The Acting Chairperson (Mr. Penner): The Committee of Supply will come to order. Good afternoon. This afternoon this section of the Committee of Supply meeting in Room 255 will be considering the Estimates for the Department of Finance.
This department had been commenced in the section of Supply meeting in Room 254, and in that section of Supply, Resolutions 7.2, 7.3 and 7.4 had been passed. Unanimous consent had also been granted by the committee to skip ahead to line 7.8.(a) where a discussion was being held on the Office of Information Technology. This is where the committee shall now resume consideration of the Department of Finance.
Mr. Jim Maloway (Elmwood): Yesterday, I asked the minister several questions concerning GISMO and the role of Julian Benson and the holding company. At that time, he had indicated to me that there were four directors of GISMO, and it took two of them to sign cheques. Our checking of the Companies Branch, however, shows that GISMO has only one director to date, and that is Julian Benson, so could he clear up this apparent confusion?
Hon. Eric Stefanson (Minister of Finance): Mr Chairman, you currently only require one director when you incorporate a company, but we subsequently appointed the four directors that I read into the record yesterday for the member for Elmwood. So there are the four directors. I can certainly repeat their names if he requires them again.
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Mr. Maloway: Well, then, I would like to ask the minister why the Corporations Branch does not have the four listed.
Mr. Stefanson: Mr. Chairman, I am informed that those changes are provided when you do the first annual return for the corporation. So, again, the process says you can incorporate a company with one director when you file your annual returns for that corporation, which is a requirement, to file annual returns for the company. You then show the total number of directors and who they are at that time.
Mr. Maloway: When the minister says that there is a requirement that there be two signatures on a cheque, is it a case where it is Julian Benson and one of the other three or just any two of the four?
Mr. Stefanson: Any two of the four is what is required.
Mr. Maloway: I have been told that the SHL contract has been in some way tied to a possible MCI call centre in the province. I am wondering whether the minister can confirm any of this.
Mr. Stefanson: Mr. Chairman, if I understood the question correctly, the contract with Systemhouse has no conditions or requirement for a call centre from MCI.
Mr. Maloway: Is there any work being done, though, on a call centre for MCI?
Mr. Stefanson: Mr. Chairman, an announcement was made a few months back by MCI with certainly representatives from the provincial government in attendance. I believe there were other elected people. I could certainly get the background of that announcement for the member. I think there was a press release done at the time, coverage in the local media. As to the status of that call centre, I am told it is to be opening soon, but not something that falls directly under my jurisdiction. I could certainly undertake to get a status report of that announcement from MCI and provide it to the member.
Mr. Maloway: Mr. Chairman, so is the minister then stating that there is absolutely no connection between the SHL contract, SHL being given the contract and MCI setting up a call centre in Manitoba?
Mr. Stefanson: Mr. Chairman, when the RFP went out for desktop services, one of the elements of it was an indication of what economic development might take place in the province of Manitoba. I am told at that time that Systemhouse indicated the possibility of a call centre being established by MCI. As I have already indicated to the member, that was not a condition of the awarding of the contract to Systemhouse. Systemhouse won the contract on the basis of merit.
Mr. Maloway: I understand the minister's point, and I was not suggesting that it was an actual condition of the Systemhouse contract that they set up the call centre. The suggestion has been made, though, that there is a connection; SHL got the contract and the requirement is that MCI set up a call centre in Manitoba and that the two are very much connected.
Mr. Stefanson: Mr. Chairman, as I have already indicated, Systemhouse certainly won this contract on technical merit and price, but I have indicated that, when the original requests were called, economic development possibilities were requested, and it was indicated at that time that this was a possibility.
But the contract, there are no conditions relative to the establishment, and, certainly, the awarding to Systemhouse was on merit, on product and on price.
Mr. Maloway: I understand that the government currently operates on WordPerfect and that it currently has a spreadsheet in WordPerfect--the person who developed the spreadsheet is a person by the name of Dale Watson who is no longer with the government--and that the government's budgeting process is contingent upon this spreadsheet working. Now, this spreadsheet evidently has to be converted, as does all of this software converted over to Microsoft Office. I am just wondering whether the minister could confirm that there is a major problem here and how it is being dealt with.
Mr. Stefanson: I think the member is incorrect with most of what he is suggesting. Dale Watson continues to be employed within the department by the government. Systems are being migrated to the new system. That is taking place, will be taking place with the various elements. There will be some adjustments as that is done, but there are no particular problems here that I am aware of. If the member has any more specifics, I would welcome receiving them.
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Mr. Maloway: I would like to ask then why the decision was made to migrate, as he says, to Microsoft Office from WordPerfect. If the entire government is on WordPerfect right now, then why would they make the decision to switch over to Microsoft Office?
Mr. Stefanson: Again, the member's information is wrong. WordPerfect is not the only system being utilized within government. It is one, along with Microsoft and along with IBM Lotus, and it is not the most significant utilization within government. In the whole area of desktop, all three of these are used to various degrees, although we are going to be migrating the entire system to Microsoft.
Mr. Maloway: Well, I would like to ask the minister what sort of problems they are having then, converting this 40-page spreadsheet that handles the government budgeting, what problems they are having in converting it.
Mr. Stefanson: Mr. Chairman, I do not know what information the member is coming with or where it is coming from. There are no problems that I am aware of or being told about relative to the spreadsheets. Even I am not sure what he specifically means when he is talking about the spreadsheet within the Department of Finance. Again, many of the elements in there are not WordPerfect, they are Lotus, so he would need to provide more detail.
Mr. Maloway: Mr. Chairman, I think I will go back to the drawing boards on this one, track down my source and get better details for the minister and come back in concurrence and ask some more questions about it.
I would like to ask the minister a couple of questions regarding the IBM contract with Family Services. I asked him yesterday about this question. My understanding is there are all sorts of problems associated with it. He indicated that the contract had nothing to do with GISMO, and I am trying to understand why not. Assuming that GISMO is such a good idea and that all of the software and hardware under Desktop will be included as part of the GISMO assets, I am wondering why that would not be extended automatically to the IBM contract in Family Services, given that the contract is a $7-million contract, given that the contract is a four-year contract that just started last year.
Why would it be allowed to operate on its own, and why would it not be included? What characteristics are there of this particular contract that do not make it GISMO-friendly?
Mr. Stefanson: Mr. Chairman, good question, but the answer is that there are at least a couple of reasons why the arrangement with IBM for the one-tier welfare system that we discussed yesterday does not have to be implemented through GISMO, and that is because the arrangement was entered into prior to the establishment of GISMO. But more importantly, the arrangement with IBM is matching the savings and benefits with the cost, that the payments to IBM are to flow on the basis of the cost and savings being achieved within the system.
Mr. Maloway: Well, that was another question that I had. I was wondering why in the original documentation it indicated that IBM would be doing the project for free and it would be getting its revenues through various means. I was wondering if the minister could explain to me what those various means were.
Mr. Stefanson: Mr. Chairman, IBM will front all agreed-upon costs for the project and be paid from the achievement of operating savings which arise from the implementation of the information technology solution and the realignment of services as a result of that implementation. So again, it is a matching of costs and benefits, which is an issue we discussed yesterday. I am certainly prepared to provide as much information as I can today. Obviously, this project directly falls under the responsibilities of Family Services, but I am certainly prepared to try and provide as much information as I can.
Mr. Maloway: I understand that the base was in 1994, I believe, but can the minister tell us how much money IBM will realize for its efforts over the four years?
Mr. Stefanson: Again, the arrangement is, and IBM acknowledges that the project has an established cost that will not exceed $8.7 million all inclusive and including, without limitation, IBM financing costs.
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Mr. Maloway: I would like to ask the minister then: what is the breakdown there between hardware and software inputs to this contract?
Mr. Stefanson: As I indicated, this is not directly under my responsibility. I will, however, undertake to attempt to obtain that information for the member.
Mr. Maloway: Can the minister tell me then whether the contract is on schedule?
Mr. Stefanson: I think I answered this question for the member yesterday. I do not know if he is looking for consistency or not, but at this point in time the information that I have is that the project is still coming in on cost as expected, but there were some adjustments to the time lines. I indicated to the member yesterday that originally it was expected to have this project completed by this fall, and it is now going to be early in 1999 when the project is completed, but it still meets all of the implementation requirements and adjustments that Family Services are looking at in conjunction with the City of Winnipeg.
So that slight time delay is not a major problem. It is a major undertaking, the changes that are being put in place. It is shifting from, as we know it, a two-tier welfare system today to a one-tier welfare system within the city of Winnipeg, and obviously the technological adjustments are very significant. So at this stage it is certainly coming in on budget, but at the time the implementation was adjusted somewhat.
Mr. Maloway: I would like to ask the minister what the relationship is, if any, between GISMO and the Pan Am Games.
Mr. Stefanson: Again, Mr. Chairman, I am not sure what information the member is bringing, but there is no tie between the Pan Am Games and GISMO. He might be thinking of the whole issue of the implementation of the desktop equipment. There will be a period of time in 1999 where some of either the existing or potentially new equipment will be provided to the Pan Am Games.
That is being worked on in terms of obviously the scheduling and requirements of government being first and foremost, but because of the changeover and the quantity of equipment that is being dealt with here, there is an opportunity to provide some assistance to the Pan Am Games. That is currently being worked on as it relates to the equipment being provided for the Desktop initiative. So that might be where he was coming from, so it has no direct relationship whatsoever to GISMO and the Pan Am Games.
Mr. Maloway: That is sort of what I am interested in knowing is what is actually happening with the IBM contract for the Pan Am Games, and how that is going to mesh and the amount of equipment that is being used, and what is going to happen to it after the games and questions like that.
Mr. Stefanson: Mr. Chairman, discussions with the Pan Am Games have been on the basis of providing potentially in the range of about 500 units, but that is in the stages of being finalized, as I have already mentioned. If some of that equipment is the new equipment, it will be provided to the Pan Am Games and then come directly to government thereafter and be implemented into our changeover in government. If some of it is used equipment, obviously it would be equipment that would have to be secured first, cleared first, everything eliminated from that equipment provided to the Pan Am Games and then disposed of by government subsequent to those games. So that is in the process of being discussed both internally and with the Pan Am Games. It is in the range of about 500.
Again, we see that as an opportunity to provide assistance for the games where we are either utilizing surplus equipment that is going to be distributed or new equipment that is coming into our system and allowing them to use it for a period of--I think we are talking three months, four months--three or four months leading up to and during the games.
Mr. Maloway: Currently, your rollout program with your desktop plan is a couple of months behind. You are supposed to have 2,300 units in place by July 1. Right now, you only have a thousand in place. You are supposed to have the whole thing out by April 1 next year.
So at that time, if you do catch up, you are going to have 7,200 desktop computers in place next March or April. Then are you saying you are going to take 500 of those away for the Pan Am Games, or you are going to buy another 500 new ones for the Pan Am Games and then meld them back into the desktop?
Mr. Stefanson: First of all, Mr. Chairman, I do not think the numbers that the member provided were accurate. Certainly, the number 2,300 by July 1 is not an accurate number, and I can undertake to provide him more accurate information in terms of the implementation schedule.
But I think the more important issue is really his very specific question. First of all, no, we will not be taking new equipment out of circulation that has been put in place in Manitoba. That would not make any sense, to have new equipment installed somewhere in government and then take it out for the Pan Am Games. That is why I have indicated to him that those discussions are ongoing, because if it is used equipment, then it is very straightforward because the used equipment has been taken out of circulation. So long as it is secured and all information removed, it can then be provided to the Pan Am Games.
If it is any new equipment, it would only be on the basis if there were any additional requirements within any area of government. So if we had a cause for any new equipment over and above roughly the 7,200 to be coming on stream, that would be the only basis that new equipment would be provided. That is exactly the analysis and review that is being undertaken right now.
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Mr. Maloway: Well, how do you plan to provide equipment into the Pan Am Games? If you do not plan to take any of your existing equipment away from the government for that three-month period and you do not plan on buying any new equipment, then how do you plan to provide equipment?
Mr. Stefanson: I thought I was clear. First of all, if it is used equipment, then it is very straightforward, because we will have 7,200 new units in the system by April-May of 1999. Obviously, that means we will have 7,000 old units that can be secured, that can be cleared, and if we use the old units, it is easy, that they go to the Pan Am Games before we ultimately dispose of them on the basis that we will be disposing of old equipment. If we were to use new equipment, as I have already said to the member, it would only be if we have some incremental requirements over and above the 7,200. We will not be taking new equipment that we have installed in the province of Manitoba and shifting it to the Pan Am Games.
We will not be going out and buying any equipment specifically for the Pan Am Games. If it is new equipment, it would be on the basis of new equipment that we would be requiring, and it would only be the timing issue of when we were going to implement it in government. If there was an opportunity to allow the Pan Am Games to use that equipment for three to four months, they might be able to use some new equipment.
Mr. Maloway: Well, that is a sensible approach to it. I did ask the other day about the used equipment as to where it was going to end up, and the minister indicated that it would be given to some sort of a committee that would then decide which schools would get priority but, in essence, it was going to end up in schools, and it would be done on sort of a lottery basis, I believe. So if the minister could confirm then that after it is used at the Pan Am Games, and then we are only talking about maybe 500 units here out of 7,000, then those 500 will be spread out through the school system, I would think.
Mr. Stefanson: I think the member is basically correct with what he said, that that is being concluded, but the expectation is that the majority of the used equipment will end up in the school system. There is that organization Computers for Schools and Libraries, but there would be a whole time frame of rollout, because there would be certain upgrades, certain adjustments made.
So, as he has already said, the fact is that there will be up to 7,000 units being made available. The conversions will be done over a period I believe of probably about two years. So to take 500 out of the used and provide them to the Pan Am Games would not be a difficult thing to do at all. Having said that, that still has not been finalized, whether it will be all used, all new, or some combination of both, and that is what is being finalized now, but his understanding, if it is used, of how it would work is basically correct.
Mr. Maloway: What remains to be cleared up, though, is the rollout timetable, because the rollout timetable clearly indicates that by July 1 there would be about 2,500, and the department confirmed the other day that they only have 1,000 units in place right now. So they are less than 50 percent of where they are supposed to be. If the minister has some other information, then I would sure like to have it because both his colleague and I are operating under wrong information then.
Mr. Stefanson: Mr. Chairman, I think the member is referring to an original rollout plan and like any plan that is revised continually and continues to be revised continually, I will certainly undertake to provide him with the most current status of the rollout as soon as I can in the next few days.
Mr. Maloway: There were certain provisions under the SHL contract, though, that demanded that successful bidders provide, I believe it was 500 computers within a week of acceptance of their bid, and this information seems to indicate that IBM did not make good on their delivery commitments. Can the minister confirm that this was the case, and could he tell us whether there were any penalties under the contract that would have applied if that were the case?
Mr. Stefanson: Mr. Chairman, I am told the provision that the member is referring to relative to 500 units was not a provision within our contract with Systemhouse. If there had been any adjustments to the whole rollout of the desktop units over the last period of time, it is as much as a result of our precautions and our initiatives as it is anything to do with Systemhouse in terms of being absolutely certain that our system is ready, that the people are ready, all of the issues we need to deal with. So we are certainly not unhappy with how the system is rolling out into government today.
Mr. Maloway: Can the minister give any indication of how many jobs in Manitoba have been lost as a result of this Systemhouse contract at this point?
Mr. Stefanson: Mr. Chairman, I would not agree with the statement about jobs being lost in Manitoba. I think on an overall basis there would be more jobs in Manitoba, and I look specifically at Systemhouse, which has created the Manitoba operations centre to serve as the headquarters for the help desk services being provided to the government of Manitoba. The establishment of that centre is estimated to create approximately 100 new jobs. That centre is located in downtown Winnipeg. The establishment of the operations centre is expected to increase local consumption through the purchase of supplies and services from local suppliers, in addition to obviously some injection into the Manitoba construction industry during this establishment of their operations centre.
Currently the operations centre is dedicated to serving the needs of Manitoba government, and SHL intends to pursue other clients obviously from the centre, spurring other growth, creating more employment opportunities. So, on an overall basis, I would suggest there are more jobs in Manitoba's economy as a result of this initiative.
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Mr. Maloway: The minister should know that that is just not so, that a hundred new jobs are--they may have created a hundred jobs, but, in fact, 50 percent, or 50 of those positions, as the minister well knows, were simply transfers out of government over to Systemhouse. As a matter of fact, the request for quotation made it very clear that the successful bidder had to employ I think it was 53 civil servants from the government, and those positions were transferred over to the successful bidder.
So at the very best one would see perhaps 50 new jobs created based on this 100 that he is making the assertion on, but the fact of the matter is that these computers, I believe, are burned and configured in Toronto. Is that not the case?
Mr. Stefanson: Mr. Chairman, again, I think to correct the information that the member put on the record, I believe the number of former government of Manitoba employees who accepted job offers from Systemhouse was more like approximately 35, so a hundred new jobs is still a significant increase in net new jobs in the province of Manitoba.
Of course, through the implementation of the Desktop initiative, no individuals lost jobs or lost employment opportunities, so, again, that was an important part of the introduction of the Desktop initiative.
In terms of IBM equipment, and he refers to it being burned or configured in Toronto, I know that that is not done in Manitoba. The product is shipped to Manitoba, but I believe IBM performs those functions in more locations than just Toronto or Ontario.
Mr. Maloway: Well, early on in this process, at least one of the unsuccessful bidders suggested that at least there would be a net loss in Manitoba of a hundred jobs, and since then another unsuccessful bidder has taken issue with the hundred and feels it is more than that. I mean, we are not being excessive here. We are being fairly conservative, pardon the pun, in this estimate and that, in fact, we have a net loss of jobs as a result of this government's move in this direction.
I might point out, Mr. Chairman, that the federal government has a different method for choosing suppliers, and if you canvass the computer community, you will find that there is general agreement that the federal government process is fine. It is a nonbiased system. It allows the little guys to compete with the big guys. Everywhere I go and whoever I talk to about this, pretty much everyone agrees that the federal government process is fine.
Where they do find problems is with this system that was concocted here to, in effect, cut out the small Manitoba company, and that is what has, in fact, happened. We see here at least a minimum of a hundred jobs lost to Manitoba as a result of this government's bungling in this area.
Mr. Stefanson: Well, Mr. Chairman, I know the member has had this discussion, in part, in the Estimates of Government Services, but I have already indicated to him that there are net jobs of a hundred, net incremental jobs of 65. I have no evidence whatsoever in terms of where he talks about net losses of a hundred or more jobs.
If he has specific Manitoba companies he can point to and they will confirm or attest to that, then he should do that, but I have no evidence to support that at all.
Our information technology community is doing very well in Manitoba today. All kinds of Manitoba companies are doing extremely well, not only in our economy, but distributing services and products outside of Manitoba and outside of Canada.
His suggestion that the system was concocted to cut out small Manitoba companies is absolutely, 100 percent incorrect. Small companies were allowed to bid on the Desktop contract, as they are on all kinds of other contracts, and some did just that. Some bid. As a result of Systemhouse getting the contract, they are doing work with a number of Manitoba companies, both small and large, and I can certainly undertake to provide him with a listing of some of the Manitoba companies that Systemhouse is working with. So our information technology community is very strong in this province, and rightfully so, because it is very competent, but we also have an open bidding system, and we look at price and quality and all-in costs with many contracts that we award.
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Mr. Maloway: There is a lot of concern in the industry about the way particularly the hardware contract was handled because, in fact, unlike Fleet Vehicles or any other tendering process where you simply list your specifications for a product and send it out to market--when GM, Ford, and Chrysler bid on cars, really it is a choice on price. I think when the minister goes out shopping for a computer, he buys it in the same way that he buys a car.
One would hope that he would look at the specifications and he would make certain that they were consistent and get quotes from two or three companies, and it would boil down to price. It would be no different than buying the car. It would boil down to just a simple price question. But the system that they concocted--that is the only other way to describe it that I can think of--they listed as, gave 15 percent for the price. So 15 percent of the points were given for price, yet they gave 25 percent for general qualifications.
Now, general qualifications were described as factors such as vendor stability and vendor presence. Now, good God, you know, when I talked to people that bid on this, I have had people tell me, regardless of what the Minister of Government Services (Mr. Pitura) says about this or the Minister of Finance (Mr. Stefanson) will say about this, these people were not given an explanation of these criteria.
I have talked with more than one of the bidders, and they both--and I am not putting words in their mouth. Through discussions it comes out very clear that they asked for, in some cases, but were not given the information as to what vendor stability and vendor presence, what the definitions of those were. For example, one of them was not given any criteria on the performance bond, and that, by the way, was what cut a lot of the local participation from even producing a bid on this contract.
SHL, in this one case, could not provide the criteria that is required for the bonds. So the bidder simply had to go in blind and arrange a bond without knowing what their criteria were. They were unsure whether it was supposed to include delivery or whether it was supposed to include failure of the equipment. They were not told how long they would have to hold the bond, because the bonding company would want to know basic requirements as to whether or not the bond would be held for a short period of time or a long period of time.
So, in fact, they were forced to come in with a $1.5-million bond without any criteria. Without knowing whether they needed a $5-million bond or a $100-million bond, they came in with this type of bond without knowing the criteria.
So, you know, clearly there is no question that there are people that are unhappy about how this was handled. The government could have saved itself a lot of trouble by simply adopting the federal program of having a nonbiased system that evidently works well. I am not any expert in this business and I do not have any experience with the federal system, but it is a system that people respect and people like out there, because little operators can get a piece of the contract, provided they are supplying a consistent level of quality equipment to the government. The government right now is purchasing vehicles, and it is purchasing them based on price. You cannot tell me they are not.
Are you telling me that when you send out a tender for the purchase of cars for the government, when Fleet Vehicles does that, that they would say that we are only going to put 15 percent of the points on price? Come on. That is just not the case. So explain to me why these would be any different than buying cars.
Mr. Stefanson: Mr. Chairman, I think what the member is missing in his line of questioning is the total cost of ownership of the system over a five-and-a-half-year period. I think he knows very well that the system is also a very labour intensive system. But beyond that I understand that these exact or very similar questions have been asked in the Estimates of Government Services where they were appropriately asked because they have direct responsibility for the Desktop Management Unit. He has asked questions here which are appropriate relative to GISMO, the Government Information Systems Management Organization, and its relationship to Desktop and the payment of the bills and so on. But I know that my colleague, the Minister of Government Services (Mr. Pitura), has answered this question in Estimates and answered this question I believe in Question Period probably on more than one occasion.
So I encourage the member for Elmwood to pick up those copies of Hansard and read them again if he cannot recall the answers that were given to him by the Minister of Government Services.
Mr. Maloway: I have no problem recalling the answers because they are just inconsistent, and they are not really answers, that is right. That is sort of the hallmark trade of this government is 10 years of nonanswers.
You know, Mr. Chairman, if he wants to talk about the total cost of ownership, those figures are available for cars as well. There are statistics that come out in the paper periodically which indicate that it costs, you know, total cost of ownership, that concept that he likes to talk about, it is $7,000, or whatever, in Montreal, I believe it was, and $6,000 in Winnipeg. That is the total cost of ownership in owning a car. That is the concept that he is employing here with the computer contract.
But at the end of the day, when the government or anybody else goes out to buy toasters or cars or whatever it is, they list the specifications that are required under the contract. What it boils down to is price, provided that the specifications are being met. That is what should be done here. You know, when you go out and buy a computer and you get your quotes from two or three companies, you ask for quotes based on some consistent specifications. You ask for a Pentium 2, 266, certain type of RAM, certain type of this, certain type of that, and that is how the companies quote.
Computer companies, for the minister's information, are used to that. They are used to providing quotes based on certain specifications. If you were to phone Dell or Gateway or Mind or Powerland, any of these companies, they will do that for you. So, yes, it does boil down to price. So it did not take any rocket scientist to figure out that, when the specifications came out and to the extent that they were even explained at all, price was only given 15 percent of the total points. Well, anybody can figure out that that is going to favour a high-priced producer, and who happens to be a high-priced producer? Well, IBM has never been known as a cheap producer of a product. Let me assure you of that. They have never come on the lower side of hardware costs.
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So, right away, the criteria were developed in such a way as to favour a company like IBM. I do not say IBM, but a company like IBM, a company that would come in at the higher end of the hardware quotes. So that was no surprise at all. The point is that the people were treated in such a bad way because, when they were asked for definitions of vendor presence, how do you define? I would like the minister to define vendor presence. I mean, IBM presumably got 25 points out of that, but a Manitoba company in vendor presence would get far less. How could they possibly give one-quarter, 25 percent, of the points to a classification or a criterion such as vendor presence and only 15 percent on price? It is just unbelievable that they would have a system like that in place.
Mr. Stefanson: I guess I have to disagree again with the member for Elmwood (Mr. Maloway). The comparison he makes is not an accurate comparison to compare a car to a Desktop Management Unit, which is a fully integrated system, has many other costs attached to it. In fact, I think he knows that, when you look at Desktop Management initiatives, the capital cost really does only end up representing about 10 percent to 15 percent of the total cost of the contract and the services.
So, again, it is not a direct comparison by any stretch of the imagination. But even having said that, I think people who are buying cars do look at the total cost of ownership. They do look at what it is going to cost them to run a car. They do look at what kind of gas mileage they are going to get, what it is going to cost to insure the car, how reliable the car is in terms of maintenance, a whole range of issues.
So, even though I have discounted his comparison, even attempting to accept it, I think most people nowadays look well beyond just the raw purchase price of a car. They look at all of those things, and they want to know what it is going to cost them to own and operate that car over the expected period of use that they are going to have it.
So, again, I have already answered that question. I know he has had answers from the Minister of Government Services (Mr. Pitura) which I am certain are very similar.
Mr. Maloway: I would like to ask the minister why the government is replacing its servers without going to tender.
Mr. Stefanson: I would encourage the member to be a little more specific. If he is talking about the servers within the whole Desktop Management arrangement, that is part of the services being provided by Systemhouse, Mr. Chairman.
Mr. Maloway: Well, the complaint that has been made and made more than once is that there was a tender for the hardware, but when it came to the servers, they are being replaced without tender. I believe Hewlett-Packard are providing the new servers, and those are being done without tender. I have not had just one complaint about this. I have had actually two. They obviously do not want to talk to the minister about these things.
Mr. Stefanson: I know within the arrangement with Systemhouse there is an undertaking to obviously attempt to utilize as much Manitoba content as possible and give opportunities to Manitoba companies. I have already indicated that I can provide the member with a listing of a number of Manitoba companies that are doing work for Systemhouse as it relates to the Desktop Management initiative. His very specific question relative to the servers and how the servers were decided and awarded, I will provide him with that information.
Mr. Maloway: I would like to get back to Julian Benson here and the holding company called GISMO. Does it have any connection whatsoever or applications to any of the Crown corporations?
Mr. Stefanson: I think the member should check his list of questions. I think he asked me this question yesterday, and it is the same answer as yesterday. No, there is no connection to the Crown corporations.
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Mr. Maloway: Well, Mr. Chairman, I mean, if this holding company idea was such a good idea, one would think that it would apply to the entire government and the Crowns. Why would it not apply to the Crowns?
Mr. Stefanson: The Crowns have their own access to capital, their own financing arrangements and so on to do their acquisition or whatever requirements they have. As I explained to the member yesterday, the purpose of GISMO is that it is a vehicle to fund the acquisition of hardware and software, the system development, the consulting work as the systems are being developed. So it is the vehicle to accumulate all of those costs. Once the system is up and functioning, then it is a matter of taking those costs and spreading them out over the estimated useful life of that system. So within government, we needed a vehicle to do that. We established GISMO.
Within the Crown corporations, they have the ability to do their financing, to establish their assets, and to amortize them, so there is no need for Crowns to utilize Gismo or any other similar structure. They can do it from within their existing frameworks.
Mr. Maloway: I guess I am still having some trouble figuring out why the government has to do this. I mean, I understand in a private business there are tax implications for doing things like this, but why would the government have to set up a holding company to do this? Surely they could have done it another way without going through this route.
Mr. Stefanson: Well, Mr. Chairman, it is an interim step to move to a system that I explained to the member yesterday, where we will be amortizing ultimately all of our assets. What we are talking about here is our information technology, our hardware and our software, with some of the recent developments. I read into the record for him yesterday the positions of the Canadian Institute of Chartered Accountants through their Public Sector Accounting and Auditing Board about their direction on disclosure of capital assets.
We, as a government, have indicated we are prepared to move in that direction. In fact, I expect that we will be ready to move in that direction for the year 1999-2000, as it relates to capital assets of government across the board. So this is an interim step to allow us to start to do it with the information technology development, to have an entity to capture all of those costs.
Once they are developed, as I said yesterday, they will roll back into government, and they will be amortized over their useful life. It has the support of the Provincial Auditor. It is starting to abide by the direction from the CICA and so on. So that is the rationale, Mr. Chairman.
Mr. Maloway: Mr. Chairman, what other jurisdictions, then, employ this method in Canada?
Mr. Stefanson: Well, Mr. Chairman, I believe most provinces are now moving in the same direction of ultimately starting to amortize their capital assets. How each province is getting there, I would have to check with other provinces and see how they are getting there. But the objective of getting to the stage of being able to amortize your capital assets to match your expenditures with your benefits over the useful life of the assets is something that I believe all provinces are heading to.
But, today, there are a lot of differences out there because some are currently doing some of it, some are currently doing none of it, and some are going through transition. So, again, there is no direct comparison to any other province, and we are going down the path of getting to the point where we will be amortizing all of our assets, Mr. Chairman.
Mr. Maloway: Mr. Chairman, before we get into Y2K, I would like to ask the minister whether he would agree to take a closer look at the federal procurement policy for computers with a view to possibly adopting portions of it for future hardware procurement.
I think that this was a big mistake to go the way he did, but, certainly, this is a long-term issue, and this equipment will have to be replaced in three or four years, maybe even earlier than that. So if he would look at why the federal system appears to work so well and get back to me on that, I would appreciate it.
Mr. Stefanson: Mr. Chairman, I will certainly look at the federal system without prejudging how it is working, but I will look at the federal system and get back to the member.
Mr. Maloway: Mr. Chairman, in the area of Y2K, I would like an update from the minister on what the Y2K committee is doing. He, by now, should have that recent report of the committee to provide to this side of the House, and he may also have the older reports with him at this time, I am not sure. But if he could give us an update as to what is happening with Y2K, I think it would be appropriate.
Mr. Stefanson: Well, we just touched on this at the end of yesterday's meeting, and I did indicate to the member that I am very satisfied with our progress as it relates to the Year-2000 project. I think we are one of the most advanced provinces in all of Canada as it comes to dealing with this issue. That is increasingly being recognized by other governments and other organizations. We have provided some additional information to the Provincial Auditor.
I am currently in the process of reviewing further information, including a final status report and so on. Certainly, once all of our reviews are complete, I will take a look at providing a copy of that information to the member for Elmwood (Mr. Maloway). I know his strong interest in this area; and, as information becomes available, to give him the comfort that I know he is looking for that we are on top of this issue, because we are on top of this issue, certainly I will provide him the information to give him that added level of comfort that we are well underway.
Mr. Maloway: Has he read the Y2K committee's recent report?
Mr. Stefanson: I would be curious what report the member is specifically referring to, but I have read various briefings and status reports on Y-2000 for the Province of Manitoba. I am certainly satisfied that we are in good shape.
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Mr. Maloway: I do not agree that the minister's assurances here are of great comfort. I would like to see this report. I know the Y2K committee was producing a report a month ago maybe. I know that, when I was in contact with them, it was going to be out in a few days. They said they would send me a copy, but I am still waiting for it.
Mr. Stefanson: I would be curious who said that to the member for Elmwood. I would expect that, if anybody gave him any direction, it would have probably been to contact myself, that reports would ultimately be made available to myself, and that, after we have had a chance to review, assess them and deal with them, we could then make a copy available to the member.
Mr. Maloway: I think the minister is hiding another report here. I mean, I am aware there is such a report that has been recently concluded, and the minister, I suppose, can sit on these things as long as he wants. There is nothing I can do about them.
I would like to ask him, has he met with the SOS-2000 committee? It is Mr. Alain Desfosses who was in town a month ago representing the federal task force. At the time I know he was busily hunting down the Premier (Mr. Filmon) and the Finance minister and anyone else whom he could meet with and discuss the matter with, but I think their schedules were kind of busy. He was unable to talk to them, so he ended up talking to me and some other people who were around. I would like to know if he has talked to this gentleman.
Mr. Stefanson: First of all, Mr. Chairman, I do not want the member to leave inaccurate information on the record to suggest that we are hiding any report. We are not hiding any report. I have indicated that as reports become available to me and once we have had an opportunity to review them and assess them, unless there is some particular reason not to provide a member with a copy, I will make a copy available for him, or if I am unable to, I will certainly explain to him why it is not appropriate. In the case of the Y-2000, any status reports, I would expect that I can provide the member with those reports at the appropriate time, and, as I have already indicated, I will undertake to do so.
In terms of his very specific question about the SOS committee, my understanding is their mandate is very much focused on issues external to government directly related to businesses. As he indicated, they were in town. I believe they met with the deputy minister of Industry, Trade and Tourism, and Mr. Todd Herron, who is seated here at the table with me, who is with our Information Technology office, participated in that meeting. So we were represented from our Information Technology office.
Mr. Maloway: Well, then, the minister would be aware that they are concerned sufficiently with this matter that they would like to see governments tie loans and grants approvals to Y2K compliance. Is the minister aware of that, and does he agree with that?
Mr. Stefanson: Mr. Chairman, just on the question about the SOS committee, I do want the member to know that we do serve on two separate national committees with the federal government, another government dealing with Y-2000, and that certainly gives us an opportunity to see how we compare to other provinces right across Canada. I want to assure the member that we are preparing very well when it comes to our current status of dealing with the Y-2000.
In terms of the very specific issue that he just raised, that is a position that was put forward at that meeting, to tie any loans or grants to Y-2000 compliance. It is an issue that obviously Industry, Trade and Tourism will be addressing and giving consideration to. So that was certainly a concern raised at the meeting, and, obviously, it is an issue that Industry, Trade and Tourism will be addressing because they are the department within government that primarily deals with our loan programs and any business support programs.
Mr. Maloway: Well, the basic concern here, as I understand it, is that the government can get its own house in order, and it is doing that. Slowly but surely, it is getting itself Y2K compliant, and businesses are being chased around on this issue as well. The banks are making it a condition of loan renewals and so on, that businesses be Y2K compliant, and insurers are looking at the issue now of requiring Y2K compliance before policies are renewed.
So there is this level of activity out there, but people are tending to look inward and look at just their own compliance and not at their suppliers, and that seems to be the major problem here, that the chain is only as good as the weakest link and that you can replace all your old computers with new computers, but if your kid walks in with a DOS game some night and puts it on the machine, it is going to take the whole thing down.
So your fancy $150-million program here for Desktop potentially could be thrown out of whack by some kid with an old DOS program, because the computers are interconnected. That is the theory behind all of this.
So their case is that the government has to be out promoting the idea. I have taken this up with the Minister of Consumer Affairs (Mr. Radcliffe), and he has been at a couple of meetings in the public. Since this meeting we had, he is evidently now promoting the idea. That is what I am really asking the minister to do, not just worry about his own area here, the government, but what is he doing to make certain that other enterprises are Y2K compliant?
For example, has he made any effort to contact all the nonprofit organizations in this province to impress upon them that they may be out of business January 1, the year 2000? That is why the recommendations of this Year-2000 committee did make--recommendation 11 was that they were asking that all levels of government require their lending bodies and programs to make the existence of a formal Year-2000 plan a condition for securing grants, contributions, loans, loan guarantees.
Now, I would take this up with the Minister of Industry, Trade and Tourism (Mr. Downey), but he is never here. I mean, if he understood the problem, I can see where he could be out promoting it. He would be promoting it in South America or all these countries that he goes to; he is never in town. So I do not expect him to be able to (a) even be able to understand the problem, let alone promote it.
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So it is up to the Minister of Finance (Mr. Stefanson), who is here more often than the Minister of I, T and T, and who, I think, has a better grasp on issues, to take some initiative here and kind of get the ball moving outside the orbit of just being in the government here. I would appreciate some sort of confirmation on his part that fully understands all these issues and how important they really are, and that he is going to make some effort to bring this up with external bodies, external to the government.
Mr. Stefanson: Mr. Chairman, I know the member for Elmwood (Mr. Maloway) is very supportive of our Minister of Industry, Trade and Tourism and his continual performance in promoting our province, helping to help businesses expand and relocate, and attract additional economic development to Manitoba. That is one of the many reasons we are seeing our economy perform so well these days over these last few years.
But in terms of his very specific question, and that is a very important question, the one he does ask, because there is a role for government to play in terms of the whole issue of awareness of the Y-2000 issue, and we are doing just that in a couple of ways. We are doing it completely through our supply chain and all of our affiliates right through government as we are dealing with individual businesses making them aware of the Y-2000 requirements. As well, Industry, Trade and Tourism is working on a sectoral basis with individual sectors of the economy, again, heightening awareness and making these companies aware of the Y-2000 requirements.
They also have some specific recommendations before them that they are looking at like the member outlined, the recommendation relative to any government loans or other assistance. At the end of the day, I think we would agree, it still is incumbent upon the individual businesses and companies to make the adjustments. We fully expect that they will do that and in doing that there are other organizations that are working with companies as well. Obviously, the auditors of individual companies are bringing this issue to the attention of companies right across Manitoba, right across Canada. So it is an important point that he raises about the role we can play as a government. I assure him that we are playing that role and we will continue to do that in terms of our supply chain, our affiliates and other avenues to promote the adjustments required for year 2000.
Mr. Maloway: Would the minister consider the idea of an all-party committee to be set up to promote the idea of compliance with Y2K issues?
Mr. Stefanson: Recognizing the time lines that are required to address this issue and the need for expediency and the fact that we are doing the kinds of things he has already asked about, I think there are other vehicles to do it more quickly, more efficiently and with the direct contact with many of the organizations without the need for an all-party committee. I am not aware of it being established in any other jurisdictions. I would be curious what information the member might have, but I certainly take note of any suggestions that he makes in this area.
Mr. Maloway: I have a final question of the minister regarding embedded chips. I mean, the embedded chip issue is something that even the Y2K committee was really not too aware of even a year ago, I am told, and particularly as it affects municipalities. I understand from my liability standpoint that municipalities right across North America may find themselves in huge law suits because the traffic lights may not work properly, the sewer system pumping stations and all sorts of other functions of the municipality may not work right. I would like to ask the minister whether he is aware of any major problems the government may have in the whole area of embedded chips and also the municipality issue.
Mr. Stefanson: Well, the member raises just one of the many aspects of the Y-2000 initiative that is being addressed. Part of the efforts of the committee are directed very specifically in that whole area of being sure to identify and find all of the embedded chips and obviously have the various steps in place to deal with them. So it is an area that is extremely important to be addressed in a number of areas beyond just municipalities, I think, as the member probably knows. So part of our Y-2000 efforts and our Y-2000 initiative in committee is to be a part of addressing that issue.
We will be working with municipalities directly on this issue as well.
Mr. Leonard Evans (Brandon East): I just have one area of concern under this, and I mentioned it yesterday. That is the successor to Manitoba Data Services. I think it is IBM now. I do not know how you describe this particular program, but MDS used to be very central in providing basic data processing services to government departments. They were a Crown corporation and they virtually had a monopoly on it. I am just wondering: what is the status of this program now?
Mr. Stefanson: Mr. Chairman, that agreement runs till the year 2000, I think, as the member knows. I had more specific details I think in the last year or two showing that our cost for those services have actually been going down significantly over the last few years. I can certainly undertake to provide him current information. As some of these new systems are coming on stream that we have discussed over the last day, there will be obviously significantly less requirement in this whole area relative to the services that ISM are currently being provided, because what they are currently providing are becoming components of some of the other initiatives that are coming on stream within government.
Mr. L. Evans: I thank the minister for that offer, and I certainly would look forward to getting that information.
I am concerned about the fact that ISM--is the name of the company you are referring to--has what I thought was something of a monopoly of service in this area. I appreciate that this is a field of very rapidly changing technology. Part of that changing technology should be reduced costs, and I am glad to see that is being passed on. I want to make sure that the government is ensuring for the taxpayers of Manitoba that we are getting the best possible price for the services rendered. Whenever a company has a monopoly, there is a tendency to charge a bit more than they would if they were really out there in the market competing.
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Mr. Stefanson: I want to assure the member that is an absolute concern for us, always getting the best price, and this price has been directly tied to benchmarking. That is one of the reasons that the price has consistently come down as the costs in many of these areas have come down. So that has driven the cost down. This contract, as I said, is up in the year 2000, and various elements of what are currently within it are now going to become parts of other arrangements which again have gone through a very competitive process in terms of driving towards the best service and the best price.
Mr. L. Evans: Well, I look forward to that report. I am just assuming from the minister's comments that this will be open for bidding in 2000, or maybe it will be just changing the arrangements, changing the patterns, so that this type of contract would not be carried on.
Mr. Stefanson: Mr. Chairman, we will decide at that point in time, or close to that point in time, depending on what elements remain, and there is an expectation that many of the elements will not, but there might still be some core of service that has to go out for tender at that time.
Mr. L. Evans: Then I propose we pass this section 7.8 Office of Information Technology, and we have some questions on Finance. The member for Inkster has a few questions, so I would defer to him to ask questions. I am not sure where, maybe Federal-Provincial Relations because this is a broad area, and I believe this is what we had indicated to the minister we were mostly interested in.
The Acting Chairperson (Mr. Penner): Item 7.8. Office of Information Technology (a) Salaries and Employee Benefits $831,400--pass; (b) Other Expenditures $892,700--pass.
Resolution 7.8: RESOLVED that there be granted to Her Majesty a sum not exceeding $1,724,100 for Finance, Office of Information Technology, for the fiscal year ending the 31st day of March, 1999.
Item 7.5. Federal-Provincial Relations and Research.
Mr. Kevin Lamoureux (Inkster): Mr. Chairperson, I would, I guess, look to the Minister of Finance or to the committee. I have a number of questions I was wanting to ask related to Question Period earlier today and maybe just a few comments on some other issues in brief, because I know the Estimates hours are, in fact, winding down. My preference is to ask the questions at the current line that we are at. If the minister feels uncomfortable in doing that, then I would secede the floor to the member for Brandon, and I will just save the questions for concurrence, whichever is most convenient for the Minister of Finance. Would it be okay to do it now?
Mr. Stefanson: Mr. Chairman, it is fine from my point of view to do it now. I might have to take some as notice. I know some of the nature of questions in Question Period today related to issues that fall under some other departments, but I am certainly prepared to answer what I can today and take whatever I have to as notice.
The Acting Chairperson (Mr. Penner): I understand that the minister is suggesting that he is going take the questions and he might have to take some of the questions as notice. Is that agreeable with the committee? Agreed? [agreed]
Mr. Lamoureux: To start off, it is to ask specific questions. First of all, is the minister aware of the home or life-lease program that is provided primarily and promoted through the Department of Housing?
Mr. Stefanson: The short answer, Mr. Chairman, is that, yes, I am aware of the life-lease program.
Mr. Lamoureux: From what I understand, individuals that choose to live in a life-lease arrangement, even if they are of middle-income class, and the vast majority would rank somewhere in there because part of the life lease requires that you would put some sort of a significant amount of money down which assists in having your rents deducted, but those individual seniors that go through nonprofit organizations through life lease are not obligated, from what I understand, to pay the school property tax. Is the Minister of Finance aware of that?
Mr. Stefanson: The member is basically correct, and I think it corresponds to the response today in Question Period that qualifying life-lease arrangements are exempt when it comes to education property tax.
Mr. Lamoureux: Could the minister explain--I would ultimately argue that is not appropriate, that as I indicated in my preamble to Question Period, Manitobans recognize the responsibility of having to pay taxes in many different forms, but what they expect from the government is that they pay their fair share.
Given what we have talked about both in Question Period and just now, a senior that happens to live in whether it is St. Boniface or Tyndall Park, is of moderate income, that chooses to live in his or her own home, has to pay a school tax, is it fair then for his or her brother or sister who happens then to move into a nonprofit housing complex that is a life lease, and that individual does not have to pay the school property tax, even though that individual might be in the higher income spectrum?
Mr. Stefanson: Mr. Chairman, I think as the member knows, this initiative falls more directly under the Minister of Housing (Mr. Reimer). In fact, we had some legislative changes roughly a year ago that changed the definition of qualifying life-lease properties relative to the square footage and so on. I am trying to recollect any conditions relative to income, but I think, in anticipation of sort of where he is heading and the point he makes about almost discriminatory treatment, that we need to recognize that, first of all, my understanding of the life-lease arrangement was that it was to be a vehicle to try and encourage affordable modest housing for seniors. There are other programs that are out there that are not necessarily universal either. We have the SAFER program, the Shelter Allowance for Elderly Renters. We also have the Pensioners' School Tax Assistance, which is tied very directly income. I think, as the member knows, it comes though our personal income tax returns for seniors.
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So, again, there are various forms of assistance that are not always universal. They are sometimes tied to income. They are sometimes tied to the size of the unit to try and address some needs out there in our community. My understanding is that was the rationale in part behind the original establishment of life leases. Some adjustments were made last year. I would suggest it is something that should be assessed on an ongoing basis, to see if it really is still required and still meeting a need out there in our community, just as we do with the tax credit issues. We look at our tax credit issues every year to determine the need and the level of support and so on. The life-lease arrangement should be really no different in my mind.
Mr. Lamoureux: Mr. Chairperson, the most positive comment on that statement was that things are assessed on an ongoing basis. I think that this is something that does warrant some sort of a reassessment. I would take exception to some of the things the minister has said. Life-lease program is an alternative form of housing. I do not think it is a form of housing which government is prepared to say is better than living in a single, detached dwelling, for example, in a community. It is just another form or another alternative type of housing accommodation which does make things easier for individuals who are 55 and older. There is a natural injustice that is there today from what I understand that does need to be rectified. Many seniors would argue that they should not even have to pay education tax on their property tax, and over the years I have constantly heard that particular argument.
Mr. Chairperson, I have always believed, and the minister is fully aware of my position on school division taxes being applied to the property tax, but having said that because I think I am not going to win that argument, at least not today, I do believe that the case that I am bringing up now is one of a natural injustice that does need to be addressed. You cannot have a 55-year-old individual not having to pay school tax of a middle-income and have his or her brother or sister having to pay tax because he or she chooses to continue to live in the community in which they have maybe grown up and contributing handsomely to that particular community.
I do not believe government should be playing the role of providing this perk or exemption as an incentive for seniors to enter into life-lease programs. It is not necessary. It is definitely not warranted in my opinion. It is very obvious, I believe, to most, that what you have is a two-tier system here and I do not believe that is what Manitobans want. As I indicated in QP, they will pay taxes but they expect government to be fair in the way in which they collect their taxes and I do not believe government is being fair on this particular situation.
Now, the Minister of Finance can maybe comment on that. But again, I want to be sensitive to the amount of time that is left during the Estimates so I wanted to comment briefly on a few other issues and I will just leave them as comments on the record as opposed to specific questions. The Minister of Finance can choose to answer them if he so chooses. He and I have had dialogue in the past on them, but I do believe that it warrants some repetition, continuing on with respect to the property tax issue, I believe the government does have a responsibility in addressing it. It is a more regressive way of collecting taxes as compared to income tax as an example.
We finance health care through general revenues. We finance education in good part through the property tax. Both of those are a social service that is provided to our communities. There are many inequities that the government is supporting by its lack of action in addressing those inequities and the classic example there, Mr. Chairperson, is those individuals who happen to reside in Winnipeg School Division No. 1, and you compare them to, let us say, someone that resides in St. James. If you live in a house, let us say, valued at $100,000 in St. James compared to one of equal value in Winnipeg 1, you are in all likelihood going to pay $300 more in property tax net to go towards the school division.
The argument that, well, it is that school division that is requiring those services is bogus, and I really think that the government is not fooling anyone when they say, well, it is the school division. Well, Mr. Chairperson, you have to take into consideration the demographics. Many of my constituents would argue that there is a tremendous amount of subsidy that our property taxpayers have to pay for inner city, heavier resource is required in certain areas, different types of programs are necessary. Many will tell you that, for example, in education, special needs 2, special needs 3 children are not adequately financed through the province, so those additional resources have to come through the property tax. Well, where is the highest percentage of that coming? Where do you have a higher percentage of the learning disabled? What sort of a property tax base do you have?
Now, recognizing that you cannot see a shift, in any given year, from property tax into general revenues, it would be unrealistic. I do not think the public would be prepared to accept it, even in the best of times, but there are some things which the government can do. I would suggest, first and foremost, that they are going to stop the drift from occurring, from the inequities getting worse, if you like, and second, start taking some sort of direction that sees the school division levy being reduced in favour of--if you want to keep it on the property tax--the provincial school levy. This way, by doing that, everyone in the province would be paying closer to reality in terms of their fair share of the funding of public education.
That has been a concern of mine for many years now. I was hopeful that the school division boundary redistribution would have addressed that issue at least in part. It has not, and there is absolutely no sign that it will because of the government's position on the whole concept of boundary redistribution. That is one issue.
The other issue that the minister and I have had some dialogue is with respect to the GST and the PST. The minister did provide me with some information last year--and maybe it is stubborn, maybe it is I just do not have the same sort of resources that the minister has--I do question the merit of not looking at some sort of a harmonized PST, GST. I acknowledge that any change requires a certain amount of boldness, and this government's actions in this area have been, well, the status quo, let us say, has prevailed.
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I can recall when the GST was being introduced, of criticizing it back then and concerned about the harmonization of the GST and PST. We did not want to make it easy for the introduction of the GST. The fact or the reality of the issue today, Mr. Chairperson, is that the GST is not going to be disappearing, and it is a question of whether or not there is any real benefit in terms of seeing some sort of a harmonization of those two consumption taxes.
I think that is something that the Minister of Finance should at least be getting the civil servants looking at, because there is no doubt in my mind, the Minister of Finance ain't going to touch that with a ten-foot pole, at least until after the next provincial election, and then maybe after that, depending on the outcome, there might be some sort of movement towards it. At least, at the very least, let us demonstrate that it is not in Manitobans' best interest to harmonize those two taxes, to clearly demonstrate that. I look forward to the minister doing that.
Another very important issue for me has been the whole constitutional realm of the way in which the feds and the provinces talk about offloading of responsibilities and what role the provincial government plays. I would like to see the Minister of Finance stand firm on a couple of issues that I think are important, not only to Manitobans but all Canadians. One is with respect to the transfer payments. It is not acceptable to see any sort of a continual decrease of transfer payments and, more importantly, I would argue, that the province of Manitoba should not advocate at all for the transfer of tax points in lieu of cash transfers being cut back.
I think that is being very shortsighted, that in the long term it is to the detriment not only of the province of Manitoba but other provinces like Saskatchewan and Atlantic provinces, even to a certain degree the province of Quebec, in that the Minister of Finance, in any sorts of negotiations that he enters into with respect to his counterparts or discussions from within cabinet, should be talking about the advantages of retaining the cash floor.
Now, having said that, I have opened the floor for the Minister of Finance to articulate on how the federal government has cut back on transfer payments. I recognize that. I do not believe it has been to the same degree which he might articulate. I know that it is not to the degree in which the Minister of Education (Mrs. McIntosh) and the Minister of Health (Mr. Praznik) and the Premier (Mr. Filmon) have been articulating, so it will be interesting to see what the Minister of Finance has to say about it. From what I understand, there has now been a floor that has been established and that floor is something which I would hope and trust that the federal government will maintain.
In fact, I understand that under the formula we will eventually be seeing some increases to that block funding. Now, why do I bring it up? Primarily because I am not foolish enough to believe that there is not dialogue that is occurring with respect to the constitutional or divisions of powers, the offloading and so forth. There is dialogue that occurs, positions that are being adopted at the political level. My concern is that we are going to see trade-offs, and some of those trade-offs might be issues such as the tax points in favour of cutting back on the cash transfers. I think the government of Manitoba has to take a very strong position on that particular issue.
Mr. Chairperson, to conclude, because I know the member for Brandon also wants to ask a few questions. The minister might want to respond now or he can take the opportunity later to respond, but I would conclude by indicating to the minister that he has had, in my opinion, a fairly what, a free ride, or he has been treated quite well within finance in my opinion over the years. A good reason for that is because some of the initiatives and the status quo in certain areas. I really think that the government or the Minister of Finance has a responsibility to seek fairer forms of taxation. I am not convinced that this Minister of Finance and to a certain degree the Minister of Finance prior to him, have really addressed that issue.
With those few words, I do appreciate the committee's patience in listening.
Mr. Stefanson: I will be very brief because of time on the life-lease issue. I have already indicated it is something we will assess as we move forward. I gave the member some of the rationale for the introduction of the life lease, but I am sure it is something that the Minister of Housing (Mr. Reimer), myself and my colleagues will look at on an ongoing basis whether it still is meeting the original objectives.
The issue of education on the property tax, the member and I have discussed it many times, so I will leave that issue. The issue of the PST and the GST, I will send the member more information. That is one of the areas he addressed. That is one area that I am really concerned with.
I think maybe his lack of understanding of the impact of harmonization, that in the case of Manitoba it will shift $350 million from businesses to consumers, people who live in his constituency, live across Manitoba. It will result in a shortfall of revenue for the provincial government of $100 million annually. The suggestion from the federal government is to increase taxes, to make the harmonized tax rate 15 percent. Today, our PST and the GST are 14 percent. It will broaden the base so that his constituents and all Manitobans will pay the tax on home heating fuel, on books, on a whole range of areas that currently the PST does not apply to. It will basically have a detrimental impact in the short term on our economy. So I really do encourage him to get a better understanding of the issue. I will send him more information.
So it is not a question of boldness. It is bold to stand up for what is right and for your province, and that is what we are doing when it comes to the whole issue. I will gladly provide one of my staff people to sit down with the member and run through all of the specifics. The last issue, the issue of federal-provincial relationships, the important issues there are predictability of funding from Ottawa, certainty of funding from Ottawa, adequacy of funding, and we have not had that over the last several years from the federal Liberal government. A first step that they should make is start to restore some of the $6.2 billion in funding cuts that they have put in place over the last few years, last three years, in support for health, post-secondary eduction. That certainly is our position, and we will be advocating that with the federal government.
I guess his last comment disturbed me a little bit. I think we have a good understanding of the tax situation in Manitoba. We have consistently reduced taxes for individuals and for businesses. I believe we have a very fair taxation system. That is not to suggest that there are not areas that we can continue to work on and improve in Manitoba, and we are always prepared to do that and open to any suggestions that individuals have, including the member for Inkster (Mr. Lamoureux).
Mr. L. Evans: Unfortunately, we are really running out of time, and we want to discuss Enabling and Other Appropriations. But it just occurred to me that it is possible, Mr. Chair, that another minister could be sitting in on Monday to do Other Appropriations, because one item in there is emergency services which includes the Minister of Government Services (Mr. Pitura), so that would be a possibility. But we only have a few minutes anyway, at any rate, and we had some questions still on Finance. So if we could finish Finance as of five, and then Monday, if there are a few minutes left, we could do Enabling Appropriations.
Hon. James McCrae (Government House Leader): I appreciate what the honourable member for Brandon East has said, but we had gone into the Estimates consideration with the understanding that these votes would be the responsibility of the Minister of Finance (Mr. Stefanson). This is something I confirmed earlier today with the opposition House leader. So I do not know that anybody else is able or, you know, charged with the responsibility of responding to those questions. So I think this is the opportunity that we have for that.
Mr. L. Evans: I am sure the Minister of Finance can and will answer a lot of these, but there are some that, for instance, Emergency Expenditures, which are department of public works, and members had some questions on the flood, et cetera. So the thought was that because the minister is away at a conference on Monday and Tuesday, those appropriations could be handled by another minister sitting in the chair or sitting beside the chair.
Mr. Stefanson: Mr. Chairman, Emergency Expenditures is not under my responsibility, but the agreement was to deal with Enabling Vote, Internal Reform and the ones that are under my responsibility.
Mr. McCrae: If there are questions under those votes, now is the time. I mean, they can pass without the presence of the minister. I mean, I can be sitting in the seat for that, but if there are questions, the Minister of Finance is the one to answer then, other than Emergency Expenditures which is the Minister of Government Services' (Mr. Pitura) responsibility.
Mr. L. Evans: At any rate, we had a couple of questions of a general nature. I am going to curtail them and then try to finish everything today. I do not know what we will have for Monday. I have some other colleagues who were going to come in on the Other Appropriations, and I sent them away because I thought we would not get to them--Prairie Dog Central and they have some flood questions, among others.
Well, just very briefly then, because you have to pass--we are on Federal-Provincial. I am just going to ask the minister then what is the main thrust of this Finance ministries meeting? There are two or three matters that we are concerned about, but let me ask the minister very briefly to respond very briefly as to what are the main agenda items.
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The Acting Chairperson (Mr. Penner): Before the minister responds to this, I might suggest to the honourable members of the committee that if there are certain questions that cannot be addressed today or cannot be asked today because of time limitations, there is always concurrence that you might want to direct those questions to. That is a possibility.
Mr. Stefanson: Very briefly, the key focus on Monday is the whole issue of federal transfers, the two main funding arrangements of equalization and CHST. There will be other issues on the agenda from employment insurance to infrastructure to a number of other issues, potentially the bank mergers. But the key agenda item and the majority of the time is going to be allocated to the issue of transfers.
Mr. L. Evans: I am pleased with what the minister has said about this harmonization question because I think it would be insane to go along with the feds to take them off the political hook that they are on, and it is certainly not in the economic or financial interest to the people of Manitoba.
What about the question of bracket creep. Nobody wants to talk about that, but bracket creep, and the minister knows what I am talking about, provides enormous amounts of additional revenue for governments at both levels. Is there any thought of pursuing this with the feds and suggesting that they modify their position, because bracket creep comes about because the deductible allowable for personal income tax does not keep pace with inflation, so, therefore, governments automatically bring in more and more tax revenue without changing tax rates.
Mr. Stefanson: That certainly has been an issue that has been discussed with the federal government, and we will continue to discuss it with them, the whole issue of adjusting the brackets on the personal income tax return. I know the member might have a question--one of the many benefits of ultimately moving to a tax on income for provinces is the ability to establish our own brackets and have control over the brackets within individual provinces. So that is something we are working on for implementation over the next two to three years. But, in terms of the current bracket creep issue, we have discussed with the federal government, if they have the ability to pass on benefits, whether it is through tax reductions, increasing credits, and so on, that the credit is something we should be looking at.
The good news is that governments of late have been into reducing the overall tax impact on individuals. The federal government reduced some taxes in this budget, as did we.
Mr. L. Evans: We are going to have to get on, but I gather your income tax proposal, which is in the budget document, 2001, this will give the province an opportunity to tackle that question if they so deem it fit. No government likes to give up sources of revenue or ways of increasing revenue because, let us face it, Mr. Chairman, the tax break that this minister has given Manitobans is pretty minor in comparison with what has been happening to revenue increases, partly because of bracket creep.
However, having said that, we have five minutes left. Because we want to be co-operative, we would like to give the Chair a chance to pass these items and get on with it. We will be asking other questions in concurrence.
The Acting Chairperson (Mr. Penner): Thank you very much. Item 7.5. Federal-Provincial Relations and Research (a) Economic and Federal-Provincial Research (1) Salaries and Employee Benefits $1,133,500--pass; (2) Other Expenditures $323,500--pass.
Item 7.5.(b) Manitoba Tax Assistance Office (1) Salaries and Employee Benefits $264,500--pass; (2) Other Expenditures $62,100--pass.
Resolution 7.5: RESOLVED that there be granted to Her Majesty a sum not exceeding $1,783,600 (for Finance, Federal-Provincial Relations and Research) for the fiscal year ending the 31st day of March, 1999.
Item 7.6. Insurance and Risk Management (a) Salaries and Employee Benefits $224,200--pass; (b) Other Expenditures $40,800--pass; (c) Insurance Premiums $1,305,000--pass; (d) Less: Recoverable from other appropriations ($1,305,000)--pass.
Resolution 7.6: RESOLVED that there be granted to Her Majesty a sum not exceeding $265,000 (for Finance, Insurance and Risk Management) for the fiscal year ending the 31st day of March, 1999.
Item 7.7. Treasury Board Secretariat (a) Salaries and Employee Benefits $2,468,400--pass; (b) Other Expenditures $581,900--pass.
Resolution 7.7: RESOLVED that there be granted to Her Majesty a sum not exceeding $3,050,300 (for Finance, Treasury Board Secretariat) for the fiscal year ending the 31st day of March, 1999.
Item 7.9. Net Tax Credit Payments, Property Tax Credit $120,900,000--pass; Cost of Living Tax Credit $56,750,000--pass; Learning Tax Credit $15,000,000--pass; Pensioners' School Tax Assistance $4,350,000--pass; Political Contribution Tax Credit $650,000--pass; Federal Administration Fee $850,000--pass; Less: Recoverable from Education and Training - Learning Tax Credit ($15,000,000)--pass.
Resolution 7.9: RESOLVED that there be granted to Her Majesty a sum not exceeding $183,500,000 for Finance (Net Tax Credit Payments) for the fiscal year ending the 31st day of March, 1999.
Item S 10. Public Debt (Statutory) (a)(1) Interest on the Public Debt of Manitoba and related expenses $1,448,400,000--pass; (2) Interest on Trust and Special Funds $49,000,000--pass.
Item S 10.(b) Less: Interest and Other Charges to be received from: (1) Manitoba Telecom Services Inc. ($20,900,000); (2) Manitoba Hydro ($505,200,000)--pass; (3) Manitoba Housing and Renewal Corporation ($38,300,000)--pass; (4) Manitoba Agricultural Credit Corporation ($16,400,000)--pass; (5) Other Government Agencies ($13,600,000)--pass; (6) Other Loans and Investments ($58,000,000)--pass; (7) Sinking Fund Investments ($330,000,000)--pass.
At the conclusion of the department Estimates, the consideration of the Minister's Salary is the last item to be considered for the Estimates department. At this point, we request that the minister's staff leave the table for the consideration of this item.
Item 7.1. Administration and Finance (a) Minister's Salary $26,300--pass.
Resolution 7.1: RESOLVED that there be granted to Her Majesty a sum not exceeding $990,100 (Finance, Administration and Finance) for the fiscal year ending the 31st day of March, 1999.
This completes the Estimates of the Department of Finance. Thank you.
Committee rise.