. His letter is in reply to a letter by Mrs. Firth, dated September 17. A government letter was sent out by a Minister with no date on it. How convenient; there was no date on it. It basically said the same thing as Mr. Byblow said - there have been absolutely no changes to the project.

Why were the requests made for that information, Mr. Speaker, by yourself, as an MLA, and by the Member for Riverdale South? I will tell you why. It was because there was rumour going around in the communities that the NDP government was going to drop the hotel from the project. That is why those letters were requested. That is why the confirmation was requested. I wish this letter had surfaced prior to the court case. It may or may not have had some impact. At any rate, it did not surface.

For the Member opposite, the Leader of the Official Opposition, to stand up in this Legislature and try to send a message that none of this is any of his responsibility, that he did everything right -

Speaker: Order. The Member has three minutes to close debate.

Hon. Mr. Ostashek: - is ludicrous and will not wash in public. We will see that it does not wash, because we are going to continue to point out what that Minister did and what his cavalier, reckless actions were at the expense of taxpayers, and the fact that he did not document them.

It was the largest project in the history of the Yukon. I think $47 million was the figure thrown around at one time. He was going to cut that project down to $20 million or $25 million, without the hotel, and he was not going to document that.

That is a pretty reckless way of looking after the territory's finances.

I am sure that we will have many more debates on that subject during budget debate and during debate on the motion. I am looking forward to it, as are my colleagues.

I would like to speak a moment now to the Liberal Member for Mount Lorne - pardon me, I should say "for Riverside".

Some Hon. Member: (Inaudible)

Hon. Mr. Ostashek: Sorry, but I heard an ugly rumour that he was going to change ridings in the next election.

We will be quite happy to discuss the tax implications for the Yukon and to point out to this Legislature how we feel comfortable with a $7.5 million surplus in light of the Taxpayer Protection Act, and I hope that we can convince the Members opposite that it is a good piece of legislation and is required. As a Minister of Finance, I would welcome the legislation. When I have to deal with my colleagues, who are beating me up for funding, I now have a hammer to help me say no, because we cannot spend more money than we have.

Motion for second reading of Bill No. 9 agreed to

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

Speaker: It has been moved by the Hon. 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

COMMITTEE OF THE WHOLE

Chair: I will now call Committee of the Whole to order.

I would like to thank the Members of the House for appointing me as Chair of Committee of the Whole. I know that I have very big shoes to fill. Mr. Abel had the respect of everyone in the House. I know that I will not be able to fill his shoes and do the job in the way he did, and I am not going to try. I will do the best that I can and try to be impartial and treat everyone equally. I hope to earn the Members' respect in the process.

Having said that, I would ask the Members of this House to help me out by following the rules that are set out to the best of their ability.

Before we take a break, I have one housekeeping matter that I would like to deal with at this time. It has been brought to my attention by the House Leaders that the first break during Committee of the Whole will be 20 minutes in duration and, after that, they will be 15 minutes. I would like to point out that, in the memorandum of understanding, signed by the Government Leader and the Leader of the Official Opposition and the Liberal Leader, it states that Members should respect the time limits for recesses directed by the Chair of Committee of the Whole.

I would appreciate Members' prompt return when they hear the bells ringing. The bells will be rung two minutes prior to the 20-minute and 15-minute time limits.

Having said that, we will now recess for 20 minutes.

Recess

Chair: I will now call the Committee of the Whole to order. The order of business this afternoon will be Bill No. 8, Fourth Appropriation Act, 1994-95. If we get that completed, we will move to Bill No. 9, Third Appropriation Act, 1995-96.

Bill No. 8 - Fourth Appropriation Act, 1994-95

Hon. Mr. Ostashek: This is the final appropriation bill for the 1994-95 fiscal year. It is necessary because one O&M vote and two capital votes were overspent. The total of these three votes is $103,000. At the same time, the remaining 27 votes were underspent by $28 million. However, Members know that the Financial Administration Act controls spending by vote, and we must, therefore, seek retroactive approval of these small overexpenditures, despite the fact that the net underexpenditure is over $28 million.

Of the $28 million, $19 million was capital, and was accompanied by a $14 million decrease in recoveries. About $11 million worth of our capital lapse is simply being revoted in the 1995-96 fiscal year. These funds appear in the supplementary for 1995-96, which we will be discussing here shortly - s

orry, I am reading my second reading speech; I thought I had read it once already.

I thought I was going through the same ones.

Some Hon. Member: (Inaudible)

Hon. Mr. Ostashek: The Leader of the Official Opposition got me excited with the second reading debate. Nobody noticed.

The purpose of this bill is to obtain appropriation authority after the fact for overexpenditures in the 1994-95 fiscal year. The Financial Administration Act requires that appropriation authority be sought on a vote-by-vote basis rather than on an overall government basis. Were this not required, the $28.5 million in underexpenditures would more than compensate for the $103,000 in overexpenditures with which this appropriation deals.

Two departments required additional vote authority. The Legislative Assembly was overspent in capital by $4,000 as a result of the purchase of a computer workstation for government private Members and their staff. The Executive Council Office overspent both its capital and O&M votes. The department was over $65,000 for operation and maintenance purposes. This was due essentially to the disbursement of funds under the settlement agreement for implementation boards and committees. This sum was recoverable from the federal government in its entirety and is reflected in the revised O&M recoveries shown for the Executive Council Office. An additional $34,000 was also spent by the department for capital purposes. This was to purchase equipment for the aboriginal languages services program and is entirely recoverable from the federal government.

I would like to speak briefly about the underexpenditures that occurred during the course of the year. Capital expenditures were some $19.5 million less than anticipated. This decrease was accompanied by a $14.2 million decrease in capital recoveries, so the net impact on our surplus/deficit position was a little over $5 million.

Approximately $11 million of this lapse was simply due to timing of construction projects and is being requested for revote in the supplementary for 1995-96, which is also before this House.

The Department of Community and Transportation Services lapsed $5.6 million in capital funds. This was largely due to recoverable land development expenditures being less than anticipated, although expenses under the Canada/Yukon infrastructure program and the public health roads/streets program were also less than expected.

The Department of Economic Development capital vote was underspent by some $2.3 million. This occurred largely in the business development fund and the economic development agreement. These underexpenditures were accompanied by declines and recoveries in the same programs.

The Department of Education also lapsed $1.8 million in capital. This was spread among a number of projects, one of the largest being the capital maintenance repair of $573,000 and the Teen Parent Centre in the amount of $204,000.

The Department of Health and Social Services capital vote was underspent by $4.9 million. The bulk of this was attributable to the new hospital, where changes in construction timing have pushed expenditures into subsequent years.

The Yukon Housing Corporation lapsed $2.6 million of its capital vote as a result of underexpenditures in almost all of its capital programs. The largest single lapses were in the home repair and home ownership programs.

Several other departments also underspent their capital votes with the results I mentioned earlier, which is a total gross underexpenditure of $19.5 million.

Operation and maintenance votes were underspent considerably, at $8.9 million. While far less than the capital underexpenditures, the operation and maintenance lapse may be more significant in that it is a real saving to the government and may signify continued savings in future.

The largest single operation and maintenance underexpenditure was one of over $3 million in the Department of Health and Social Services. The savings are not attributable to any single, or even several, causes, but rather a whole host of items throughout the department's programs.

Large operation and maintenance lapses of over $1 million also occurred in Community and Transportation Services, Justice and the Public Service Commission, where leave accruals were less than anticipated and resulted in a savings of over $900,000.

In addition to those mentioned, virtually all the departments were underspent to some degree in their operation and maintenance spending.

Our revenues and formula financing grant, taken as a whole, are virtually unchanged. Revenues did increase by about $3.3 million. One of the biggest changes was the fuel oil tax, which went up $500,000. This was due largely to preparations to open the Faro mine and increased mining exploration activity and tourism.

Liquor profits were up over $600,000 as the result of reduced operation and maintenance and capital expenditures. Investment income was almost $800,000 more than anticipated due to higher interest rates and larger balances on hand to invest.

Several other revenues were also higher than expected. These increases were not all net gain, because in many cases they simply offset the formula grant, which can be seen to have decreased by $3.2 million from that shown in Supplementary No. 1 for the same year.

Overall, the result of the various year-end changes and adjustments was an accumulated surplus of $31 million - several million dollars higher than the estimate I mentioned in the last sitting of the House. This accumulated surplus is the only reason we will be able, in 1996-97, to maintain a reasonable level of expenditure in the face of a $20 million cutback in our formula grant by the federal government.

In effect, these monies are being used to ease the transition to tighter times that we will inevitably be faced with in the years to come.

I now will be pleased to answer any questions of a general nature.

INTRODUCTION OF VISITORS

Mr. Schafer: It is my pleasure to introduce to the House today the students from Old Crow School. The students are here to do their wonderful cultural dancing and to visit the Legislature. I would like the Members to welcome them into the gallery.

Applause

Mr. McDonald: I have a few questions for the Minister. I do not have a lot of questions for this particular supplementary; I will save them for the future. However, I have some general questions with respect to the general state of affairs in our relationship with the federal government and a couple of questions that seem most appropriate now.

First of all, I take note that in the first supplementary, the government requested a supplementary of $16,626,000 in capital. In the final supplementary, it appears it is turning back $19 million. This is not a new problem, but it does appear to suggest that when one makes a judgment on the requirements for new spending authority in the supplementary to come, which again requests new capital expenditures of $13 million in the current year, in all likelihood we will be turning back large amounts of money.

Can the Minister give us an indication as to whether or not he or his department are apprised of this problem and will do something about it, or are they just going to let it ride?

Hon. Mr. Ostashek: I wish I had an easy answer for the Member opposite. He makes a valid point, one that bothers me immensely.

I do not know what the answer is, but I am sure that the Member opposite will appreciate that during his term as Finance Minister, he probably had the same difficulties with the departments. They are overly optimistic about how much they can spend before the end of the year. When they go for a supplementary budget, they are also aware of the Financial Administration Act, which says that they are not allowed to overspend unless they have the vote authority. As a result, I believe that they leave themselves a lot of breathing room.

I know that when we were faced with the special warrant earlier in the fall to try to deal with these issues, I had many concerns. I was concerned about whether the money would be spent. The Opposition has asked very legitimate questions - why do we give them this money if they are just going to lapse it? I wish I knew what the answer is. Am I just going to go along with it? No. I am going to keep on trying, but it is really a tough one. The Financial Administration Act certainly does not help. I am sure that the Member opposite is fully aware of that. I know that when we put budgets together, we have the departments screaming and hollering that they cannot cut any more. If they cut any more, there will be layoffs. We force them to cut some more to reach our targets, and they get through the year; and they still lapse funds.

So, it is a difficult process. I do not have any easy answers. I am going to continue to work on it to get it as tight as we can. That is all that I can offer the Member right now.

Mr. McDonald: I appreciate that answer. I want to make one little point that seems to have come up in the last few days about my time as Finance Minister. There is a hint or suggestion that I was Finance Minister for years and years and years. I guess it has achieved the stuff of legends in the Yukon Party benches. It is not that I did not want to be Finance Minister for years and years and years, but for the Minister's information, I was Finance Minister for two years; and then I was demoted. I took on Government Services, which was a real challenge. I think that I have just offended a whole lot of people in Government Services. That just goes to show you how high the heights are in the Department of Finance.

The problem with capital spending is a little different than it is with operation spending and I can understand why departments want to be very, very flush with cash for fear of overspending because they do tend to have spending patterns that carry on through the winter.

A lot of what is spent in capital is decided by the end of the construction season, particularly in Community and Transportation Services; they do request a lot of money, and in this particular year they requested $17 million more and are turning back about $5 million. Certainly, the road construction budget is a budget that one would think would be well in hand by December of a given year.

One might argue that it is possible for the capital estimates to be more accurate, particularly when those capital expenditures have been spent, or largely spent/committed, by the time the snow flies. Consequently, the Ministers should not be asked to present supplementary estimates and legislators should not be asked to consider supplementary estimates if the department already has the information in hand.

I heard in the budget lockup that there is a new procedure for analyzing expenditure patterns and that there is a monthly reporting system of some kind. Could the Minister give us an update on this procedure?

Hon. Mr. Ostashek: Yes. This was implemented not only because of overexpenditures but also because of underexpenditures. Departments ended up with a lot more money than we, as Cabinet, were aware of, and the Member will recall the hot debate we had over that a couple of years ago with the larger-than-expected surplus that came up at the last minute.

Between variances, we now ask the departments to give us a monthly update. They do not have to take everything into consideration but we expect them to have their major expenditures and revenues identified on a monthly basis. This is the first year we have tried it. We think it is working fairly well. It seems to have played itself out. We do not do it for the first two or three months in the year but after the first variance is filed we follow up on a monthly projection, month by month after that, as we get closer to the fiscal year.

I appreciate what the Member is saying about capital projects later in the year. The Member can also appreciate that whether or not construction companies are getting better in what they do, or whatever the reason is, we have construction companies working longer and longer each season.

With the House rule changes - the two sittings per year - and having the budget session in the spring of the year we will be moving closer to the end of the fiscal year, so I hope that we will be able to eliminate many of the supplementary requests, or the requests that come are for monies that will be spent by the end of the year, and the requirements for those expenditures are much tighter than in the past.

I appreciate where the Member is coming from on that.

Mr. McDonald: How accurate is the monthly update that is conducted by the Department of Finance in terms of determining expenditure patterns? I understand that we will not know precisely how accurate it is until we find out what the final lapses are for year-end.

There have been two variances now and the monthly update has occurred between the period of the two variances, so presumably a more rigorous variance report would have been able to determine how accurate the monthly updates have been. What is the level of confidence the government has in this process?

Hon. Mr. Ostashek: I do not think that we will be able to make a valid judgment about this until we have had a year under our belt.

By the experience that we have had so far, the end of January variance identified another $3 million surplus. I think that we are going to need a whole year to look at it. When the final budget comes in, we will have an opportunity to see how accurate it is.

I believe that with the amount of money that we are spending on computer systems for departments and the amount of money we are spending on programs . . .

I see the Leader of the Official Opposition smiling; I do not like it any more than he does, but we do have a staff of some 3,000 people who do a lot of calculations and a lot of work. They need to have those programs in place to be able to give us those kinds of results.

As we keep improving our programs, I think that we will be able to keep a little closer tab on spending and have more confidence in the accuracy of the figures. However, I think we need to give this a full year before we can make that judgment.

Mr. McDonald: I do not want to get deeply into this subject because I want to raise it again in the context of the supplementary for this year. I would like to make one final point on the Financial Administration Act. There were some discussions in Public Accounts. The Public Accounts Committee has not yet reported, of course, on the subject of overspending in the Financial Administration Act. Has the Department of Finance, or the government, generally or corporately, drawn any conclusions about what it would like to do with the Financial Administration Act?

Hon. Mr. Ostashek: I can say what I would like to do with it. I know that Members opposite have some difficulty with it and probably legitimately so. I believe that one cannot ask anyone to budget accurately - especially departments of the size that we have - some 14, 15 or 16 months in advance.

Even if we start legislative session in early February, the budget will be put together in November or December and updated to the end-of-December figures.

We are asking them to project about 16 months in advance and we are asking them to make sure that they do not go over their vote. There appears to be a stigma attached to going over that vote, whether or not it is from past history. There is a real concern among deputy ministers to not exceed their vote. I have experienced it in my three and a half years in government.

From my point of view, I would like to see the clause amended. I believe it would lead to more accurate budgeting.

Why would we want to reward a deputy minister who lapses $10 million, $15 million or $20 million at the end of the year? Why should we reward that person and penalize the deputy minister who exceeds his budget by $100 million? It does not make any sense to me.

Mr. McDonald: What does it mean, finally, in terms of the act itself? Obviously, we all agree that it is more than a little awkward to be put in this position, at least technically, acknowledging that the act is not being respected, no matter what we think of the act itself. If it is not being respected then that, to the uninitiated, sends out very strange signals.

There are Members in our House who still, after many, many years, feel that this is fundamentally wrong. Consequently, there is some desire to do something about it. What provision in the act would the Government Leader think would be worth reviewing seriously? Is this not part of the plan? Has he got any ideas?

Hon. Mr. Ostashek: I do not have the act with me. I do not know the exact number of the clause, but it is basically the clause that states that it is illegal to overspend one's vote. There is no active penalty for it. I think that we have some very high-priced and professional people working for us. I believe that there are other ways of instilling discipline in them if they abuse the tools that are given to them to run their departments.

I find it awkward to insist that departments cannot overspend and expect them to budget accurately. It is human nature that they are going to put in requests for money for vacant positions that they have no intention of filling at this time. They will do all kinds of things. They will continue to requests funds for programs they have not used for years. It is a piggy-bank for them, in case they run into trouble.

I believe I approached the Member opposite a couple of years ago about an amendment to that section of the Financial Administration Act. I never did follow up on it, but I would entertain an amendment for that one section in particular.

Mr. McDonald: Obviously, we want to provide incentives for people to do a good job. Presumably they will do a good job. We have to be sure that when they have legitimate reasons for an overexpenditure, they should not feel like criminals.

The incentive side of the equation is something we have talked about before, but what about the penalty side? Does the Minister believe that there should be penalties for deputies who overspend?

Hon. Mr. Ostashek: In my opinion, I do not think there should be any in the Financial Administration Act. There are ways to deal with these issues other than the act. If they overspend for legitimate reasons, why would one want to punish them? It would have to be considered on a case-by-case basis and depend on how much was overspent and for what reason. If they were not being diligent in their job and felt there was no stigma in exceeding the act, those are some things that would have to be taken into consideration. It would be up to the Ministers and me, as Government Leader, to instill whatever discipline we felt was necessary.

Chair: Is there any further general debate?

Yukon Legislative Assembly

Chair: Is there any general debate?

Hon. Mr. Ostashek:

I have no general comments on this. We can go into line-by-line debate.

On Capital

Capital in the amount of $4,000 agreed to

Yukon Legislative Assembly agreed to

Executive Council Office

Chair: Is there any general debate?

On Operation and Maintenance

Operation and Maintenance in the amount of $65,000 agreed to

On Capital

Capital in the amount of $34,000 agreed to

Executive Council Office agreed to

On Clause 1

Clause 1 agreed to

On Clause 2

Clause 2 agreed to

On Clause 3

Clause 3 agreed to

On Schedule A

Schedule A agreed to

On Schedule B

Schedule B agreed to

On Title

Title agreed to

Hon. Mr. Ostashek: I move that you report Bill No. 8, Fourth Appropriation Act, 1994-95, without amendment.

Motion agreed to

Bill No. 9 - Third Appropriation Act. 1995-96

Chair: Bill No. 9, Third Appropriation Act, 1995-96, general debate.

Hon. Mr. Ostashek: This supplementary requests additional funding for 1995-96. Over $2.5 million is new operation and maintenance and almost $13.3 million is new capital. It is all contained in this bill before us today. The majority of these funds were included in the special warrant that was approved back in November. In addition to the changes in expenditures that are reflected in this document, there are also some changes in our income figures, which I will speak to briefly.

Revenues are down, largely as a result of decreases in income tax entitlements for the current and previous years. These decreases have occurred largely because of the impact of the Faro mine closure, which is just now working its way through the Revenue Canada system. Decreased national tax yields are also a factor in Revenue Canada's projections. Offsetting the income tax decreases is an increase in our investment income - the result of interest rates being higher than originally anticipated, although, as we are all aware, they are now dropping. Also contributing to this increase are much-higher-than-expected cash balances available for investment purposes. The latter factor is a result of lower-than-forecast expenditures in the previous year.

The established program financing has decreased from the figures shown in the main estimates by some $644,000. The latest figures from the federal government now show our EPF yield to be a little over $11.3 million for the year. The change is due to prior year adjustments and changes in our income tax revenues, which have an impact on EPF calculations.

As an aside, I would like to remind Members that the established program financing will be done away with by the federal government, beginning April 1 of this year. It is, as is the Canada assistance plan, being replaced by the Canada health and social transfer, which, it will be noted, appears for the first time in the 1996-97 main estimates. The formula financing transfer payment has increased by some $4.5 million. The grant for 1995-96 is frozen at the 1994-95 grant entitlement level and this change therefore reflects changes in that entitlement and deteriorations in variations of our revenues.

The EPF and grant as a whole are basically awash. The total income for the year is entirely due to an increase in the recoveries of about $9.9 million.

The increase is made up of over $3.5 million in operations and maintenance, and more than $6.3 million in capital recoveries. These increased recoveries are almost entirely a function of the increased expenditures reflected in the supplementary. The one significant exception to this statement relates to the additional recoveries from DIAND for residential care to Thomson Centre and Macaulay Lodge. These sums are not accompanied by increased expenditures.

I have spoken in very general terms of the expenditures contained in these estimates during my second reading comments. I will therefore not spend much time on them now, particularly because we will be going into departmental discussions shortly.

The increased operations and maintenance expenditures are largely the result of the recoverable claims, implementation disbursements in the Executive Council Office, and additional education and highway maintenance costs associated with the reopening of the Anvil Range mine.

Capital expenditures are up for a number of reasons. The principal reason is simply the revote of lapsed 1994-95 monies. These revoted funds amount to approximately $11 million and were, as mentioned earlier, one of the items included in the special warrant of last November. Aside from the revoted monies, the principal reasons for the increased capital expenditures relate to highway and highway facilities construction, the Whitehorse General Hospital and the new visitor reception and tourism business centre.

There are, of course, a number of other expenditure items that I have not mentioned, but Ministers will speak to those during departmental debate.

When we tabled the 1995-96 main estimates, we projected a balanced budget for the year, after providing a contingency for net supplementaries of $7 million. With this supplementary, we will have largely devoured that contingency, and we are showing a small annual surplus of only $1.3 million. This sum will be added to our March 31, 1996, accumulated surplus and will help to offset the annual deficit that we are projecting for the 1996-97 fiscal year as a result of the federal cuts to our formula financing grant.

I want to point out that, unlike our neighbouring territory to the east, this government is fortunate to have the funds available to cushion the blow that we received from the federal government. Because we kept on top of our finances and husbanded our resources, we will avoid the abrupt and wrenching process that our neighbours are now beginning to undertake in an attempt to control their accumulated deficit. Apparently this will reach - the last time I heard - $160 million, and it could be higher in the next fiscal year.

Before going into detailed estimates by departments, I will undertake questions of a general nature that Members may wish to ask.

Mr. McDonald: I would like to begin by suggesting to the Minister that he not take great comfort in comparing the financial situation of the Yukon government with that of the Northwest Territories.

I think the Northwest Territories has marched for years to the tune of a different drummer when it came to controlling expenditures. Certainly, the consensus-style politics of that Legislature has not been one of the driving forces to keep expenditures down, and consequently they have budgets and budget patterns that are really quite different from our spending patterns. They are less frugal.

I have some questions about special warrants. As the Minister knows, there is a house agreement that there will be two sittings in a year. Does the Minister foresee any circumstance at all, given that there are now two sittings in a year, in which there will be a need for the kind of the special warrants that we have seen in the last two years?

Hon. Mr. Ostashek: Well, we might have a need for special warrants, depending upon when the supplementaries are passed. Two sittings should reduce the need for special warrants. There is certainly a purpose for special warrants for emergency expenditures or for expenditures that are required when the House is not sitting.

Special warrants are not something that I like to use, but they are required and they are a legal way for the government to do business. If they are not abused, I do not think that there is anything wrong with using special warrants. We certainly have not tried to abuse the special warrant process.

Mr. McDonald: I think that no one likes special warrants. Certainly, people who are not part of the budgeting process at all, particularly the budgeting process in Cabinet, but who hold some responsibility for the budgets generally - such as MLAs - feel very burned at the prospect of special warrants. It is certainly something that I have come to recognize, particularly in the last few years.

One would think that the act of having a couple of sittings in a year would allow spending proposals to be put forward to the Legislature in a timely way, such that there would not be a need for special warrants of the kind that we have seen, meaning regular updates on departmental requirements for additional funding.

In the case of the rare emergency, one might be able to make the argument that, if the House is not sitting, a special warrant is required but, if the House is going to sit in the fall in any case, and a spending proposal can be put on the table at any time during the fall sitting before December 15, I do not see the need for special warrants as we have seen them in the last few years. Does the Minister not agree with that? Is he going to insist that it remain wide open when it comes to special warrants?

Hon. Mr. Ostashek: I am not going to make a commitment that we will not use the special warrant, because when I look back at the history of governments in the Yukon, going back to 1984-85, there is only one year in which they did not use special warrants. There were two sittings in most of those years. It is pretty hard for me to stand here, on that record, and say that we will never use the special warrant because we are having two sittings. The record speaks for itself. There were two sittings in most of those years. For every year but one there was a special warrant.

Mr. McDonald: I was under the impression that the budgeting procedures were getting tighter all the time. I guess my assumption was wrong.

I have some questions about the formula financing negotiations. I know the Minister has had some ministerial meetings to talk about formula financing. There have been Finance Ministers meetings to discuss transfers to the provinces and territories. I wonder if the Minister can give us as comprehensive an update as possible as to what is happening.

Hon. Mr. Ostashek: We have reached agreement that will extend to 1998-99. The basic agreement is the same as the last one. There is, however, a change in the incentive for economic development in the new agreement.

The last formula excluded a small portion of incremental revenues from the full application of the perversity factor. The new agreement will exclude 20 percent of all local revenues from the formula.

In other words, 20 percent of our revenues will not be fail-safed under the formula. If revenues increase, 20 percent of that increase will accrue directly to us. If revenues decrease though, the opposite is true.

There is a little risk involved in fighting for economic incentives, but we felt that we were prepared to accept that risk. The effect of the exclusion is to reduce the perversity from $1.51 to $1.21. To accomplish this on a cost-neutral basis with the federal government in the first year of the new formula, our gross expenditure base is reduced by a sum equal to 20 percent of our revenues in the first year.

Under normal circumstances, the new incentive yields about the same as the old one did, but under circumstances of rapid and major economic expansion, it is apparent that the new arrangement could be far more favourable to the territory. It will really depend on how much of an economic increase we have. If we have a big surge in activity, it could be quite dramatic. If we have the normal increase in economic activity, it will not be that dramatic.

I am not sure if the Members opposite are aware that the Northwest Territories was not part of the incentive provision of the old formula. It was one we negotiated after we came to power. We changed that one point over the old arrangement. The Northwest Territories did not participate in that, but it is likely they will agree to the new incentive arrangement, with the result that both territories will have the same formula again.

Why I am reluctant to say they will agree is that it was the former Finance Minister and I who made the agreement with federal Finance people. We now have new players there, so I would not want to commit them; however, I see no reason why they would not sign.

It is expected that announcements regarding the new arrangements will be made within the next week, when they are finalized and the papers are all completed. No more changes will be made, and we will go through to the 1998-99 year under the new arrangement.

One other point that has changed in this round of negotiations is that DIAND was not involved in them. I went to DIAND when we were having difficulty reaching an arrangement. I believe that was a year ago last December, when our formula was frozen. We went to Ottawa and convinced the Finance Minister to freeze it because they had nothing sorted out as to where we would go with it. At that time, I had a meeting with DIAND officials, and went after them fairly hard, saying they were not helping us at all, and that since we were still under their domain most of the time, they could use some of their influence to help us get a formula financing agreement.

A couple of weeks later, I received a letter from them, saying it would be in our best interests to negotiate directly with Finance people, and they would step right out of it.

Mr. McDonald: The Minister indicated that in the change to the incentive provisions 20 percent of revenues would not be failsafed and that there would be a significant financial impact only when there is a rapid or major surge in economic activity. What level of activity would be required? What would have to happen before we actually saw some appreciable benefit from the change?

Hon. Mr. Ostashek: The rate of change in our revenues or economic activity would have to grow faster than the provincial-local escalator, if the Member can understand that.

Mr. McDonald: I think I can, as a matter of fact, strange as that may seem, but I am asking a more blunt question. Before we could actually see a significant change - a change that would actually register and seem to make a difference - would we have to see a mine the size of Anvil Range start up? What level of economic activity would we have to note before we actually saw an appreciable difference?

Hon. Mr. Ostashek: It would be very hard for me to project the level of economic activity required. As I said, it is going to be tied to the provincial-local escalator.

Let us say that the PL escalator were to grow at three percent a year. If our economic activity were to be growing at five or six percent a year, we would start to see pretty major changes. If it is just a normal growth, we will not see a significant change - the numbers will be very low.

The Northwest Territories and the Yukon looked at this and saw a real up side, and we do not see any real down side, looking at the next four or five years. As I say, there is some down side risk if 20 percent of them are not failsafed. If our economic activity went down the tube, we would not be getting the overly generous contributions that we got when the Curragh mine went down. We hope that that will not happen.

That is the best I can offer the Member. We have to almost double the PL escalator to really see any significant benefits.

Mr. McDonald: I would like to try to focus a little bit to see what common language or commonsense measure we can use to try to determine what the impact of the change might mean to the average person.

If the provincial-local expenditures increase - or the GDP - and the Yukon's GDP increases by a certain amount, is analyzing how much the economy is growing dependent on the gross domestic product? What indices determine the economic growth for the Yukon?

Hon. Mr. Ostashek: The GDP has something to do with it. It is the rate of growth of our economy. That is what would do it - for example, more income taxes or fuel taxes being paid in the territory. All of the avenues and vehicles that we have for raising our own revenues would have an impact. If those go up dramatically, with the 20-percent exclusion from the perversity, we get to keep that 20 percent without having the $1.21 applied to it. We could try to work something out for you to determine an actual level in dollars to give you an idea of when we would start noticing significant changes in the amount of money that we would keep. The way I look at this is that, whatever revenues we have that increase as a result of economic activity, we can exclude 20 percent from the perversity factor, and that would be a step in the right direction. I know that both of us have the same distaste for the perversity factor. The federal government would not go any further than that in this round, but I believe the fact that we have got them to move on it at all gives me some hope that in the next round of formula financing agreements, we may be able to convince them to either reduce it again, or eliminate it completely.

We will try to run some numbers for the Member opposite.

Mr. McDonald:

I would appreciate that. I want to be able to communicate the actual benefit of this change to other people. Not being an expert in the technical jargon in the first place, I would not even want to attempt to inflict it on the uninitiated.

The Minister has had a number of discussions with the federal Minister, presumably not only about formula financing, but also about what the federal government is intending to do. Can the Minister indicate to us what the federal government's known plans are with respect to provincial transfers?

Hon. Mr. Ostashek: I was just at a meeting of Ministers of Finance not that long ago - I believe it was in early February - discussing the Canada pension plan and having a preliminary peek at where Mr. Martin was going with his next budget.

We were told at that meeting that he has already told the provinces what cuts they are going to have in the next two fiscal years - 1996-97 and 1997-98. He indicated to the provinces that there would be cuts - and I assume also the Northwest Territories, because we have a formula financing agreement - and we were able to convince him to hold back the cuts on us that he wanted to impose by one year. He will not be treating us any differently than he will treat the provinces - but I am making some assumptions there. The message he basically gave us at that meeting was that the provinces knew what the cuts were going to be in 1996-97 and 1997-98, and he would not make any commitments to no further cuts in 1998-99. That projects him past the next election.

We did go through a procedure where he went through his departmental spending and all the areas of spending and asked us for advice about where we would cut if we were in his chair. It was quite an educational exercise. There was some very good advice for him from around the table, I thought, about where he could cut and not directly impact the provinces and territories. He let us all have our say. In his summation, he found reasons why he could not adopt every one of the suggestions that were put forward. We then focused directly on transfer payments.

I would expect that there will be more cuts coming in 1998 and 1999. What the magnitude of those cuts will be, I do not know. He did indicate to us that he may be saying in this next budget when he plans to eliminate the deficit. As Members opposite may be aware, in his economic statement last fall he did make a commitment that his target for the 1997-98 fiscal year was two percent of GDP, which is about $17 billion, but he has not given any indication of how he is going to eliminate that $17 billion.

He has a tremendous challenge before him, and I do not envy him at all. We are very concerned, both at the Premier/Government Leader and Finance Minister level. We do not believe that the federal government has been equitable in their cuts. By our calculations, it will have reduced transfers to the provinces for health, post-secondary education and social services by 40 percent over the next three years. Its overall program spending was reduced - and I do not want to be held to this number - somewhere in the neighborhood of 10 to 14 percent.

Those are not figures the Finance Minister will accept, but these are the figures that were calculated by the western Finance Ministers in a report that they prepared for the western premiers conference. The message that all of the Finance Ministers have been delivering to the federal Finance department is that we do not need any more cuts to education, health or social services. I think, as we watch the news and as budgets start coming down across Canada over this next month, that many provinces will be having difficulty meeting their own projections because of the magnitude of the cuts they are having to absorb from Ottawa. Saskatchewan is a case in point. They have to absorb some $200 million, as do some of the maritime provinces.

It will not be an easy road ahead for any of us. I know when you listen to what all of the experts have to say, such as this article in the Globe and Mail of October 13, 1995, it gets pretty scary.

Speaking to an outlook conference in Toronto, Mr. Frank, who is from the Conference Board of Canada said, "Federal and provincial debt combined now amounts to 100 percent of the country's annual gross domestic product, and even

another five years of government belt tightening will reduce this ratio by only a few percentage points."

There is a monumental task ahead of all Canadians. I think that we have been fortunate in the north in that we have been shielded from that considerably, compared to what the provinces are going through. I do not have much optimism that we are going to be shielded in the future. We are going to have to take our hit with the rest of Canada.

Chair: Is it the wish of the Members to take a 15-minute break at this time?

Some Hon. Members: Agreed.

Recess

Chair: I will now call Committee of the Whole to order.

Is there any further general debate on Bill No. 9, Third Appropriation Act, 1995-96?

Mr. McDonald: Before we leave formula financing, are there any other changes? The Government Leader mentioned the one significant change in the incentive factor. Are there any other changes in the formula financing agreement he can let us know about?

Hon. Mr. Ostashek: Yes. I hope the Member opposite can follow me through this paper, because it does get fairly complicated, but I will try to explain it. Most of it centres around the perversity factor.

At the end of our last formula financing agreement, the perversity factor stood at approximately $1.51. With this same perversity factor and the new incentive arrangement in the new formula, the effect on a mathematical basis is to reduce that old perversity from $1.51 to $1.21 - I said this earlier. Along with the new formula agreement, effective April 1, 1996, there is a rebasing of the formula's tax effort and the perversity factor.

The rebasing yields a new perversity factor of about $1.42. We are comparing this to the old one of $1.51, so we can keep apples and apples together.

The decrease is a result of better data being available and of sundry fee, permit, liquor tax and rate increases being taken into account in the calculations. Now it has changed from $1.51 to $1.42, but with the new incentive factor - the 20 percent - it really reduces this to about $1.13 or $1.14. We are getting very close, on the incentive factor at least, to even dollars. Taking the incentive factor out, the rest of the formula is subjected only to about $1.13 or $1.14 perversity. The rebasing, which is the other adjustment I mentioned, will give us a bit more of a net benefit.

Ironically, for some reason, this works in the opposite direction for the Northwest Territories' situation. In an article, they say that the rebasing is what caused their financial problems.

Mr. McDonald: I happen to know that governments always come to some fantastic conclusions about what causes their financial problems. It is up to people to walk them through reality.

Has the government done a tax-burden calculation to compare the Yukon's situation with other jurisdictions?

Hon. Mr. Ostashek: If the Member would look in the back of the budget speech book, it shows that our tax rates are among the most favourable in the country. I do not know if the Member has his budget address book with him. If I have another copy here, I can send it over to him. He may have some questions on it. If you look at the personal tax rates for the Yukon at 50 percent, there are eight higher or at the same level. If we look at the high-income surcharge, we are one of the lowest. If we look at corporate tax rates, we are still among the lowest. If we look at the small business rate, we are still among the lowest. We have no retail sales tax. Our tobacco taxes, with the increases, are at about the middle. We have very low unleaded gasoline or diesel fuel taxes. We still have one of the most favourable overall tax rates in Canada.

Mr. McDonald: I thank the Minister for the table. I was actually making specific reference to tax burden and the calculation of the cost of living that Yukoners and people of the north in general face. Has the government done any calculations on that front?

Hon. Mr. Ostashek: I understand where the Member is coming from. We have not updated our information because we have not gotten anywhere with that argument with the federal government in formula financing agreements. We have not done anything on it in the last couple of years.

Mr. McDonald: Does the Department of Finance have any suspicions about what our tax burden is, as it compares to that of other jurisdictions, based on the change in tax rates, cost of living, et cetera?

Hon. Mr. Ostashek: The department officials think we might be slightly over-burdened, but not it is nearly as bad as it used to be.

Mr. McDonald: The Minister indicated that in 1997-98 he expects that the federal Finance Minister may well take another bite out of transfers to provinces and territories. He will recall the discussion we had last year about the size of the cut to the Yukon and what it meant. I guess there were differing interpretations of what it meant to treat each province and territory equally or fairly. On what basis does the government feel it should be cut, in order to be treated fairly? Is it on a per capita basis? Is it a percentage cut of the total transfers to jurisdictions? What constitutes fairness?

Hon. Mr. Ostashek: For the record, I believe he said that there would be no cuts in 1997-98, but he would not commit to no further cuts in 1998-99. That is what he said.

What constitutes fairness? In this last round of cuts I believe we said we were cut somewhere in the neighbourhood of seven percent, vis--vis 4.4 percent for the provinces. I took issue with the Minister of Finance and his officials on that. I recall that Mr. Martin asked his officials in front of me if that was in fact the case. If the Member opposite recalls, he said a five-percent cut, but it was a five-percent cut to our expenditure base, to which we contribute as well as the federal government. They took five percent off without factoring in the fact that we had money in there.

If we took a percentage of their contributions to that expenditure base we come up with a seven-percent cut to it, vis--vis 4.4 percent from the provinces.

Mr. Martin accepted our argument that Finance officials confirmed that is what they did, and I do not believe it will happen again.

What is fairness? We always argue for the basis of per capita, because it usually makes it better for the territory, especially when it comes to cuts. If the argument is for increases, we do not do so well using a per capita calculation.

I think that Members opposite will recall that I raised that issue on the Canada/Yukon infrastructure program, where the funding for that was calculated on a per capita basis and amounted to a very small amount of money for Yukoners from that program.

There is a great debate taking place right now in the provinces on the new Canada health and social transfer and how this would be allocated to the provinces. There is no agreement on this yet, because the smaller provinces are saying that the transfer based on per capita is not equitable.

The larger provinces, the "have" provinces, such as Ontario, Alberta and British Columbia, feel that they have been penalized over the last few years with the cap on cap and they want to see it on a per capita basis. That is a debate that has still not been resolved at the federal level. My preference is that if we have to take cuts, we take them on a per capita basis, because they mean we lose less money.

Mr. McDonald: That is going to be a very important debate to resolve for us because we are in the most sensitive position with the smallest population but large responsibilities.

As for the seven-percent cut - the $20 million that was cut from the main estimates for next year - did they stick with a seven-percent cut even though it was higher than that of the provinces?

Hon. Mr. Ostashek: Yes, they did. I and the Northwest Territories argued very, very hard on it, but their reply was that we receive more money than the provinces per capita so they cut us more.

Mr. McDonald: I take it then that even though the debate on whether or not cuts should be made on a per capita basis or on a percentage basis is not yet resolved, they have decided that, at least for the time being, if it is going to be resolved it is not going to be resolved in our favour, I take it.

When the Minister indicated that he had spoken to Mr. Martin and that Mr. Martin had asked his officials in front of the territorial Finance Ministers to verify it, was Mr. Martin not moved at all by the arguments being made? Did he not acknowledge or accept the arguments being made? What was his response?

Hon. Mr. Ostashek: Quite clearly, he did not accept them because they did not change anything. The arguments did not change the amount that we were being cut. Whether it will happen in the next round of cuts will really depend on who the players are. Nobody has a crystal ball to know whether Mr. Martin will be there or whether I will be here when the next round of cuts comes.

In my dealings with the federal Minister of Finance and the debates we have had and the points we have made, I believe we would stand a better chance of being treated fairly if he is the player involved, but we do not know that. We do have that huge financial bureaucracy to deal with and if the Minister changes we do not know what could happen.

One never knows. He may have other cuts in mind, but perhaps he dropped them once he learned we had already been hit by seven percent, rather than the 4.4 percent of the provinces. We do not know.

Mr. McDonald: I was trying to follow through. The train of thought I was following was that the Minister had indicated at the beginning of his remarks that, after talking it over with the federal Minister, he did not think it would happen again. We do not know if it will happen again; it may well.

In terms of other taxation issues in the country, one of the big ones will be the question of a harmonized sales tax. We have heard various federal Ministers indicate they are putting their jobs on the line if there is no change to the GST. The most talked about change to the GST is a harmonized tax rate - the harmonization of provincial and federal sales taxes.

The suggestion is that if there is a harmonization of the tax rates, and there is a single tax rate across the country, it will be higher than seven percent. What is the government's position on this matter? What has this government communicated to the federal government?

Hon. Mr. Ostashek: Since day one, we have been quite clear that we are against the harmonization of the GST and the sales tax if it will mean Yukoners will pay more at the till. I am very concerned, but I can put on the record for the Member opposite that Alberta, the Northwest Territories and the Yukon have been united. We do not want to see this go ahead.

Alberta's position is that it already has a harmonized sales tax. There is only one in Alberta and only one in the Yukon - the GST.

The federal Liberal government and the Prime Minister, with their Liberal red book, made a commitment to Canadians that - and I guess this is the dilemma they are in - they are going to get rid of the GST. We all know that that is not going to happen. It cannot happen, as they need the revenue from the GST. They have to see how they can hide it. They want to be able to tell Canadians that they got rid of the GST. They have changed the name and will amalgamate it with the sales tax, if they get consensus from the provinces.

Those are all options that the federal Minister of Finance is looking at. I can tell the Member opposite that I have raised this issue at, at least, the last two meetings I have had with him. I am deeply concerned about it. I am deeply concerned because some of the things that we hear about this issue - such as the federal government trying to get provinces on side by appeasing them with a one-tax program, the national sales tax - include such figures as 12 percent, though we figure it is more like 14 percent, that people would have to pay at the till.

If that happens and if you were to get consensus - Maybe I should clarify the record. He is nowhere near getting consensus on it at this point. He has the Maritimes on side; Quebec is already blended with the GST and has one tax, which the province collects. No other province, that I am aware of - as of two or three weeks ago when I was down there - has consented or agreed to a unified sales tax. They are trying very hard to get Ontario on side; but all of us who are against it have a really deep concern about shifting the tax burden to lower income people. It is a real concern of ours. We are totally against it.

At the last Finance Ministers meeting, we discussed an issue that we are facing, however. Several of us asked Mr. Martin, "What is the other side of this equation? What happens when you do not get consensus for a national sales tax?"

Whether or not he was trying to get us to think more about amalgamation, and whether or not he was sincere, he said that the Prime Minister had told him that he had to do something with it. He said if he could not get a consensus, they would probably eliminate it and increase income taxes. If that were to happen, I would also be very disappointed.

We are going to monitor this very closely. We are not going to support a national sales tax, but if it came to pass that the federal government said it would collect a national sales tax - that is if it got the consensus of other provinces and imposed it on the Yukon - whether or not we went along with it, it could conceivably happen.

The federal government wants to have one tax across Canada. They say they will rebate to the people the portion that they would not be giving to us. I have great concerns with that because I do not trust the federal government to rebate that to our people. If that ever happens, there would have to be a debate on how we would deal with that issue.

At this point, we are not supporting it at all. Alberta, the Northwest Territories and the Yukon are unified in their stance. We do not want to see it happen.

Mr. McDonald: I am happy to hear that, and I am actually happy to hear the justification for not wanting to see a higher sales tax, because clearly it does have a much greater impact on lower income people than on others. Obviously, it does have a higher impact on people who live in areas with a high cost of living, and the Yukon qualifies as one of those areas in Canada.

One significant problem is that the federal government cannot rebate the money to people who make the expenditures. It would be too onerous and too complicated. The best thing that the federal government could do would be to slightly improve the rebate system that they now have and perhaps give the provincial and territorial governments a few extra dollars. This would not make consumers particularly happy and that is something that we have to resist.

I would love to see the government sponsor a motion to this effect at some point in the Legislature so that we can all speak with one voice on this matter. I have a feeling that within a month or so Mr. Martin's decision is going to be made or his position will be made clear to the public and we will know whether or not he is going to be imposing something or whether or not there is a chance that this higher sales tax might be inflicted on the Yukon.

Obviously that will dominate the papers for months, and rightly so.

I will ask this question of the Minister: what has been the Yukon's position on the GST? The Minister of Finance has indicated that he has a commitment to get rid of it. Has he asked the Yukon and the provinces what they would like to see replace it? What has been the Yukon's position when asked?

Hon. Mr. Ostashek: The only option the federal government has put forward is to have a national sales tax and distribute the revenues accordingly or eliminate it completely and raise revenues through other sources. One of the arguments we have been offering the federal Minister of Finance is this: why not go with two rates in Canada? Why not go with a seven-percent rate in the Northwest Territories, Alberta and the Yukon, and go with whatever rate they want to in the provinces that do have sales taxes. We have asked them to consider if it has to be one national rate.

They have lots of arguments about why there should be one national rate, and I do not know if we are having any impact at all. I can say that he is looking for a way out of this dilemma that he is in - on one hand being instructed by the Prime Minister to get rid of this tax somehow and on the other hand not having any cooperation from the provinces or territories.

He indicated that he may be giving some signals about what he intends to do with it in this budget, but he will certainly not be addressing it in this budget. Based on what I have heard, I do not think that we will see any changes to the GST in this budget, but he may send a signal about what he intends to do with it.

Mr. McDonald: I just finished reading an article in something called The Hill Times, which is a paper that we are all receiving these days. The article made it fairly clear that the federal Liberal Ministers have indicated that if something does not happen in March they are going to either resign, or something terrible is going to happen. They have obviously done a lot of campaigning at the doorstep to replace the GST. Clearly, something might happen, or at least some signal may be given shortly. I do think that it would be worthwhile for the Legislature to express itself on this subject. I have a motion on the Order Paper on the general subject. Perhaps that might be our opportunity to speak as a Legislature before the federal budget.

I do have a couple more questions. I may come back to this once I think about the answers a little more clearly. I came up with a couple of more subjects here.

With respect to the future of the Canada pension plan and the unemployment insurance program, could the Minister tell us what position the Yukon government has taken in discussions on these two subjects?

Hon. Mr. Ostashek: I have not taken a position on the Canada pension plan, as is the case with most Ministers of Finance across Canada.

In a meeting with the Minister of Finance last December, we insisted that he hold hearings across Canada to let Canadians speak on the issue of the Canada pension plan as to how they would like us to deal with it.

We said that we will not deal with it again until those hearings are completed. Those hearings are scheduled to begin very soon across Canada. We will be having a hearing here in Whitehorse. I received a note this morning, and we will be in touch with the Opposition shortly to have one of their Members sit on that committee when it is Whitehorse.

There will be one Minister and one Member from the Opposition.

There will be one Minister and one Member from the Opposition that will hear what Yukoners have to say about how they would like to see the Canada pension plan restructured, considering the challenges that are facing the federal government, the provinces and the territories in this joint plan.

The Member opposite may be aware that we do not have a vote in those discussions. The Northwest Territories and the Yukon do not get a vote. We get a say, but not a vote. It is left to the provinces and the federal government. They all have to agree. If there is one hold-out, nothing will happen.

We have asked them to produce a discussion paper. The first paper is being put out now. They will be issued to the general public shortly. I cannot tell the Member opposite when the meeting will happen here, but we do not expect it to be before April. We hope that Yukoners come out and speak. We would like to hear what they would like to see happen with the plan.

We are unique in the north. The Northwest Territories and the Yukon are the only two jurisdictions in Canada that are net contributors to the Canada pension plan. We put in more money in premiums than is drawn in benefits. I believe that my Finance officials are going to try to calculate how much of a net contributor to that plan we are. I think it will be an enormous amount of money.

There are many reasons for that, but the biggest one was that for many years not many people retired in the north. They drew their benefits when they were in the southern climes. Still, it is an argument we can use. I sincerely hope that Yukoners will give us some direction as to how they want to see this pension plan structured for them in the future.

Mr. Chair, I move that you report progress on Bill No. 9.

Motion agreed to

Hon. Mr. Fisher: I move that the Speaker do now 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?

Mr. Millar: Committee of the Whole has considered Bill No. 8, Fourth Appropriation Act, 1994-95, and directed me to report it without amendment. Further, the Committee has considered Bill No. 9, Third Appropriation Act, 1995-96, and directed me to report progress on it.

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. Fisher: 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: This House now stands adjourned until 1:30 p.m. Monday next.

The House adjourned at 5:29 p.m.

The following Sessional Papers were tabled February 22, 1996:

96-2-96

Letter dated February 20, 1996, signed by the staff at Yukon Housing Corporation to the Government Leader supporting the President of the Yukon Housing Corporation (Ostashek)

96-2-97

Letter dated September 4, 1992, to John Devries, MLA for Watson Lake, from Hon. Maurice Byblow, Minister, regarding the government's position on additional funding for the Curragh stripping project and additional funding for the Taga Ku project (Ostashek)