HALIFAX, MONDAY, APRIL 20, 2015

 

COMMITTEE OF THE WHOLE ON SUPPLY

 

4:56 P.M.

           

CHAIRMAN

Ms. Margaret Miller

 

MADAM CHAIRMAN: The Committee of the Whole on Supply will come to order.

 

The honourable Government House Leader.

 

            HON. MICHEL SAMSON: Madam Chairman, would you please call for the resumption of debate on the estimates of the Department of Internal Services.

 

            MADAM CHAIRMAN: We still have the Progressive Conservative Party with 58 minutes left in questioning. No, you're done? Okay. We'll move on to the NDP.

 

The honourable member for Halifax Needham.

 

            HON. MAUREEN MACDONALD: Minister, I want to ask you a few questions about Engage Nova Scotia. First of all, I don't really understand why Engage Nova Scotia is in your department. Perhaps you could explain that to me and then once I understand that I'll have a few other questions for you.

 

            HON. LABI KOUSOULIS: Could the member clarify where information came that it was within the Department of Internal Services, because we have no recollection of it? Just curious, I'm under the impression it's with Priorities and Planning.

 

            MS. MACDONALD: Well, that's what I thought, as well, because that's what the press release indicated. But I was told out of estimates last week that some reference was made to it and I wanted to pursue that.

 

            MR. KOUSOULIS: We're not aware of any references that were made to it; we might have been talking just in global terms of employee engagement and in revving up the Public Service.

 

            MS. MACDONALD: Okay, that's probably what it was; it's some confusion.

 

I actually wanted to ask questions about Engage Nova Scotia. I just briefly want to know, who are the five ministers who make up the Treasury Board?

 

            MR. KOUSOULIS: The five members are myself, the Minister of Education, the Minister of Finance and Treasury Board, the Minister of Service Nova Scotia, and the Minister of Energy.

 

            MS. MACDONALD: That's it for me; I have no other questions.

 

            MADAM CHAIRMAN: Does the minister have any closing statements?

 

            MR. KOUSOULIS: Madam Chairman, I'll close all my remarks after the Public Service Commission, but I would like to table a document here just for further clarification. In our previous day of estimates I stated that the security for the Legislature is under the budget of the Speaker. We have looked into it. Some of the security is actually under Building Services within Internal Services, and I'd like to table that document for clarification to the House.

 

            MADAM CHAIRMAN: Shall Resolution E12 stand?

 

            Resolution E12 stands.

 

The honourable Government House Leader.

 

            HON. MICHEL SAMSON: Madam Chairman, would please call the estimates of the Department of the Public Service Commission.

 

            Resolution E34 - Resolved, that a sum not exceeding $18,991,000 be granted to the Lieutenant Governor to defray expenses in respect of the Public Service Commission, pursuant to the Estimate.

 

            MADAM CHAIRMAN: The honourable Minister of the Public Service Commission. (Interruptions)

 

            We'll take a two-minute recess while the minister changes his staff.

 

            [5:01 p.m. The committee recessed.]

 

            [5:03 p.m. The committee reconvened.]

 

            MADAM CHAIRMAN: The Committee of the Whole on Supply will come to order.

 

The honourable Minister of the Public Service Commission.

 

            HON. LABI KOUSOULIS: Madam Chairman, I'm pleased to rise and speak to the Public Service Commission budget. The Public Service Commission Budget Estimate for fiscal 2015-16 is $18.99 million and 109 full-time equivalent staff. Our budget was reduced by $500,000 and the elimination of nine positions; this was offset by the increase in salaries due to wage increases and the transfer of the Public Service Renewal Team to the Public Service Commission.

 

            We have been able to make our reduction based on a new and improved service delivery model. This new model creates efficiencies in our processes and services. Madam Chairman, I want to sincerely thank all of the employees at the Public Service Commission for their hard work during this past year. They set forth to develop a new service delivery model. It is because of their efforts that we have been able to reduce the size of the department and find savings while improving services.

 

            As minister I'm proud to say that the Public Service Commission is making positive strides in becoming a workforce that is inclusive and free of discrimination. The Public Service values are respect, integrity, diversity, accountability, and public good. These values are reflected in everything we do. As a department we are working towards two main outcomes: the first is engagement and the second is improved client service delivery. Additionally this year we will be engaging in collective bargaining, working to lean our processes, enhancing our Public Service by becoming more diverse, and ensuring a welcoming workplace for all.

 

            Last year the Public Service Commission completed an organizational restructuring. As a result a new service delivery model was adopted called One PSC, and as a result the department is more responsive to corporate needs while maintaining our day-to-day operations. One PSC is making service delivery more efficient - it will include self-serve, online, and in-person supports.

 

            A new online tool called MyHR will help clients quickly find the answers they need to HR questions. It will allow employees to be in more direct control of their employment experience. We recognize at the PSC that employee development is a key driver of engagement. Last year we updated a corporate orientation program and introduced a new manager orientation program called Manager Quick Start, and introduced a formal mentoring program.

 

            This year more attention will be paid to early career employees and their development; we will expand on the services being offered through our learning centre as well. The Public Service Commission developed two strategies this year: the Corporate Employee Engagement Strategy, and the Diversity Strategy. Work is well under way with our Youth Strategy as well within the Public Service Commission.

 

            Madam Chairman, Nova Scotians and employees expect their government to have a diverse and inclusive Public Service that reflects the people of its province. Our workforce must reflect the province's diverse population and deliver services in a way that meets the needs of all Nova Scotians. This will help to position the province for success in the global economy. We are striving to equitably represent the public we serve at all levels of the workforce. We will ensure an inclusive and respectful workplace, free of harassment and discrimination. We are a culturally competent workforce that values diversity and inclusion.

 

            Each year youth leave Nova Scotia to find employment opportunities elsewhere; we want them to stay here. To confront this challenge as one of the largest employers in the region, government has made youth employment a priority. We are looking at how we connect with youth on the Public Service opportunities, during their post-secondary education, and when they are hired in the Public Service. At the same time we are working to create more opportunities for youth. We also want to make it easier for them to apply and to work for the Public Service. That's why we're creating entry-level positions for graduates and skilled youth with little experience. Our work continues on this strategy.

 

            We believe that an engaged, productive, and strong Public Service is the key to delivering important programs and services. Madam Chairman, these are challenging times for our province and for all of us. Like other public sector jurisdictions in Canada, Nova Scotia has been faced with a burgeoning debt, annual deficits, and growing demands to expand services while cutting costs.

 

Government needs to change the way we do business, and that means finding ways to do things better. We need to work smarter, which means some changes and reorganizing. Government recognizes this and is committed to supporting employees so that they can successfully navigate present and future challenges.

 

In 2011 the executive leadership of the Nova Scotia Government became concerned about a sharp decline in employee engagement in the civil service. This downward trend was consistent across all government departments. From a corporate high of 74 per cent in 2009, engagement dropped to 62 per cent in 2011, and further to 60 per cent in 2013. It was imperative that we took immediate measure to increase the level of engagement among public servants. The results tell us that engaged employees are more motivated and committed to their work.

 

That results in overall citizen satisfaction, trust, and confidence in government as part of the Public Service value chain. That's why I worked with my executive team to put together a comprehensive plan. That plan first started with increasing the engagement within the Public Service Commission, and that plan has worked, Madam Chairman.

 

A mini survey conducted at the Public Service Commission in November showed an increase in all of the key indicators of engagement. A few highlights include: an increase of 21 per cent in employees feeling valued in their work, and an increase of 22 per cent in feeling valued overall as a Public Service Commission employee; an increase of 35 per cent in the effective flow of information from senior leadership to staff, and a 21 per cent in the effective flow of information from senior to senior leadership; and we also saw a 28 per cent increase in the number of employees who said that the PSC has implemented activities that improve their current workplace. All that in less than a year. This investment was also leveraged to all 10,000 civil servants across government.

 

            Pride in the Public Service, launched in February 2015, outlines government's commitment to creating a culture where employees feel valued, challenged, and motivated to do their best work. The strategy focuses on the areas of internal communication, growth and development, well-being, and job support. It considers some of the barriers to engagement across government, and provides tools and measures to mitigate them. I am confident that this strategy will help us achieve an engaged workforce.

 

            In recognition that absenteeism is high in government, the PSC has established a new Absence Management Program. We know that the level of support offered to an employee before, during, and after an absence has a direct impact on engagement and client service delivery. To that end, we recently partnered with Morneau Shepell and launched this new, short-term illness support program on April 1^st. The benefits of the program will include: consistency in absence management processes; enhanced capacity in service levels; greater support and assistance for ill or injured employees; reduced costs associated with absenteeism; and an increase in employee productivity and engagement.

 

            Madam Chairman, the Public Service Commission is making great progress. We are streamlining initiatives, improving productivity, and strengthening how we deliver services. Our corporate strategies will support government's efforts to strengthen its workforce and they will help us achieve our goal of being the best public service organization in Canada.

 

            We recognize that a strong Public Service is essential for delivering the programs and services to Nova Scotians. Before I take questions, I want to introduce the Public Service Commissioner, Laura Lee Langley, to my right, who will be with me here today. Thank you.

 

            MADAM CHAIRMAN: We will start with the Progressive Conservative caucus for the first hour of questioning. No? Then we'll move on to the NDP.

 

The honourable member for Halifax Needham.

 

            HON. MAUREEN MACDONALD: Thank you very much. We had a chat earlier and it's nice to see you. I have a very small question - well, it may be a large question - but I really have only one or two questions.

 

I'm looking for a breakdown of all the change with respect to full-time equivalents across the public sector. I know there has been a lot of movement throughout the Public Service, that numerous positions have been eliminated and some have moved, and others.

So I would like a detailed breakdown of all of that change - where have the positions that have been eliminated been eliminated, and what has been moved and to where?

 

            MR. KOUSOULIS: From a global perspective we, within the Public Service, had a total elimination of 320 positions. Most of those positions had a vacancy attached to them so there was not a person doing the work. There were total layoffs of 109 positions where there was a person doing the work. I will table a summary of each department and where their FTEs - full-time equivalents - were eliminated from.

 

MS. MACDONALD: Thank you. I'm just going to ask the Clerk if I could have a quick look at that summary.

 

Does the minister, the department, the commission have any more detailed information about the classifications, the positions of these various positions that have been laid off? I would like to have a better understanding of that as well.

 

            MR. KOUSOULIS: We can get a breakdown of each of those positions, and what classification they are, for the honourable member.

 

MS. MACDONALD: I'm not sure looking at the summary table that I can actually identify which positions were vacant and which positions were the 109 layoffs.

 

            MR. KOUSOULIS: On the table that I tabled, every position here was occupied by a person and none of them were vacancies.

 

MS. MACDONALD: If I understand correctly these are the 109 layoffs, but there were 320 vacant positions as well that were - no, okay, that's the total. Okay, I can see the math here. Thank you, I have no further questions.

 

            MADAM CHAIRMAN: Would the minister like to make some closing comments?

 

            MR. KOUSOULIS: I'd like to thank all my departments for assisting me with Budget Estimates this year. I would like to speak briefly about Internal Services and to reiterate that we are delivering savings to all departments and we're doing this on behalf of the taxpayer.

 

            We are a department that supports the functioning of other departments that deliver front-line services to Nova Scotians. I'll give you a prime example. We purchase on behalf of health care, education, and every other department. As we put our RFPs out and purchase, we are now combining all of those departments into one purchasing body and we're getting significant savings.

 

            With the savings we don't keep it within our department, we deliver it back to the departments that we're purchasing on behalf of. We have just completed a one full-year review of our procurement practices and, originally, when this department started we were anticipating savings of $50 million to $60 million in procurement after five years. I'm very pleased with the hard work from the procurement department - last year we saved $20 million and this year we're projected to save over $40 million. This is in procurement alone. This was all done in utilizing our buying power. I believe in the future we will save much more, and I am hopeful that we will save even more than the $60 million we first anticipated.

 

            At this point we have not brought all procurement professionals into the department. As we bring them in and consolidate more purchasing we will increase savings even more. The department was initially created from an initiative that was started a few years ago. This initiative was put together from a consulting report from Ernst & Young. Analysis was done for savings under a shared services model. The original model called for moving many employees and some drastic layoffs. Having read the report I was very concerned about the layoffs and very concerned about moving so many employees, and as I analyzed the document a couple of things jumped out at me.

 

The recommendation was to go to four regional hubs in Nova Scotia and move the employees there. Digging a little deeper and asking our department of CIO, which is the IT department, to give us feedback on how this would affect that department in a shared services model the first thing that came back was, well, if you move all the people into four regional hubs, does that mean all the computers and all the work moves into the four regional hubs?

 

            This actually went against the plan that we have ahead of how we're going to work in the future. Under that plan, for example, Cape Breton, all IT professionals in the Public Service would have been in Sydney, but what about the schools and the hospitals all across the Island? How would they have been serviced, and when I questioned that the answer that came back was that people would drive. As we looked a little closer at the analysis it made no sense to move people to Sydney and then have them drive one, two hours every day, back and forth to where the work needed to be done, for example, supporting IT in hospitals and in schools.

 

            As we moved forward it was a different course of action that we took with the shared services model. We saw great savings in procurement and we've seen that savings already come through in one year. What we also saw was that a shared services model should not move employees and then you put a formula to it where you say well, if we combine the IT of three very large departments we can eliminate a third of them. If you don't eliminate the work, how do you eliminate the people? And that's what we gave more careful thought to and that is why we did not look at reducing our employees on day one. The original model had massive layoffs and I personally felt that if we had gone down that road we would be laying people off and then have to rehire them to do the work because the work wasn't going away.

 

            The only way you can effectively eliminate positions is you either have to streamline your work, eliminate it, or automate it. The original report was looking at first eliminating the positions and then doing everything else. The approach we're taking is we're going to bring all the people within Internal Services in a shared services model in the department and we're going to move forward in a very calculated way that is also respectful to the employees of the Public Service.

 

My goal within the department is to not have to lay one human being off. I think we can do that, because as we move forward we'll find efficiencies every year. But we also have currently over 800 employees in the department and with 800 employees not every position is filled, so as opposed to laying a person off, what we can do is look at the positions that are vacant and ask, how can we eliminate that position by redistributing the work that the person who would be in that position would do? I am proud to say, Madam Chairman, that is how we are moving forward.

 

            In talking about human beings in the Public Service, I want to talk about one of the most successful companies in the world, Apple, and their founder Steve Jobs. Steve Jobs understood the importance of human capital. He also understood the importance of human development. Steve Jobs created what is now the most successful and the highest-value corporation in the world. Steve Jobs had a retreat that he did every year which was called Apple's Top 100, and Apple would invite 100 managers, employees, and they would go away on a retreat.

 

            These were not the 100 most senior employees; as a matter of fact they were from all levels of the organization - they were the 100 leaders within the organization. They would go away and brainstorm, and in brainstorming they would actually take a pause away from their work and reflect on it and be out of their work setting where they have piles of paper on their desk, which is distracting.

 

            The retreat, I would say, was a pretty shrewd investment because what came out of this retreat was the iPod. It came out of it two years in advance before that came to market - and we know what a success the iPod is. I'm sure pretty much every Nova Scotian has one.

 

            I would like to say that what we have to do is we have to invest in our human capital. It is one of the most important investments we can make. The equipment we buy cannot be used without a human being behind it. When we are looking at what is valuable in any organization and in government, it is the people, they hold all the knowledge. Everything else cannot function without that.

 

            People attack investment in people, they attack public servants, and we try to belittle the work that people do and it's a shame, Madam Chairman. There has been talk about an investment that our department made, which was $93,000 for engagement. The investment we made of $93,000 - $33,000 was for materials and the other $60,000 was to bring a professional from outside the organization in and they worked in the organization for six straight months and we had a great payoff with this individual.

 

            Let's break it down because $93,000 sounds like a large investment and any of my small businesses that I owned could never afford to invest $93,000, but I could afford to invest $500 in an employee. When you break down the $93,000 invested across the Public Service Commission, that's what the investment was, $500 per employee.

 

            But let's break it down further. We are the HR of government. That investment was actually working out to $9 per employee in the Public Service, and if people are going to be cynical when we're investing $9 for an employee, then it's a sad, sad day.

 

            I will tell everyone the results of that $93,000 investment was the reorganization of our department - breaking down the barriers, open communication, engagement, people talking and planning. I would walk into rooms and we'd see just papers upon papers on the wall, people strategically thinking - how can we do things better, what work are we doing that we can eliminate, streamline, or automate and get rid of?

 

            We had three business units in the Public Service Commission and they were not working well together. With the engagement that we did and working together as a team, we eliminated one of the business units. Now we have two and they work very well together. They are working together and they are streamlined.

 

            So what did this $93,000 investment have as an outcome? The executive director position that we eliminated at the top of one of those business units, total compensation was $160,000 annual, but we also eliminated eight other positions, all with no layoffs, Madam Chairman, let's be clear about that. So we had an elimination of nine positions, streamlined a business unit, and had a total saving of $500,000. I would challenge anyone who can invest $93,000 as a one-time expense, but then realizes savings of $500,000 a year annually, every year forward.

 

            As I said earlier, I have the true belief that our most important asset is humans, and I would like to thank all members of the Public Service for the work they do on behalf of Nova Scotia, as well as education and health care workers.

 

            Now, before I came into government I also sometimes had a little bit of a cynical view in terms of how people perceive government, and I must say that I've been proven wrong. I will also add that I see the attacks on public servants and they should be proud of the work they do.

 

            In an organization of 10,000 people we're not all perfect, but what we do have is we have the ability and we have the drive to make everything better and make the organization better. Like everyday work, you know we have our challenges but we strive and we get through them. Our job that lies ahead now is to engage and to energize the Public Service so that it can deliver its services on behalf of all Nova Scotians.

 

MADAM CHAIRMAN: Shall Resolution E34 stand?

 

Resolution E34 stands.

 

We're going to take a small break at this point to change departments.

 

[5:32 p.m. The committee recessed.]

 

            [5:37 p.m. The committee reconvened.]

 

            MADAM CHAIRMAN: The Committee of the Whole on Supply will come to order.

 

            The honourable Government House Leader.

 

            HON. MICHEL SAMSON: Madam Chairman, would you please call the estimates of the Department of Finance and Treasury Board.

 

            Resolution E8 - Resolved, that a sum not exceeding $14,415,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Finance and Treasury Board, pursuant to the Estimate.

 

            MADAM CHAIRMAN: I will now invite the Minister of Finance and Treasury Board to make some opening comments, if she wishes, and to introduce her staff to the members of the committee.

 

            The honourable Minister of Finance and Treasury Board.

 

            HON. DIANA WHALEN: Thank you very much, Madam Chairman, and good afternoon. I did want to introduce my staff before I begin. I am joined today by my Deputy Minister, George McLellan, and also Byron Rafuse who is the Associate Deputy in the Department of Finance and Treasury Board. Also there are other executive directors and directors in the gallery from the department, who are here to support us as we defend our estimates here today.

 

            Good afternoon to everyone. It is a great opportunity for me to speak about the 2015-16 budget of the Department of Finance and Treasury Board, and the work of my department and our agencies.

 

            Madam Chairman, it's an understatement to say that Nova Scotians are facing a tough budget. Our province is in a challenging financial position and it has been for some time, with a struggling economy, with government borrowing to pay for services, and with an aging population. This government decided to stop the fiscal decline and take the difficult steps to protect the services that Nova Scotians need and rely upon. This is our goal and commitment to Nova Scotians.

 

            The government is dealing with recent wage patterns that are beyond what Nova Scotians can afford - initiatives that haven't achieved what Nova Scotians need or that no longer reflected our changing populations, and programs and practices that overlapped or duplicated with other similar initiatives. As government we need to turn this around as soon as possible, to slow the growth of our debt, and this budget, while challenging for everyone, takes us a step closer to a vital goal - sustainability and achieving a balanced budget.

 

            Why is balance so important? Balance is vital to the province's long-term fiscal health and it means that as Nova Scotians pay the bills for today we know we aren't increasing the bills to be paid by future generations, our children and our grandchildren. Being in deficit limits a province and it creates a drag on economic growth. And in deficit Nova Scotia can't explore options for a fairer tax system and job growth, nor can we consider improvements to social programs that are so urgently needed.

 

            Madam Chairman, the Auditor General wrote about the debt situation in 2012 in one of his reports that was heard right here in this Chamber from the Public Accounts Committee. The debt was $13 billion at the time; today it is $15 billion. He said that the debt doesn't stop with the Premier but with the people, and government needs to protect things that matter like health care, education, and support for seniors and low-income Nova Scotians. That means making changes, it means stopping some things or maybe asking others to take the lead instead of government, and it means making some tough choices so that in the long run we can have the province we all want and deserve.

 

            At Cabinet we have made strategic choices to deliver valuable services to the people who need them most. I'm pleased to tell you that we plan to balance Nova Scotia's budget a full year earlier than when we came into office.

 

We are a full year ahead of our target when compared to last year's four-year fiscal plan that was presented in the budget of 2014-15. If the financial and economic forecast holds, Nova Scotia will enjoy a small surplus in 2016-17. It will be a great first step, but it will still be a small step and we are still vulnerable. A prior year adjustment or another bad winter could wipe it out, that's why our government is so determined now to make progress. Nova Scotia needs a surplus that is significant enough to absorb those concerns. Our government is working towards fiscal resilience. We believe we must continue to rein in spending and to respect taxpayers' dollars by making prudent choices.

 

            I'll take a couple of minutes to talk about the responsibilities of the Department of Finance and Treasury Board. The department supports government by establishing a sound fiscal plan and financial framework to support priorities of the province. It provides financial leadership; administers the fiscal framework; develops and monitors the province's expenses; oversees financial controls; and provides transparent financial reporting to Nova Scotians. And if I do say so myself, Madam Chairman, we do it very well in the Department of Finance and Treasury Board.

 

            We provide professional services and support to provincial government departments and entities and we manage the debt of the province; regulate certain financial institutions; and provide policy oversight to the securities and liquor control sectors. The department delivers financial accounting, fiscal and economic policy advice, and provides statistical services to help inform decision making across government departments. It also supports the Minister of Finance and Treasury Board in overseeing certain Crown Corporations and agencies, which is also among my responsibilities.

 

            Among changes to help improve government's ability to deliver needed services affordably, the Department of Finance and Treasury Board saw some changes this year. Changes made last year to streamline overall operations saw some staff move into the department from other parts of government, and the 2015-16 budget reflects the financial impact of those changes. Overall, the budget estimate for 2015-16 for Finance and Treasury Board is $14.4 million and we will have an estimated 108.7 full-time equivalent staff in 2015-16.

 

            I'll briefly detail the changes at the Department of Finance and Treasury Board - in August Pension Services became the responsibility of the Minister of Finance and Treasury Board; four staff were relocated to us. As well, five staff members have recently joined us from three other government departments and the Public Service Commission as a Corporate Labour Relations unit.

 

Like every other department, we are finding savings through program review and I'll talk briefly about the results. We used to offer an online program that adapted Statistics Canada data to individual communities in this province. It took information that is already widely available and repackaged it to make it easier for lay people to use. While it provided good, useful information, all the data is still available from Statistics Canada.

 

            The Department of Finance and Treasury Board had to find savings to reduce our costs, just as we have asked every other department to do. As a result, Community Counts is no longer offered and the three positions associated with the program have been eliminated from our department. It's not easy to make decisions that impact employees, and this was a hard decision, Madam Chairman. I thank those employees for their service to the Government of Nova Scotia.

 

            I've said before that this was a very difficult budget that affected every department in some way. In our fiscal situation we simply cannot afford to maintain all services and programs. Government supports open data and is making statistical and operational information it gathers easier to access for individuals, businesses, and researchers. It is early in the process and too soon to talk specifically about this, but you'll hear more in the coming months. With access to more government data, businesses and researchers can use the information to develop new products and services.

 

            Two additional positions were eliminated as part of our review of how the department functions. One will end with a retirement and the other was a vacant position. We transferred out eight internal audit staff to the Department of Internal Services as part of realigning government structure to make it all more efficient to accommodate rising salaries, increased operating costs, and grants and contributions through the social impact bonds - the budget of the Department of Finance and Treasury Board increased by 6 per cent.

 

            Madam Chairman, this sounds like a large increase but with a budget that is relatively small compared to other departments, it amounts to less than $900,000. We also increased our total FTE count - I don't think that's right (Interruption) No, it's not. No, we actually decreased our FTE count by 1.3, I think. I'll come back to that, I'm sure there will be questions on the FTE count, but I see something not right in my notes.

 

            Under the Department of Finance and Treasury Board we also look after two agencies, Madam Chairman. We are responsible for the Liquor Corporation and the Nova Scotia Securities Commission. We were responsible for the Halifax-Dartmouth Bridge Commission but we've relocated responsibility for the bridge to the Department of Transportation and Infrastructure Renewal, a much better fit for the engineers over there, especially this year with the big project underway.

 

            I wanted to talk briefly about the agencies that we've had and of course a little bit about the Bridge Commission since they've been under our responsibility for most of the year. The Nova Scotia Liquor Corporation manages the receipt, distribution, and sale of beverage alcohol in Nova Scotia. They do so responsibly, ensuring that the product is sold only to Nova Scotians of legal age. The NSLC is the largest single banner retail business in Nova Scotia and the fourth largest retailer of beverage alcohol in all of Canada. Its revenue for 2015-16 is expected to be $228.229 million.

 

The Liquor Control Act describes four keys responsibilities for the NSLC and each one has equal importance really: first is the promotion of social objectives regarding responsible drinking; second is the promotion of industrial or economic objectives regarding the beverage alcohol industry in the province; third, there is the attainment of sustainable financial revenues to the Government of Nova Scotia; and four, the attainment of acceptable levels of customer service. The Nova Scotia Liquor Corporation is a Crown Corporation that operates independent of government, but the Province of Nova Scotia is the sole shareholder.

 

            Regular meetings are held between the Department of Finance and Treasury Board and the Liquor Corporation, and updates are also provided on a very regular basis. I'd like to speak for a moment about the corporation's social responsibility work because it does go beyond responsible drinking campaigns. The NSLC has adapted with the changing demographics and societal attitudes towards drinking. They are a valuable partner in the work of the government and society to address issues like drinking and driving and the need to enjoy beverage alcohol responsibly.

 

            Corporate responsibility is at the heart of the organization, and it's a responsibility that the NSLC takes very seriously. For 2015-16 they are working in four areas of social concern and the first is accountability. They plan to develop and implement a corporate social responsibility framework aligning their objectives in this area with their five-year strategic plan. This is the best way to ensure integration across business operations. The corporation plans to expand the reach of their university anti-high risk drinking program beyond campuses to reach off-campus students as well. They will roll out the second year of the Cabbioke responsible drinking program to work with industry partners throughout the province, and they will develop a platform to increase awareness of underage drinking.

In communities the Liquor Corporation staff will develop a strategy to support key fundraising programs for the IWK, the United Way, and the NSLC Cash Can.

 

The Nova Scotia Securities Commission is the second of the agencies that I mentioned, Madam Chairman. They operate, and it is administered under the Securities Act and Regulations. The commission's mandate is to provide investors with protection from practices and activities that tend to undermine investor confidence in the fairness and efficiency of capital markets to foster the process of capital formation. Its revenue in 2015-16 is expected to be $16.8 million.

 

I'll speak for a moment about some interesting Securities Commission work. The commission is proposing crowdfunding rules to make it easier for start-ups and small- and medium-size companies to raise capital. The revised rules will reduce disclosure, costs, and regulatory burdens for these companies. This work should be completed by the end of December of this year. It is also reviewing the CEDIF regulations with the view to streamlining them and allowing CEDIFs, which are our Community Economic Development Investment Funds, to raise capital under crowdfunding and other prospectus exemptions. The commission will also make it easier for CEDIFs to promote their capital- raising efforts by removing the requirement for the commission's advanced approval of certain documents.

 

            The Halifax Bridge Commission ensures safe, efficient, and reliable harbour transportation infrastructure at an appropriate cost. They operate and maintain the Angus L. Macdonald and A. Murray MacKay Bridges - invaluable transportation infrastructure in this province. The people who work at the Halifax-Dartmouth Bridge Commission ensure Nova Scotians get across the harbour safe and sound. The big project this year is the redecking and raising of the Macdonald Bridge. It is a $150 million project which will be completed in the fall of 2017. It's the biggest capital project for the commission since the MacKay Bridge opened in 1970. The province is investing in this project through a 100 per cent repayable loan, an arrangement that will result in significant savings for bridge users. The Bridge Commission revenue for 2015-16 is expected to be $11.607 million. I'm happy to answer further questions about any of these agencies.

 

            I'll round out my discussion of the work of the Department of Finance and Treasury Board by talking in a little more detail about our efforts to service our debt, because we have several real success stories here and because it is extremely important.

 

            I'm sure most of you know the difference between debt and deficit, but for some new members I'll quickly explain. The deficit is the gap between what the province received in revenue and what it spent. In 2014-15 Nova Scotia received $9.78 billion in revenue but we spent $9.89 billion - that means we overspent by just over $102 million. The debt is the accumulation of deficits over time and our investment in tangible capital assets as well, like hospitals and snow-clearing equipment. For 2014-15 the debt for the Province of Nova Scotia is $14.9 billion. Nova Scotia's accumulated deficits amount to $9.25 billion and the province's tangible capital assets debt amounted to $5.64 billion.

 

Those are big numbers and it's important that we're all clear about what they mean. Of the $9.9 billion we earned in the past year we spent just under one-tenth, or $862 million, servicing our debt. Madam Chairman, I think that's a number we should all remember in this House - $862 million spent on debt repayment in this year. Think about what a small province like Nova Scotia could do with that much money - $862 million. We could add two more Departments of Transportation and Infrastructure Renewal or we could double our home care and long-term care services. Of course, three Departments of Transportation and Infrastructural Renewal would be ridiculous, but it shows how much we pay for the debt we've accumulated in the past, and I hope it gives a glimpse into what we could accomplish if we didn't have to make these payments.

 

As I said, paying down our debt is important and I'd like to tell you about some of our successes. The Department of Finance and Treasury Board has been managing the debt portfolio over the last few years with the intent of locking in historically low interest rates. This strategy aims to help protect the province from unanticipated increases in interest rates. We have done this by issuing more than $2 billion, a 50-year and 30-year bond since January 2012. The result is that about half of our outstanding market debt, that is bonds owned by investors, is now locked in for 15 years or longer; therefore, debt servicing costs will not increase for this portion of the debt for a very long time. This is a significant accomplishment because interest rates could rise at any point.

 

We have also controlled the amount of short-term debt or other debt that resets with interest rate charges. This strategy is expected to help reduce the impact of unanticipated increases in interest rates on debt servicing costs in a given financial year. For example, an unanticipated 1 per cent increase in interest rates would increase debt servicing costs by about $15 million over the following year. During the past fiscal year we continued the strategy, issuing about $1.1 billion of long-term debt for terms up to 30 years. We saved $15 million in 2014-15 gross debt servicing costs because interest rates were lower than we expected a year ago and because the fiscal situation improved somewhat.

 

For 2015-16 we expect these costs to rise by about $10 million mainly because of incremental borrowing for the expected budgetary deficit and for capital spending. You can see the details on Page 12.2 of the Supplementary Detail book and Page 53 of the Budget Assumptions book. This helps to show why it's so important to balance the budget, Madam Chairman. The Department of Finance and Treasury Board recognizes that interest rates right now are close to all-time historical lows, and for the remainder of the fiscal plan period to 2018-19 we expect modest increases and debt servicing costs mainly due to rising interest rates.

 

            Here is another success story in this area. Bond market participants, which include institutional investors and banks, continue to react positively to Nova Scotia's professional debt and management practices. Furthermore, the market has reacted well to the steps we have taken in the 2015-16 budget - our provincial borrowing costs dropped in the first few days following the budget by 1 to 3 basis points relative to other provincial benchmarks.

 

            As well with this budget, despite the very difficult fiscal and economic circumstances we face, we have stabilized our net debt to GDP ratio at 37 per cent and we expect this will continue over the coming years, going downward to 33.4 per cent by March 2019.

 

            Madam Chairman, in the Ivany commission they recommended a 30 per cent debt to GDP ratio, so we're on the right track. Net debt to GDP is the most commonly used measure of debt sustainability for government bond users. We have also heard positive comments from rating agencies whom we will be meeting over the coming weeks to provide more details on our budget and the four-year fiscal plan.

 

            These rating agencies - you might have heard of Standard & Poor's or Moody's - they assess the credit worthiness of bonds and those who issue bonds. Bond ratings are important because they affect the interest rate that corporations and governments pay on the bonds they issue. The more confidence they have in us, the better our rating, and the better the price we get for the bonds we issue. That's a lot of numbers and unfamiliar terms for many people, so I hope you'll feel free to ask as many questions as you like on this. We have expert staff in the Chamber to help ensure that you have detailed answers for everybody.

 

            I'll turn now to how we developed this budget and our tax review and pre-budget consultations with Nova Scotians. In my pre-budget consultations I met with chambers of commerce and social justice and other organizations, people who could speak on behalf of Nova Scotians from all walks of life and from across the province. A significant message was that greater government efficiency is necessary but, at the same time, it was essential that we try to protect our most vulnerable Nova Scotians.

 

            The input we received was invaluable as we developed the budget. I appreciated the opportunity to learn about economic concerns from across Nova Scotia. We also consulted with Nova Scotians on taxation, specifically on their response to the Laurel Broten tax report charting a path for new growth, taxation, and regulatory review. Teams of staff from the Department of Finance and Treasury Board and other departments made themselves available to her regularly to provide any information or other support that she might need. She also did research locally, nationally, and internationally, to develop her recommendations. She offered 22 tax recommendations, 16 regulatory recommendations, and four user fee recommendations. Again, we received invaluable input.

 

            Quite apart from what you might expect, more than 500 Nova Scotians met with me on this topic in public sessions from Yarmouth to Sydney. Our conversations were mature and thoughtful, and I was pleased by the level of understanding and discussion about such a complex topic. As well, 300 people and organizations emailed submissions to me.

 

            I said on Budget Day that our government is taking a long view on the recommendations in that report. Some of the measures that are recommended need more careful analysis. Government needs to understand their impacts on people and we need to consult further in some cases.

 

We will develop a systematic and structural plan that rolls out over a number of years. We are establishing a tax working group to act as a sounding board on implementation challenges and opportunities with regard to the tax recommendations specifically in the Broten report. This will be an important project under my leadership this year, and we'll continue to consult with Nova Scotians and tax experts on taxation around the key recommendations.

 

            Governments around the world are considering or have implemented new tax regimes that refocus taxes away from income and towards use of government services. It is happening in Europe, in Australia, and in New Zealand. We will look at some of these changes as well over time.

 

            This budget follows a very deliberate plan to respect taxpayers' dollars, and our approach is disciplined and responsible. We will rebalance taxes paid on income earned through wages or dividends by lowering the non-eligible dividend tax credit. A taxpayer should pay relatively the same amount of tax on income whether it is earned through dividends or wages and salaries.

 

            Over the past few years when the small-business tax rate was reduced, the dividend tax credit remained the same instead of going down in sync. It is now being reduced from 5.87 per cent to 3.5 per cent. By not changing this policy previously, Nova Scotia lost tax revenue. The change will restore $30 million per year to Nova Scotians, while maintaining fairness for taxpayers.

 

            We will also increase tobacco taxes by 2 cents per cigarette, because evidence suggests higher prices means lower consumption. As well, this will increase revenue by about $16 million for this year. Government is also eliminating the Healthy Living Tax Credit - this sounds counterintuitive in a world where obesity rates are increasing and driving up health care costs, but a tax credit is a tool to change behaviour in fairly specific ways. The Healthy Living Tax Credit aimed to help people with lower incomes to get their children into sport activities by reducing financial barriers they would face. It was a good idea; however; only about 5 per cent of tax filers use it and almost one-quarter of those earn over $90,000 a year.

 

            These families would likely enrol their children in activities with or without the credit. For these families, cost to participation is not a barrier. By eliminating this tax credit, we can shift the monies being directed to middle- and higher-income families to programs that serve lower-income Nova Scotians.

 

            Some other tax-related decisions since the release of the tax and regulatory report are that we will maintain the volunteer firefighter tax credit for people who stand ready to help Nova Scotians in a time of need. I heard from many members of the Legislature and very many in my own caucus about the importance of that, and we certainly agree with that decision.

 

            The $10 million provincial tax exemption on printed books will also be maintained to support publishers, authors, and booksellers, and also to recognize the importance to students and to our public libraries. We will maintain current HST rebates on children's clothing, children's footwear, children's diapers, and feminine hygiene products. We will maintain the Affordable Living Tax Credit that was brought in to help lower-income Nova Scotians compensate for the cost of a higher HST when the HST was raised, and we will continue to do that. Place a cap on corporations' capital tax for financial institutions. This change will encourage financial institutions to grow in Nova Scotia and has no budget impact.

 

Members have shown great interest in the Film Tax Credit. I know that any change to a tax credit would be tough for an industry that has been heavily reliant on government support. We need it to rebalance industry funding. Officials from the Nova Scotia Department of Finance and Treasury Board have met with representatives from the film industry twice in the last week and had a constructive conversation both times. Both sides have agreed to not get into the details of the talks as there is more work to be done. More meetings are planned between the department and industry for this week.

 

This government will also establish a $6 million creative economy fund for the film, animation, music, sound recording, and publishing industries. This fund will begin April 1, 2016, and Nova Scotia Business Inc. will work with the sectors in establishing criteria for the fund. Government supports the creative and cultural economy. In budget 2015-16 government will provide almost $70 million this year to enable growth of the cultural sector.

 

            This significant investment includes $12.5 million in direct culture and heritage development programming including: $2.6 million for Arts Nova Scotia; $14 million for libraries; $10 million in operational funding and programming including museums and the Art Gallery of Nova Scotia; $24 million for the film industry tax credit; and $7.5 million for the digital media tax credit.

 

            I know there have been questions from members about a carbon tax credit and why we didn't implement one in this budget. Provincial and territorial leaders met last week in Quebec City to discuss energy strategy, a cap and trade system, and carbon tax among other issues. In fact, during my discussions this winter with Nova Scotians, including chambers of commerce, about taxation and the budget, I heard interest in the carbon tax. I heard that this system could have great benefits and perhaps some drawbacks - what are the impacts on lower-income people, and how can we reduce that impact? Possibly through the Affordable Living Tax Credit or possibly through other tax or direct mechanisms.

 

            The Broten report talks about British Columbia's carbon tax model as a fair way to tax carbon emissions while reducing overall burden to make tax structure more effective; in fact, that province is considered to be a world leader in this area, their model is so successful.

 

            China could be moving to a tax credit regime in the next short while. Nova Scotia, however, is not British Columbia and while we can look to them for examples, we have to ensure that the changes we make will have the impacts we seek. We will do further analysis to determine how to develop the structure, whether we'll implement some form of carbon tax or a cap and trade.

 

            British Columbia achieved a revenue-neutral model, that's vital. Economists will tell you that making money off carbon taxes will create a drag on the economy or slow it down. But if you can shift taxes, Madam Chairman, and reduce corporate and personal income tax so that the changes are revenue neutral, it can actually create lift in the economy which, of course, is what we hope to do. That is what has happened in British Columbia - carbon companies have adjusted, the industry recoups costs through pricing and benefits from reduced corporate tax. They adjust, the market adjusts, and residents adjust through tax changes. Emissions are down and general taxes are down in British Columbia, so it has achieved its targets and has been a good thing for that province.

 

            We haven't talked a lot about carbon tax in Nova Scotia and it's a topic that bears discussion. We will talk with many stakeholders in this province about how a carbon tax could be developed here. Most jurisdictions have moved to consumption-based taxes, away from income-based taxes. You'll see this change especially in Europe, Australia, and New Zealand.

 

            We will take an ongoing long-term approach to tax changes to diversify our tax base and make revenue more sustainable. Staff will continue to consider existing tax credits and exemptions to ensure that they provide the best value for Nova Scotians. An important step we're taking is the establishment of a new Office of Regulatory and Service Effectiveness housed in the Department of Business. It will develop an agenda for implementing Laurel Broten's recommendations on regulatory reform. Staff will also work with their counterparts in New Brunswick to streamline the regulatory environment between our two provinces.

 

            Government established program review to determine if government should be delivering certain programs and services and if the way we deliver them makes sense. Over the decades government has introduced new programs that often, over time, overlap, creating costly duplication and inefficiency. An ongoing, comprehensive, rigorous examination of government programs will ensure that we deliver only effective programs that return excellent value to taxpayers.

 

            There is only one taxpayer, Madam Chairman, and we must respect and make the most of taxpayer dollars. That is the intent of program review. Directed by a panel of Cabinet Ministers and MLAs, chaired by the Premier, program review has worked in a collaborative environment with departments, and it is now a permanent part of government that will deliver more savings and efficiencies in the future.

 

            Across-the-board cuts haven't worked in the past and could do more harm than good. We know that, and we heard it also during our public consultations. More than 150 programs were identified for review in the first year. Criteria included purpose, effectiveness, and cost. We asked ourselves: what public need does the program address and is it government's role to address that need? How effective is the program? Can we respond to this public need more effectively? How much does this program cost and is that appropriate? Could the province adopt more cost-efficient or effective approaches?

 

            Program review to date will save taxpayers $119 million. The savings identified came primarily from program changes, for about $10.2 million; grant and tax change for savings of about $56.8 million; structural changes, saving about $42.7 million; and several revenue adjustments and administrative efficiencies that will save about $9 million.

 

            Making these tough choices will return government to sustainable finances and to options for better, more efficient programming for Nova Scotians in the future, and regular evaluation of success is necessary to ensure that programs continue to serve Nova Scotians well. For this reason we've now incorporated program reviews as a permanent part of government to deliver more savings in efficiency as government moves to sustainable finances and a balanced budget.

 

            I've said before, this is a difficult budget. We've made many difficult and tough decisions, but we believe we're on the right path for Nova Scotians; we believe that in the future we will have more capacity to do the things that matter most to Nova Scotians.

 

Thank you very much, Madam Chairman, I'd be happy to take questions from the Opposition.

 

            MADAM CHAIRMAN: The honourable member for Pictou East.

 

            MR. TIM HOUSTON: Thank you, Madam Chairman, and I thank the minister for her introductory comments.

 

I just want to follow up, to start off with a question that I asked in Question Period the other day. I'm looking at the Estimates and Supplementary Detail, Page 11.2 and it has to do with the cost of senior management in the department. So we're looking at the estimate for 2015-16 and there's $4.734 million and if you back out the pension, the amount for pension regulations which is $520,000, you get kind of an adjusted cost of $4.214 million. I'm just comparing that $4.214 million to the forecast from last year which would kind of be the actual of last year, and there is an increase there of $475,000, almost $500,000.

 

            I'm just looking for the minister's comments on that because I assume that if you back out the FTEs - sorry, Page 11.3 - if you back out the FTEs related to the pensions, I think the FTEs are pretty steady but the cost is up by almost $500,000 and I'm just looking for the minister's comments on that increase on cost, please.

 

            MS. WHALEN: Thank you very much and we're just looking at some of the detail there. As I mentioned in my opening comments we had a number of staff move in and I said that in Question Period the other day. We had the labour group move over to Finance and Treasury Board and we also had the Pension Management Group under Nancy MacNeill Smith come over from Labour and Advanced Education. I think at the start of your question you said pensions are not in there, you've taken them out - I would say that this is the labour group that have added to that amount.

 

            MR. HOUSTON: Thank you. Madam Chairman, I just want to follow up on that, too, because the estimate for FTEs for the coming year is 30.2 and the actual from last year was 25.9, so I'm just wondering, I think I heard in Question Period that there are five FTEs related to pensions. (Interruption) Okay, so four. So if you back the four out, I think the FTEs are relatively stable. When you back out the four new from pension the FTEs are pretty stable, but the cost is up by about $500,000. I would just like to follow up on that because I believe when you take out the new FTEs from pension the forecast FTEs, which would be the actual from last year, are pretty stable, 26 I think, but the costs are up by $500,000, so I am just curious about that cost.

 

            MS. WHALEN: I wonder if the member opposite would just confirm, is this still in the senior management category . . .

 

MR. HOUSTON: Yes.

 

MS. WHALEN: . . . because we're looking at numbers that are 25, not 26. I'm not looking at the Estimates Book, I just asked for that one specifically because that's the number you took it from. I have a breakdown in front of me of all the staff numbers, and under senior management they've remained stable. If you go through them, they are completely, estimate to estimate, pretty stable, we're at 25 - we have to huddle for a minute.

 

Madam Chairman, I'm sorry for that interruption. The big difference I see we've gone from 25.9 to 30.2 in the book that I have, but it shows four extra people in under pension regulations. So that would just about completely account for it.

 

            A little bit up on the policy and advisory services - I'm told there was a little up and down because of a maternity leave during the year, somebody was out for part of the year. But really it hasn't increased - when you take the four positions out for the pension regulations group you come pretty much to an even level.

 

            MR. HOUSTON: Yes, I guess that's the point that I was trying to make, that the FTEs are stable. The FTEs certainly do appear to be stable to me, but when you look at the total estimate of $4.734 million and you back out the pension of $520,000 because we're backing out the FTEs, we'll back out that amount, too, you come to $4.214 million. That $4.214 million - let's call that the adjusted estimate for comparison purposes - is $475,000 higher than the actual from last year.

 

            In the face of the FTEs remaining stable, I'm curious about that $475,000 increase.

 

            MS. WHALEN: As I've said here in Question Period a number of times in the past, we don't have a lot of programs in the Department of Finance and Treasury Board but we do have social impact bonds and there is $500,000 in the budget for that so that was not spent last year, it carried forward. We are still working on that and I hope we'll have a chance to talk some about it. So that's about $500,000 right there.

 

            MR. HOUSTON: I thank the minister for that. So that would show up right in this senior management number - the $500,000 would be right in there? Okay, I might need to come back to social impact bonds.

 

            For now, I'm looking at Page 11.2 of the Estimates Book, Grants and Contributions. I'm just wondering, there is a significant increase there, the estimate is now $898,000 whereas the actual from last year was $385,000. I'm wondering, would Engage Nova Scotia be in that grants and contributions?

 

            MS. WHALEN: The Department of Finance and Treasury Board has no involvement directly with Engage Nova Scotia. I believe it might be through Internal Services but not through the Department of Finance and Treasury Board. That's another area, as I said, we have very few programs or different factors.

 

            I went through all the financial information that we gather, as I said, the debt management, the organization of the Public Accounts each year, the controlling of finances across the government and consolidating of those finances, but we don't have a lot of special project-type work that goes on in the Department of Finance and Treasury Board.

 

            MR. HOUSTON: Just reading through the department's mandate from last year, the 2014-15 statement mandate said this year Finance and Treasury Board will play a key role in supporting a comprehensive review of Nova Scotia's tax regime; this review will examine the province's tax system and regulations to help position Nova Scotia to deal with its demographic, fiscal, and economic challenges.

 

            I'm just wondering, is that referring to what we now know as the Broten report - "play a key role in supporting a comprehensive review" - was that the role in supporting the Broten report?

 

            MS. WHALEN: Madam Chairman, at this time last year you will remember that we had commissioned the Broten report starting in February 2014. It was to be about an eight-month review, so it was a lot of work underway at that time but we knew that within that fiscal year, within the 2014-15 fiscal year, that the report would come back to the Department of Finance and Treasury Board and that it would have to be looked at, studied, and there would be a lot of consultation with Nova Scotians.

 

            That statement that the honourable member across the way has just made refers to that, for our preparation and getting organized for that which really is a major review. We had no idea of course at that time how sweeping the recommendations would be or what they would be, but we knew that this was the first time ever for Nova Scotia to review our taxes in that way and to also include fees and regulations was a very broad mandate, and there would be a need to consult with Nova Scotians after it was received.

 

            A lot of work was put into deciding how we would go about that, what was the best way to try to package up which is really, Madam Chairman, you can appreciate, a very dense kind of subject matter. It's not easy to have people come out and talk about taxes in their many different forms, the HST exemptions and all that stuff. (Interruption) Some people love it, yes.

 

            I was actually very pleased to see that we had around 500 people, in some places over 100, out to talk about taxes. The whole exercise was titled Let's Talk Taxes, that's what was in the ads when we ran the ads to invite people. I really worried, Madam Chairman, that people would not be interested, that it was too sort of a remote subject, but people did come out and people from all walks of life, I will say - lots of municipal councillors and lots of other people came out to find out about that.

 

            We wanted to look a lot more on how we would move on some of the recommendations and just to consider the impact on people as well. That was why it was very important that that kind of work be undertaken.

 

            It is not to be confused with Engage Nova Scotia which I know has another big mandate and who knows, perhaps we will want to work with them for some of the further consultation because I spoke earlier about the need, in my opening statement and in the Budget Address as well, that we're going to need to do more work. There are still big questions outstanding on the tax review and the recommendations we received.

 

            MR. HOUSTON: So last year the expectation was that the department would play a key role in supporting that process. My question is: to what degree did that role actually come to fruition? Maybe you can give the House some context - were there specific people allocated specifically to the Broten team, and how many FTEs might have been allocated to that process?

 

            MS. WHALEN: I have a number of people who were involved, so I'll just go over that. I knew that we had an Associate Deputy, Byron Rafuse was the lead for our department. As well there were a number of other people. I am told there was somebody for user fees, as well as our staff who work with economic modelling and taxation modelling. So there were those two people, plus two more perhaps under them, support people. We also had a young woman from our communications group who helped to organize the meetings and set up meetings across the province and around the city. Nobody did this full time, it was all tacked on to existing work, and we had one admin person in our executive offices who also helped in that respect for organizing and pulling it all together.

 

            The work was done really very, I would say, independently, from what I'm told by Laurel Broten, she would tell the staff what she needed in terms of modelling and further information. There was also at least one staff member, maybe one at Priorities and Planning? One perhaps at Priorities and Planning, and that would be to get the corporate-wide view on regulations and how best to work on the regulatory piece within government, because that crosses all departments. So that was done as well. There are probably, I think we said eight people who were involved.

 

            MR. HOUSTON: So eight people, but it wasn't 100 per cent of their time - would you say it was maybe 20 per cent of their time, so like two FTEs? I'm just trying to get a sense of the involvement of the department.

 

            MS. WHALEN: I think the important part to note here is that, as I said, nobody was doing this full time, the work had peaks and valleys, absolutely, it would at times require more time and at others less because there were different stages of the research that was ongoing. I'm told that what it meant was that a lot of our staff worked long hours, occasionally they would work very long hours, so they rose to the challenge.

 

            I must tell you, Madam Chairman, when we began to do this tax review, when I was first sworn in as minister and took on my duties there, staff told me that this couldn't be done, that it had been tried before and you can't do it, it's too big. They tried it, I believe, under Minister Baker when he was Finance Minister - that would be about the mid-2000s - and it was a good idea. The Finance Minister of the day wanted to look at other ideas and how taxes could be reformed or improved, but doing it entirely internally was too much and it got bogged down and it moved slowly and no final decisions were ever made. The work was never completed.

 

            I think with that in mind, and knowing that that had been the previous experience it was just felt that it would be very unrealistic to do it even within a year, and because it was a campaign commitment, Madam Chairman, we moved on it. We said we're going to give this our best shot, we're going to find the help that we need, and we did go forth and hire Laurel Broten to do the work, again promising that there would be support from our staff and they rose to that challenge.

 

It's a very good question from the member opposite, from the Official Opposition, when he mentions how they managed that because they did it with their professionalism, with their dedication to getting the work done because they may have had their doubts about the size of the job initially but when we undertook it, when the work was underway, everybody really pulled their weight and added to the work that was done and contributed the level of expertise and knowledge that they had. I think it speaks very highly to the dedication and professionalism of the people within the Department of Finance and Treasury Board and I would say, beyond that, to the Priorities and Planning Department as well.

 

MR. HOUSTON: Now in your opening remarks you referred to a tax credit as a tool to change behaviour in a very specific way, and I was listening to those comments and I was thinking of the Film Tax Credit. We know in the Broten report there was a recommendation made of some changes to the Film Tax Credit and we know that those recommendations weren't followed, that there was a change to the Film Tax Credit and it was different than what Ms. Broten has recommended.

 

I'm just wondering, I'm remembering those words that "a tax credit as a tool to change behaviour in a very specific way," and I'm trying to reconcile in my mind what the behaviour was that the department was seeking to change in what way when it changed the tax credit.

 

So my specific question, opening question would be, what was the process to analyze the recommendation on the Broten report in respect to the Film Tax Credit and decide to use a different mechanism, a different change to the Film Tax Credit - who led that process and what was that process?

 

MS. WHALEN: Madam Chairman, in answer to the question from the member opposite I think it's really important to remember the context of this year as I already explained - the fact that we began the year with $278 million deficit. That would be a year ago today when we sat in estimates, that is what we had forecasted. It was a huge gulf to get that to anywhere near a balanced budget. That was why this year has been characterized by a lot of internal work, not only did we go through the usual budget process of looking at each and every department and having them defend every one of their programs and also bringing their new ideas to the table, which we almost invariably had to say no, I'm sorry, that can't happen.

 

I know there are members present here and ministers here who went through that process; it's not fun to be on the side that has to look at new and good ideas and say we can't do that because we just don't have the money and on our path to getting to any sort of sustainable position we can't look at programs even if they're really good, even if they're really needed. We just don't have the capacity to add new obligations to the Government of Nova Scotia.

 

            With that in mind, there was the regular process, which takes months anyway to bring each department in and go through it, but we also had the team that sat - right after last year's budget we began sitting to look at program review where, again, we looked at every department but not every program, and examined where money was going out. And I said in my opening remarks what some of those criteria were that we looked at, and I know that the honourable member opposite, the Finance and Treasury Board Critic, would also appreciate that you have to look at what's doable.

 

In any specifics, and I know the member wants to speak about the Film Tax Credit, I would just in answer to his question say that it came up through our review of all programs and all services and all tax credits and all foregone revenue, as well as everything else that we were looking at - we had to look at how we move the province forward. But I want to remind everybody in the House that as it comes to this point in time for the Film Tax Credit I'm not really at liberty to go into a lot of information, and I think that it's very important that we know that while the meetings are ongoing, I'm very sensitive to the fact that people need to be able to have those discussions in a respectful way, which they have been to this date - and we've agreed we won't be speaking about it with the media or talking. As I've said, a lot of things can be misinterpreted or maybe difficult to talk about, so I would like to stay away from the specifics of that. Thank you.

 

            MR. HOUSTON: Madam Chairman, I hear what the minister is saying but I do have a number of questions about how the change occurred. What was the thought process of the government in making the change? And I will like to explore those because I think it's important that Nova Scotians understand how the government makes these decisions, what factors they incorporate into these decisions, what things the government considers important when it's making these decisions. We heard the minister say that this was a tough budget process and maybe there was a little more scrutiny over certain items this year, and I assume that the Film Tax Credit is no exception to that. I do want to explore the process of how we got, we had a recommendation from the Broten report and then a different direction was taken. It is important to me to understand how that happened, what the government saw as important in that process.

 

I know from Public Accounts, I had asked some questions about historical data on the cost of the credit to the province, and at that time Mr. Rafuse provided information for 2015 it was $27 million, for 2012 it was $16 million, for 2011 it was $22 million, and back in 2010 it was $15 million. That's the cost side, that's the foregone revenue, that's the cost I guess to the province. It has been a concern to us on this side of the House that the government might not have properly understood the value generated by that cost, and that's going to be my line of questioning here today, to make sure that when these types of decisions are being made the government understands that there are two sides to that - one is what is the cost; the other is what is the benefit, what is the value of it?

 

This Film Tax Credit certainly turned out to be pretty important to the industry. We are hearing from them that this was a pretty key way in how they finance their productions and they build their industry.

 

We've also heard, the argument has been advanced and I believe it, that this is a significant industry to the province. I've heard anywhere from $120 million to $140 million, so when we see a change made to something that's this significant to Nova Scotians, this significant to the economy of the province, then it's important for us to understand how that happened and were all the factors being evaluated in that decision- making process because it's encouraging to me and to members of the industry and to many, many Nova Scotians that there are talks happening now to see if there can be something done to help reverse the negative impacts of this.

 

Talking about it is always good, but as I said the other day in a speech, talking about it before you make these changes is far, far better. If these talks are productive and there is a decision to change something that has been laid down in a budget and presumably incorporated in these estimates, my question would be, what's the process the minister would have to take - do you need to redo some of the budget estimates, do you need to retable your resolution? If there is a change to be made, what's the formal process, what would be the impact on the process that we're following now if there was a decision to change what was in the budget?

 

MS. WHALEN: Madam Chairman, again to the Official Opposition in answer to your question, it's a very good question about the financial impacts and I had to be reminded as well with all the talk that we've been having lately, but just to remind the member opposite and others in the House, the $24 million is budgeted this year which is what we would expect it to cost this year. The changes that are being discussed now are in the outer years. You would have to provide some adequate notice to the industry for any changes that are made and then they would have an impact in the next year and out years from that. That's largely because films that have already been made, the Government of Nova Scotia pays out the amount of money that we've agreed to after the production is finished.

 

We might make the commitment in one year and pay out in a year, or maybe a little longer after that time, so we have to make changes with a good lead time so that the industry has no disruption on the current program of films that have already received their first part approval from the Department of Finance and Treasury Board and from government, and those are used to finance the films. It's very important to the industry and it's a commitment we made, just as we make those kinds of commitments for other businesses through the new Department of Business or, now, NSBI.

 

The kind of accounting that's done is for obligations that we expect will be paid out in the current year. To go to the member's question, the $24 million was what was anticipated for this current year - there is no reduction in that; it's what we do expect will be paid out and where you would see the difference would be in the subsequent years, which only appear in one place in the budget and that's in the four-year fiscal plan. I'm not sure the page number of it, but you'll know the one that shows the next four years out. It's remarkable because it shows a balanced budget next year of $22 million, so I know you know which one I'm talking about.

 

            The year after I have to say that the next year out, so two years hence, it's not much of an increase again because the kind of fiscal planning we do is very detailed, and I must say the Auditor General looks at the out years as well as the current year. It does indicate if you have some programs you've changed or any plans to increase programs, that's all reflected in the out years as well and we look at the economic modelling and what's expected for the national picture, for our own domestic product, for any major projects that would be coming on stream, either ramping up or perhaps closing down in a year or two out.

 

            Unfortunately we don't show a big increase the second year out, again, but we do show three years of a surplus going out for the next three years, and that is where the number will be reflected.

 

            MR. HOUSTON: I believe the date for the Film Tax Credit of July 1^st is a significant date and I do believe that the selection of that date does impact this year - in some way, shape, or form, I believe that it must impact this year, even if it's just the multiplier in the general economy. I know in Pictou Country there was a production that was scheduled for the Fall, which had booked a number of hotel rooms and rental cars and everything else, when you think that level of impact that has now been cancelled, postponed, or something.

 

            There is an impact to this decision in this year and that probably speaks to my next question about what's the size of the industry to the overall economy based on your analysis. We heard that the most recent kind of comprehensive analysis that was done was for 2004 and I'm wondering, if internally, has the staff done any analysis to try to figure out the size of the industry, the value of that industry to Nova Scotia?

 

            MS. WHALEN: Again, just in terms of context for this question I think what's important is with the discussions that are underway between the industry representatives from Screen Nova Scotia who are sitting with our senior officials and whom I've met on both occasions when they've been in, we've shared numbers - I think what is important is we count differently, the Province of Nova Scotia counts what comes back, at least the Finance and Treasury Board Department, in tax dollars. The industry understands that, they're talking about the amount of money which is the total spend for their industry, which is another valid number as well, how many dollars are spent in the economy as well as we look at how much might come back just purely in tax revenue.

 

            There is another measure of economic impact, which is different again from just the dollars spent that doesn't measure, necessarily, economic impact, there is another way to do that. The important thing is to sit down at our discussions, the numbers have been presented, we're not going to argue about the numbers between us, I think we understand we're measuring by two different yardsticks if you like, and we understand better what they're saying, and I think they understand more perhaps the focus we have about tax dollars back into the Treasury.

 

            Again, as I said, the talks were constructive. The meeting held on Friday went for four hours, Madam Chairman, a very lengthy discussion with a lot of sharing of information. The aim that we're having is to better understand the needs of the industry in terms of moving forward, and also for ourselves what our constraints are, if you like, and where we come to common ground that will support the industry and ensure that the industry remains and continues to be active in Nova Scotia. That's what I'm aiming to do, so I'm really hesitant to talk about the numbers today, although I know we will certainly be able to share them in the future.

 

            MR. HOUSTON: Madam Chairman, I think we'll work through this. It would be a little hard to take that in Budget Estimates we couldn't discuss Budget Estimates and numbers because we didn't want to prejudice meetings that should have taken place probably two months ago but happen to be taking place now. But I think we can probably do it.

 

            On Page 4 of the guidelines for applying for the Film Tax Credit, these guidelines are on the Finance and Treasury Board website and it indicates that it's a labour-based credit. It says that the Nova Scotia Film Industry Tax Credit is a labour-based incentive designed to encourage employment of Nova Scotians, and is available to local and guest producers. It is calculated based on an applicant company's eligible salaries incurred in the making of an eligible film. It's effective for expenditures incurred after 1994 and before 2016.

 

            On your website there's a series of forms that must be completed in order to be eligible for a refund - there are seven forms, in fact. One of them is called the Declaration of Residency - are you familiar with this form? It's one of the seven forms that's part of this application.

 

            MS. WHALEN: The member opposite had a question about one of the forms on the website relating - I guess there are seven forms that you would have to fill in. I did hear from the industry that they fill in a lot of forms and in fact that they're audited four times, so being a chartered accountant the honourable member might be interested to know that after the production is done there is a lot of duplication that perhaps we'll be able to deal with, along with other things.

 

            They certainly have a lot of scrutiny on the finances after a production is finished. The form the member is speaking about in particular is the one to determine whether you are or are not a Nova Scotian. We don't receive those forms in their completed form at the Department of Finance and Treasury Board. Those forms were returned to Film and Creative Industries and I would say in future will be going to NSBI where staff - as members may know, three staff people have been assigned to NSBI. I understand one is a person with film expertise or understanding of that industry, one for music, and one I believe is administrative or understands the finances, actually, the tax credit side.

 

            That skill set will be transferred to NSBI - and I'm sure you had an opportunity to ask the Minister of Business about that to some degree. But that form would have gone to that organization, and to those people. There are three boxes: I think one says I'm not a Nova Scotia citizen or resident; the other two, one says I'm a resident as of December 31^st which would be for tax purposes, if you live here December 31^st you're going to file your taxes here, and the other one says I was in Nova Scotia for taxable purposes during the production or during the year. If they tick that box, as well I think they're considered resident for the purposes of the production.

 

            That is the form and it's an important one, definitely. Our aim is always to see that tax dollars are used to support Nova Scotia. Our provincial aim is helping Nova Scotia citizens or Nova Scotia principal businesses, and ensuring that the funds that we spend here help to stimulate our economy. We talked earlier about why are tax credits in place and what they are intended to do, and certainly when a tax credit like this has been in place for quite a long time, often I guess it isn't the aim then to consider what it was for, but when you introduce a tax credit you certainly do think what is my intended aim.

 

            Over the years that I've been here in the Legislature - and some of the members know that I was elected in 2003 - I myself have proposed some tax credits over time that I would now say, probably not a very good idea when I look back on it. After one meeting of these Council of State Governments - I don't know if any of the members here have gone, I would imagine some have attended their conferences, they always have great policy discussions and policy ideas about what all these other, I think it's nine states in the Eastern United States and our Canadian provinces from Ontario east participate in those and we talk about the kinds of challenges we have and look at different policy objectives. I know that the idea of electronic waste recycling came up at those meetings, we looked at what other provinces were doing and Nova Scotia itself moved on that.

 

But after one of those meetings I heard of one state that had a special credit for energy efficient cars so I introduced a Private Member's Bill when I came back that there should be a credit to encourage people to buy energy efficient cars. If you bought a hybrid you got the best deal, a little bit of an incentive so that you're spending that much more - I was well aware that it cost perhaps $5,000 or $6,000 more to get a hybrid than it did to buy the same model that isn't a hybrid. People said it didn't pay back very well so it seemed like it would be a better way to encourage people to buy those energy efficient cars and the bill I introduced, as well, included cars that are just good on fuel economy, they weren't the hybrids but were good on fuel economy and there could be a benefit on that.

 

I think that sometimes over time you see that the evidence is that that doesn't actually change behavior, that a small tax credit isn't enough. It's a feel-good measure in that instance I talked about, that you'd like to see a public aim of cleaner air and less pollution move forward, but I look back at that particular Private Member's Bill and say, well, probably that wasn't a really good idea and I think that other provinces and states that have tried it have backed away from that and found that it didn't work very well.

 

Sometimes we have some really good intentions and we look at the tax system to accomplish it, and it may even seem like an inexpensive thing to do because it's not a dollar allocation when you do a tax credit but it's still, if you're going to do it, those people who are able to access it are actually able to lower their taxes. That's a personal tax credit that I would have thought of and not one that, as I said, brought back repeatedly with some of my others - like the seven or eight times that I brought back the bill on having a February holiday which we discussed here as well during debates.

 

Anyway, thank you very much, and I'd like to hear from the member.

 

MR. HOUSTON: I thank the minister and we were talking about the specific form in the package that's filled out and the specific form, the declaration of residency, is very interesting to me. As the minister quite rightly pointed out, that's the form that talks about the residency of people for tax purposes. This form makes it very clear that the people benefiting from the refund are tax-paying Nova Scotians; they also include their social insurance numbers and other personal details on there. So in thinking about the analysis, or the lack of analysis, in making the decision to change the Film Tax Credit, did the department look at the overall cost of $24 million and immediately recognize that some of that obviously is coming back, straightaway, in the form of taxes because it's taxable income to these Nova Scotians who receive it?

 

The $24 million went into the hands of tax-paying Nova Scotians who paid tax on that $24 million. Did the department do any analysis to try to determine how much of that came right back as tax revenue? I don't know, if you assume everyone was in the low tax bracket, which I don't think is a fair assumption in this case for these types of individuals, I would think that 20 or 30 per cent of that is coming straight back in the form of tax revenue, so the $24 million would be the cost of that without even considering all the multipliers in the economy. I would think the cost can be immediately brought down and I wonder, was there any analysis done to determine what is that kind of net cost just at stage one?

 

            MS. WHALEN: I would just like to go back if I could, there is another page on the website as well that starts with what are the requirements to qualify for the tax credit, and I'm sure since the member found the individual forms he looked at the first page which talks about what makes you an eligible company for the purposes of this tax credit and what you need to do to qualify for the 50 per cent, which is our minimum if you qualify, the minimum that we will cover of labour costs. It's important to note, I think, that if you look at that carefully it says - and perhaps you have it in front of you, member - no? It's the first page of that credit.

 

            What I think is important and what surprised me was it does say there that the first requirement on labour is that 25 per cent of the people that you end up saying worked on your film, and I think it was mentioned the other day sometimes there are 19 pages of names of people who had some work or another on the film, so lots and lots of people engaged. If 25 per cent of them are deemed to be Nova Scotian, according to the form that the member spoke about, then 50 per cent of the salaries are covered.

 

            It doesn't say for sure that 50 per cent of the people working there are going to be Nova Scotian are eligible, that maybe in most cases there are a lot of Nova Scotians employed, I believe often there are because I have been told up to three large productions can be done with the local crews that we have at one time, but it's not as clear that it must be. Perhaps the member would like to look at that when you get a break and just have a look and see because it's a little bit unclear.

 

            In that regard perhaps I'll ask the member to pose his question - I don't think I've answered your most recent question just now.

 

            MR. HOUSTON: Madam Chairman, the question was, was there any analysis done because I believe through these forms it is possible to follow the money, so to speak, and I'm wondering if there was any analysis done that actually tried to determine exactly how much would have come back to the province in personal income taxes from the people who were Nova Scotians, tax-paying Nova Scotians, receiving that credit. I think it's the case that the $24 million goes out and some portion of it comes right back straightaway, and I wonder, was that analysis done?

 

            MS. WHALEN: I've already said, and I guess I'll say it again, we're not anxious to argue a lot of the numbers. We have two different ways of looking at it. When I sat with the industry representatives we have accepted that we have two different methods that we've looked at - we have not said their numbers are wrong; they have not said our numbers are wrong. We're measuring really with a different mean. Our aim is to see what comes back to the Province of Nova Scotia in tax dollars as we put out money through the tax credit, which, again, is not based on a tax credit really, if you qualify you get the funds and that's very clear. I think everybody knows it's a refundable tax credit.

 

            All of our analyses, and it has been done, and done and checked and rechecked and I've asked it's that all of the taxes collected, that would be a multiplier effect for HST in the economy, personal income tax based on the number of people employed, and corporate tax somewhat, all adds up to $6 million, right now on $24 million - so about a 25-cent-per- dollar return in tax dollars.

 

            Now as the member said earlier this is an industry that has some spinoffs and social value. We don't dispute that there is social value, but if you're thinking of tax dollar return, the formulas are rigorous, they're clear, they've been done and, as I said, questioned and redone. I've read about other jurisdictions in the United States that had put their return at 13 cents per dollar, 14 cents, that sort of thing. There have been a number of other jurisdictions that have made studies.

 

            What's interesting and I think everybody here could find an interesting parallel that there is always a big disconnect between what the industry in a particular jurisdiction measures and the dollar spend, which is an important measure of how many dollars are spent and circulated. But compared to the tax return, which I just say it may be a cold number and it has very defined parameters, it may not capture so many of the other aspects that are valued, but in dollar terms that seems to be a common thing, that fiscal - I'm trying to say the right word - within a Finance and Treasury Board Department, the fiscal measures that are used don't measure some of the things that are looked at when an industry includes it.

 

            But I think the industry is looking at its total spend in the province. That is not a number that we dispute, that amount is spent. We have done another analysis that just shows how much is spent directly on the productions that receive the tax credit because not everything that has to do with film and television in our province receives a credit - it's not on every single activity of film and television productions. If you take just the ones that our tax credit went into, then the spend was $67 million directly. We've narrowed the gap in terms of how much is being spent and where it relates to our credit that the Nova Scotia Government has provided support.

 

            I guess I'd like the member opposite to understand that we don't dispute their industry spend and they understand the more narrow measure that we're using, which is very important though from the fiscal responsibility side. How can we afford all the other programs if we don't look after our tax dollars? That's really what it comes down to. Again, Madam Chairman, I want to reiterate that right now there is a basis of understanding between the industry and ourselves, and we are not trying to fight or disagree on the numbers - we understand now that they're just based on two very different measures.

 

            I think equally they have validity, and what we're looking for now is how we move forward to find a place where the credit can better reflect the value that we need for our province, and that can also support the many people who are employed and able to pursue a career in film. Thank you.

 

            MR. HOUSTON: I thank the minister, that's very helpful. But just to give the minister some context, I'm not particularly interested at this time what the industry might be saying about the size of the industry and their numbers. I'm really solely focused right now on the numbers the minister was relying on to make this decision.

 

            So I understand that $24 million was kind of the top line cost of this tax credit. I think I heard the minister say that $6 million was the number the department identified as coming right back directly in as tax revenue, just direct taxes, personal income taxes, whatever the case may be, $6 million came right in. So $24 million went out, $6 million came right back in immediately without considering anything about the broader size of the industry. I just want to confirm that I understand that.

 

So my question would be, is it fair to say that the net cost before other considerations is really $24 million minus $6 million, so we're really talking about $18 million, and I wonder, would the minister be able to confirm that, and also is there anything on the analysis that could be tabled that supports the calculation of $6 million as the immediate return to the province?

 

            MS. WHALEN: Madam Chairman, I was reminded that on Budget Day there was a fact sheet on just the facts as we saw them from a finance point of view, and I'm reminded that it's called a financial return. That is what we calculate, not the economic impact but a financial return which is more of just a fiscal measure. That tax sheet was provided to the media, certainly in the lock-up and I just asked was it given to the Opposition members who were in the lock-up as well. I don't know if you received that. I'm not sure. I know, like other members, we are inundated with paper and information, but it was intended to have no narrative, just to say here is the information that we have from a finance or fiscal responsibility point of view and that was provided. I don't have a copy of that here right now to provide but, again, it said that there was a $6 million return in tax money back to the province.

 

            I've asked again how do we impute the HST particularly, because I know I've spoken to many people who said they did business with somebody in the film industry or rented rooms or rented their cottages out to be either as accommodations or to be film sites or rented their sheds for storage, I've talked to people who have done all these types of things, particularly in our more rural areas. Now, bearing in mind that the tax credit goes up by, I think, it's 10 per cent if you go 30 kilometres from downtown Halifax, so just getting to the periphery of the city you can receive a 10 per cent increase on that.

 

So there are a lot of people who have some dealings and made some money and certainly it has been beneficial, but what I'm told is that the formula that is used - and I think this is the important thing for everybody to know - it's the very same formula that is used when a payroll rebate is considered. How many employees, what is the average salary, and then how much HST do we impute would be transferred or spent in the economy, as well as a result of the activity that's undertaken?

 

            That's really what is being looked at. It's, I would say, a standard formula. I think it applies to industries in general when money is circulating in the economy. It's a multiplier; it's like a ripple effect. I understand when one dollar is spent, it makes its way through multiple hands. It's something like a 2.4 multiplier for the funds spent and even with that it comes back at $6 million in this formula.

 

Again, I want to reiterate that there is no argument between the industry and ourselves about this - it's just a question of us understanding the two different measures, which we do. I'm sure all of the members in the House appreciate that that's where we want to get, to a place where the return on investment is good for Nova Scotia, ensure that the benefits are for Nova Scotia, and also that the many people who rely on and are participants in this industry will find that there is still an active and vibrant film sector and we will continue to have films made here.

 

            MR. HOUSTON: Madam Chairman, that's interesting because I'll be honest, I find it very surprising that there's a formula that would somehow produce the result that only $6 million came back even when you consider the broader impact on the economy. I would be very interested in seeing that. I don't know if that, not that headline number of six, but can I dig behind that? Would the minister be willing to share the formula as to how that is calculated? I would really like to understand how that number was derived.

 

            MS. WHALEN: Madam Chairman, I wonder, could you tell me how much time is left in the hour?

 

            MADAM CHAIRMAN: A minute and a half.

 

            MS. WHALEN: A minute and a half, oh dear. Well, I've enjoyed it. What I can say is that formula is available, as I said earlier, the formula that is used is used with all payroll rebates and support that is considered from the government. I think it's an important measure that we should all understand and I know that the critic for the Official Opposition is very interested, he understands finances, as do all members here. We have a former Finance Minister as well in the Third Party who will be asking questions soon, and I think understanding that formula is important. We don't have it here, but I can certainly promise to make it available and if you'd like to sit down with staff and just walk through it - I'm not sure that it needs that, but it is good to understand what the variables are and how it is used, so I'd be happy to do that.

 

            I think it would help because, as I said, without a doubt I have questioned and others have questioned and double-checked and reviewed it many times to say, is everything in there, are you sure? This certainly is what we used for other projects that are deemed to be worthy of support from the government as well when we look at if we do this how many jobs will come and what will be the impacts. I think all of us are interested in knowing where we put our money for so many other projects as well, not just in this instance but in every instance where government money is spent, are we incenting something that is going to bring back good benefits to the province?

 

            As I said before it is a fiscal measure; it looks at financial return. It's a formula that may appear to be kind of cut and dried, if you like, but it's very important that we have measures that we can rely on. We often talk in this House about evidence-based and trying to look at things as carefully as we can to make sure that they are returning to us the benefits that we need as a province.

 

            Again, I will affirm that there are many hard-to-quantify elements of film and culture. We appreciate the government has a role to play and I think that's a really important thing for us to end on perhaps in this hour of question - that when we're talking about cultural activities, I spoke earlier about books. In the Broten review it's clearly one of the HST exemptions that were just pointed out as a question, why do we exempt printed books? It interesting to note that more and more people are buying books online and they are not exempt; it's only the printed books that were exempt and that goes right back to when the GST was first introduced, I think it was 1990, and so from that point onward books provincially had been exempt.

 

            Let's not forget the federal government still collects their 5 per cent on books, and that would have been 6 per cent or 7 per cent in the past as they've been declining in their consumption taxes. Nevertheless books were never considered for an exemption from the federal government and yet provinces had exempted books at that early introduction of the HST or the GST.

 

            So we look at that and we say well there is $10 million that the province is not collecting because people are buying books and they're tax exempt. You have to look at it and really ask yourself if that's it - again, just to go back to the earlier question we had, is it creating a common aim, is it doing something that even though it's not tax exemption, in a way it's a consumption tax exemption, but you have to ask yourself, what is the goal of that? Obviously encouraging reading, a love of literature or books or learning, that's important, we see a social benefit to that. You have to ask yourself whether or not this is something we should continue - is it a cost?

 

            I went through the list of things that we looked at in program review as well. Is this something that has a reasonable cost for the benefit that we're getting? Is it something that is a social aim and important to the province? As you know I had announced that we would not be putting the provincial tax back on books. That was something we looked at carefully and I must say a lot of it has to do with libraries, Madam Chairman. When you consider the impact on every community, libraries are just so important and I hope we'll get to talk some more about that afterwards because we know that would put a big pressure on their budgets and a pressure on the municipalities as well that are required to, that do support - I know here in HRM the municipality pays a good portion of the library costs, the province pays larger portions in libraries outside of HRM.

 

            We all know the great impact that has and there is no single better place as a leveller for education than our local libraries because, you know, a lot of families that may not be able to buy a lot of these books can go as often as they like and can bring home books and make sure that their children and the rest of their family has access to all of the latest and all of the learning tools that they need. That's essential and that was really a big part of that decision, so I hope we'll be able to talk more about that as well. Thank you, Madam Chairman.

 

            MADAM CHAIRMAN: That ends the time for the first hour for the Progressive Conservative caucus. We'll now move on to the NDP.

 

The honourable Leader of the New Democratic Party.

 

            HON. MAUREEN MACDONALD: Thank you very much, Madam Chairman, and I'm looking forward to having some time with the Minister of Finance and Treasury Board and her officials from the department.

 

            It's rare that the Department of Finance and Treasury Board comes onto the floor of the main Chamber during Budget Estimates. The Rules of the House, as some people might know but maybe others don't, the Rules of our House are such that five departments get to be called during the Budget Estimates in this Chamber and those five departments are determined by the Official Opposition - they decide which five departments to call. I don't think in the time I've been here, I ever really remember the Department of Finance and Treasury Board ever being here before. Perhaps once, but I don't really think so and I've been here for 17 budgets I think at least - probably more than 17 budgets because I've been here in years where we had two budgets in one year.

 

            It's unusual for Finance and Treasury Board, so I welcome you. I don't know if you are enthusiastic about being in this Chamber rather than over in the Red Room. I think the reason for that is a former Finance Minister used to admonish the Opposition when they had an opportunity to ask questions of him because they would have a tendency to ask questions about the global budget of the province and he used to remind them that it wasn't his job to defend or explain the budget of Community Services or Justice or the Department of Health. In fact, it was his job to explain the department's budget.

 

            Now, I think, listening to my colleague in the Official Opposition and the minister's opening comments, there has been a bit of latitude given with respect to us having an opportunity to talk a bit more broadly than just these specific line-by-line elements of the minister's budget. So in that vein, I probably will do the same thing - I'm very interested in revenue and taxation questions as well as the kind of narrow operation of the department.

 

            First of all, because I know that there are people who are very interested in how government works and various departments, I would like to get from the minister an explanation of the number of people who actually work for the department now. My calculation is that it's roughly around 108 or 110 people employed in Finance and Treasury Board. The budget for this year for this department is estimated to be about $14.5 million, just under the half million, so $14-plus million. I'm trying to just get some basic information so that folks who are listening and are interested in knowing more about this department and what it does for the province and in the operation of government context,   I guess.

 

MS. WHALEN: I do thank the member opposite for her welcome to the staff - and   you are right. I'm told it is the first time that any of the staff can remember Finance and Treasury Board coming to the main Chamber for estimates. I know we have called the Premier's Office in the past and other small areas or small budget areas.

 

            I did want to mention it because there was a little bit of controversy around this on Friday in the House itself and I think it's worth remarking on that the original five departments that the Official Opposition chose did not include Finance and Treasury Board. It had been approved, the five departments that were coming in and it included Justice in this Chamber rather than Finance and Treasury Board, and I hope that members understand that it was presented to me that it was our choice whether we would make the change when it was asked and I had no hesitation. I firmly believe, and I know the member opposite as well believes that our job is to be accountable and be willing to discuss the issues that are important, and the funds that we spend. I was, maybe surprised, but not unhappy to come to the main Chamber and discuss these.

 

            The other point about whether or not we could come Friday. I know Friday was originally the date planned; it was pushed off because of the meeting that was being held with Screen Nova Scotia, and I said at the time I could be here but the other important part of estimates for the public to understand is that the minister does not come alone, the minister comes with their senior officials and my senior officials were very engaged in the meeting that went for four hours on Friday afternoon. So that was the reason for the change to today, to Monday, and I'm very happy to be here and I know my officials as well, certainly it's different, but happy to be here.

 

            One of the big differences is that if you're in the Red Room, your other staff is much closer, they can send you a sticky note or send you an answer to certain things and they are farther away today. They are up in the gallery so I don't have a quick chance to whisper or get an answer from some of the many other very talented and wonderful professionals who work in the Department of Finance and Treasury Board. I wanted to make that clear, we're happy to be here, it's a different forum but it's a very important department and I'm proud to be the minister and to work with the people who work in that department.

 

            As was mentioned, we talk about FTEs in government, full-time equivalents. That, in some departments, means that you might have 100 full-time equivalents but you might have 200 people because of the number of people who work seasonally or in different ways, they might job share or work part-time and we fill a full-time equivalent with two or some proportion of that. In my case, I asked earlier today about the 108.7, do we have part-timers, are there a lot more people? No, that pretty much is the number of people we have working. I mentioned earlier about maternity leaves, we've had people in and out a little bit, which is a wonderful thing if their family is growing. We're happy when there are some young families in the department, we're happy to have young people working for the government in general and the Department of Finance and Treasury Board. So I'm glad to see that.

 

            There is a little bit of change and it's not a full number, it's 108.7. Looking at the department's - I guess it's not on our website, but I have their organizational chart in front of me and we have, as you know, a deputy minister and a number of senior officials who report to the deputy. I can give you a little bit of a rundown on what they are. Perhaps I'll start with the Associate Deputy Minister in Treasury Board, Doug Stewart; many of the members opposite will know Doug. Doug Stewart has a team of about 20 people. I want to get the exact number. It's up four this year. I mentioned earlier that that would be the labour relations groups coming into that area, so Treasury Board which had been 20 last year, that's the number I had in my mind, we're up four and so it would be 24 this year, and as I mentioned, that was some of the central group that will make a corporate labour relations group. That is the difference in Treasury Board.

 

            The Treasury Board people are quite remarkable because they act in a lot of ways as almost consultants in government; I think that would be fair to say. They certainly, if you have any special projects that you want looked at, anything that they need to kind of coordinate on behalf of departments they have a lot of expertise, not only in the numbers, but in understanding how to organize and work through really complex projects. In doing that, they, for example have looked at shared services, that was an initiative that began under the Third Party, the NDP when they were in government, they were exploring shared services, how we could take services like IT services or procurement, or professional - I'm trying to think of some others - human resources, we've done some of that already, that's centralized with the Public Service Commission.

 

            But taking those things that were sort of spread throughout government and maybe didn't have the ability to leverage savings and to be done as efficiently as possible, the initiative was to bring them together into one unit where they could be more professional and better. An example of that, a little bit different but an example, is the announcement we made in this year's budget about bringing all the inspector-type services into one, enforcement and inspection which exists in Environment, Health, Agriculture, and Aquaculture where they go and do water testing.

 

            We were told that different businesses - somebody told me they had a campground and a little restaurant and they had up to nine different inspectors who would come and visit that business at any time; just at the drop of a hat any one of nine inspectors could come and check for different aspects of the business. By bringing them under one shop in the Department of Environment, there will be an opportunity for common training, for cross-training between the departmental objectives so that perhaps you might be down to one or maybe it would be two that would be coming to a similar business and they would have the ability to test all of the things that previously you had nine different departments or agencies doing.

 

            In a sense, that's another way of bringing people together and similar to shared services. Procurement is one that I know the previous government had begun, had actually seen savings coming back and very important to be able to say as you consolidate some of these services, you've not only professionalized them because as a group they can have better training, a better ability to share knowledge with their co-workers because they're in bigger divisions. That's a very important thing.

 

            I was talking about Treasury Board itself. They have the expertise to bring these kinds of big changes underway - transformative changes, changes that require a lot of expertise and detail and working through, much like a very large project. In many ways, I look at that group and say they perform the sort of role that a consultant would do, and I don't know if all members of the House know, but I did work for about 15 years as a management consultant, so I really appreciate the kind of work that they do and they're very versatile. They can work on one subject for an intense period of time and then move to other departments and other challenges.

 

They put their heads together and they come up with a plan on how they can advise government to best utilize the existing resources we have in the best way possible. They're always focused on that, the best use of our dollars and best alignment that we can come up with. They often have great suggestions for us and they worked very diligently on the budget as the member opposite would know, having been through that.

 

They work individually with departments, so within the section of Treasury Board we have individual staff members who are - they're not assigned directly to a department, they stay in the Treasury Board offices but they work very closely with the finance directors of different departments and they understand their budget very well and they come together with the departments when Treasury Board meets and looks at the individual budgets of each department. They have an arm's-length view, but they also understand the departments very well.

 

            As I said, those were the first ones there at Treasury Board, about 24 people. We already had a little discussion around our senior management group which includes 25 last year and we said 30 this year, but largely because we had brought the pension people into that and they had previously been at LAE. I should say, I think that was a very appropriate change. I think at one time they had been with Finance and for about 15 years had rested in Labour and Advanced Education. The pensions we're talking about are the private sector pensions and the plans that are there not for government but for the private sector.

 

            The alignment really makes sense with Finance. We have people in our senior management that understand the finances of pensions and have more of an interest in it, I have to say, more of an appetite to - it allows more collegiality because they can talk about pensions with others in senior management and I don't think they feel quite as isolated perhaps as they might have in LAE which has very different workplace attachment and training and those kinds of issues which are very exciting and compelling, but not as financial in nature. So I believe it has been a very good move, we're very pleased to have them and they're a very professional group that provides good service to the private sector as well.

 

            That's our senior management group. They would include our policy people in that as well; policy has about four or five people. Four people and they're a very bright group of workers and professionals who do a lot of work on trends, and they also help and manage a lot of our relationship with NSLC and with - well, it had been the Bridge Commission, and also the Nova Scotia Securities Commission which is another very important area. We have the Controllers Division as well, and that is 25 people, once more. I should look exactly at what they do; I have a list of exactly what the controllers do.

 

Members of the House will be aware of the Public Accounts, I think a lot of members serve on that committee and the Controllers Division actually prepare the Public Accounts which means they are always keeping track of our updates as well when we're doing the updates to budget. We do those in the summer, in August or so; by law I believe we have to provide an update by the end of September. We do another one in December to let the public know, through the media and through the Opposition, let everybody know how we're tracking through the year and how well we're doing. Those figures are extremely important.

 

            This year, through the Controllers Division, knowing how we were tracking through the year, I think it's really important to mention the mid-year mitigations that were made. They were made before the August update. I don't know if the members remember them, I felt they were very important because we knew at that point that we were not tracking to budget. We had started at $278 million negative, and we had risen, I would say, by some amount - it might have been that we would go over 300 if changes weren't made. That was my fear, and our commitment had been to track as closely as possible to our budget and stay on track. Well, I'm giving them full credit for doing it - I'm told Treasury Board tracks better and the others just do the Public Accounts, but anyway I think the mid-year mitigations are nevertheless very important and pertinent.

 

            I was told that it was about seven years since any government had intervened during the year to say let's change track, let's find out how we can do it differently, and as the members will note, there was both a 1 per cent reduction across the board for all departments - I know that's a very blunt tool when you go across the board, but we did do that in mid-year and said everybody, you have to cut 1 per cent out - the bigger amount that could be saved at that point was going to the slowdown on hiring. Not a freeze on hiring, but a slowdown so that wherever there were two positions left vacant, we would only replace one. That was in place to the end of the year so that we could see how we were tracking.

 

The estimate was about $30 million would be saved by doing that and here we are at the end of the year, our departmental spending actually, from last year, it's not closed yet because we won't close it until the summer, but it appears to be down about maybe $22.5 million. That's even with other pressures like closing out last year's snow budget or looking at the mitigation that we did for mink and otherwise.

 

            Perhaps, I don't know if the member wants to go through every department? Every section of our department? There are others. There's Corporate Services, Fiscal Policy, I think that's one that the member would know well from her time as minister, certainly the section that does economic and tax calculations and modelling. That's a big one as well, 23 in that area. They do a lot of work, obviously, tracking all of the latest trends in the economy, not only in Canada, but they look worldwide as well with what's going on with interest rates, with employment, with labour stats, housing starts, retail sales, you name it, and they're following every one of those at all times offering advisory services, obviously, to us and helping with the planning. They are very integral when the auditor comes in to look at our estimates for revenue which is what the auditor does sign off on for that.

 

            Again, I mentioned our Corporate Services Unit which helps with some of the internal work that we do; there are 18 people in that areas as well. I think overall that pretty well covers it, I don't know if the member has written down those numbers, but I get them to 108.7 for this year.

 

            MS. MACDONALD: I want to thank the minister for her very thorough answer to what I thought was probably a much simpler question; however, let me ask the minister a few short snappers that perhaps won't require such extensive conversation.

 

            Before I move to talk about the Film Tax Credit, which I do have a number of questions around, I want to ask the minister about that line item Grants and Contributions, Page 11.2 in the Estimates Book. Now my understanding is that the Department of Finance and Treasury Board gives a rather substantial grant - let me see if I can find it here - to the Nova Scotia Firefighters School. Is that line item I'm looking at, I have the Supplementary Information Volume Three here, is there $330,000 to the Nova Scotia Firefighters School? I'm just curious about that line item, the estimate for 2015-2016 because I see an increase in that line item and I'm trying to - so I guess what I'm asking the minister is if the minister would give me a detailed breakdown of what those grants and contributions have been estimated for, please, in the 2015-16 budget?

 

            MS. WHALEN: I've been looking at that on Page 11.2. I think that is the area that you were looking at. It's the Departmental Expenses by Object, and what I see again is you mentioned Grants and Contributions last year was $635,000 and this year will be $898,000. If you're looking there as well you'll see our forecast is lower, it's $385,000 - those are social impact bonds which were begun under the previous government. And I fully support them, I think it's a really good thing, I'm glad that they had begun and looked at, and I hope maybe we'll talk about some of how that's advancing, but the money wasn't spent last year, it wasn't allocated to anything else, so that line item has come in under.

 

            This year there is now $500,000, so the $250,000 from last year plus another $250,000 for social impact bonds, so that would account for the difference in those two lines, where we were at $635,000 last year and we're $898,000. It has an extra $250,000 for social impact bonds.

 

            I mentioned them in my Budget Speech as well and there are no projects to announce just yet, but I want to keep the momentum going. I want to keep our eye on that as an objective, that we move on that, that departments know that this is something we have to find that right match of a project and we have to begin to get experience in this area.

 

            There are about 50 projects around the world that are unique in the way they are structured - they're structured with an outside delivery group whether it's a non-profit or others and they are funded by people investing in a social outcome. That's what we're talking about there. I should go back as well to the other item because the member opposite asked me a "short snapper," she said. I would like to hit on the $330,000 that was mentioned. It's under the Insurance Division, that's Doug Murphy's division that looks at credit unions and insurance, and we may want to double-check this but I'm going to tell you what I think it is. If I'm wrong, I'll be back to correct it.

 

            I understand that we give some money directly to the volunteer firefighters, possibly all firefighters, but I think the volunteer ones because they are first responders at sites and it helps to compensate them as part of the insurance system. I think we get the money from insurance companies so there's some money that we get in our fees from insurance companies and we then distribute some, as a grant, to our volunteers - in the book it does say distribution of the Volunteer Fire Fighters Levy. It particularly helps those volunteer organizations who don't have - well, they have the public support, they do a lot of fundraising and they're run by volunteers, but it's another way to help compensate them for the cost that they have of helping, really, the insurance companies and the public by going and being at the scene of accidents. It's not a very large amount of money, but it's certainly important to those volunteer firefighters.

 

            MS. MACDONALD: Mr. Chairman, I thank the minister. Minister, on the day of the budget, on the day that you tabled your budget, we were given kind of an itemized list that outlines the results of the program review process through each department. This list identifies the $50 million that was taken out of the Graduate Retention Rebate and then, in addition to that, we see from your department the elimination of the Community Counts program, but we don't see anything that indicates that the Film Tax Credit was being reviewed and altered in any way.

 

My question really is this - my question is, in the process of making the decision to change the Film Tax Credit, was that a process that was part of the program review and, if yes, could you explain that process a little bit; if no, is it a process, I mean I think both of those processes would have been - the business of making this decision would have gone in front of the Treasury Board, I would say, so I want to ask the minister, besides yourself, what other ministers were involved in making this decision - if it would have been the ministers who are members of the Treasury Board and if so, who are those ministers?

 

            MS. WHALEN: I would like to talk a little bit about the whole program review and process that we were engaged in. I mentioned to all the members that as soon as we finished the budget last year we recognized that there was a need to have a really thorough review. I had said - and I think other members had said - we want to go line by line, item by item, we need to find out all the programs.

 

            This year we looked at 150 programs. At the same time we also had a tax review which identified not only 22 tax recommendations that they encompassed a lot more than one item, some had multiple items within them. So we had a lot of information that we needed to go through that we asked for that was looked at. I think it's most important to note that the process has been very thorough, that many people have been involved. I think it's important not to move into areas that might be confidential about who says what, or who does what, or who sits where. I understand the last minister that was here, Internal Services, actually spoke about who sits on Treasury Board and the member opposite would have been, I imagine, the chairman of Treasury Board - perhaps not, because there was a Minister of Treasury Board under the (Interruption) Oh, okay.

 

            I think the Department of Finance Minister should always be on Treasury Board would be my thought. It's an important decision-making financial group, but in the past the last government had a separate minister for Treasury Board and Finance - they were two separate departments and as has happened across Canada, they at one time were together, they got separated in many jurisdictions, and we followed suit with other governments and brought them back under one roof.

 

            Really, if you look at processes like preparing the budget, Treasury Board looks at the spending side and our Finance Department will follow the revenue side, and they had to work closely together to marry those two and bring out a budget. There were so many times that we needed to work in conjunction that I think the current structure is better and the member opposite and other members know that as Minister of Finance I am chairman of  the Treasury Board. That's one of my responsibilities, and that is an area where a great deal of financial information comes before us from the smallest departments and even the smallest expenditures, sometimes, for our approval, up to some very major expenditures.

 

            It's a group of very dedicated individuals who spend their time to understand the different departments and the financial pressures just as much as I do as the Minister of Finance and Treasury Board. It's a very good and balanced group. We also have heard there is a program review, the program review had another number of members who sat as well, but all of Treasury Board was there and we looked at over 150 different programs and services, and the aim, Madam Chairman, which was very important, was to ensure that services that are most important to the public and the people of Nova Scotia are going to be maintained, the core services that we all know have tremendous pressure.

 

            The member opposite had been asking about being here for the first time as Finance and Treasury Board Minister in the main Chamber, but I remember a time when 20 hours was spent on the Department of Health and Wellness. The minister at the time, the member opposite, had (Interruption) Was it? I was thinking 20, but I know it was a very long, very gruelling process of looking at all of the Health and Wellness spending and the many, many programs that fall under that. I had been at that time asking some questions about health issues, as did many other members of the House, that is the process of looking at all of these many programs. When we have departments like Health and Wellness with such huge budgets, right now $4.1 billion this year, it's a challenge to even touch the surface of many of the program costs that they have.

 

We do our best at Treasury Board to get an understanding of the pressures and the cost drivers, where the increasing costs are coming from, and try to understand how we allocate. The role of Finance, the important part of Finance is not to go into the departments, as was mentioned, we're not here to defend the budget of other ministers, but we are charged with trying to see that there is an allocation of resources across all of the departments so that all of the priorities of government and each of the departments have the funds they need to do their important work.

 

That is everything from ensuring that the Department of Natural Resources can work and maintain control over the mining and forestry and natural resources of the province, helping Agriculture and Fisheries, ensure they are doing their work - and I will tell members of the House, I've been asking every one of these departments to not only do their work but to try to see where they can bring some value back to Nova Scotia.

 

            Our new structure with the Department of Business is going to be in a position to do that much better because when you take out the enforcement side of those departments and you leave them working with industry, not as enforcers, but as support and as people with knowledge that can help perhaps address some of the challenges that different areas of Agriculture or Fisheries have. We are going to be able to look at how we maximize the return to the province for those natural resources and for some of our natural benefits that we have.

 

So those are the important rules that we're looking at and we hope that through our exercise of program review to not only challenge departments and areas to save money but to ask them with the resources you have, with the Crown lands, with the opportunity to grow industries and support industries, what are you doing to return dollars to the Province of Nova Scotia, so that we can do more on the core areas of education and health - and I heard the member opposite speak about mental health which is an area I share with her, the concern about that - so how can we get more funds to our province to do the core and important business? Thank you.

 

MS. MACDONALD: Madam Chairman, I want to ask the minister - we've both been here awhile and we've stood in different places at different times, and I remember well in 2012 when you were a champion for the Film Tax Credit when you were on this side of the House as the Finance Critic and your words have been circulating from that time on lots of Facebook sites and they're recorded in the Hansard. I remember actually when you were very critical of me for not getting the money from the Film Tax Credit out the door fast enough. I think that pretty much was the criticism that you had with respect to the Film Tax Credit at the time - it was that we weren't processing it fast enough.

 

I guess I would have two questions for you. I would like to know what has changed your mind - what body of information now has changed your mind and what's different now than the case then? And I'd also be curious to know about the processing of the Film Tax Credit because my understanding was that it was a pretty rigorous process with a lot of detailed accounting and auditing - several different audits in fact would have had to occur with respect to the processing of these tax certificates or applications. And I think the final question I have - and it's a concern that I hear from the people in the industry - what's happening now with a lot of people who are in process and how is the government communicating with people who are already in the queue and now are having a very difficult time either getting information or understanding what the way forward is going to look like? I suppose those are three questions.

 

            MS. WHALEN: There were three questions there - we were just going over the very different ones. The first one: did I remember speaking to the former Minister of Finance about the backlog? The question that I remember and as I've read it was about the backlog of applications that were sitting in the Department of Finance and hadn't been moving through and as the member knows there had been digital as well as film - I know there was definitely a lot of digital backlog for those.

 

            Actually, if we go back in time, I think digital was a bigger part of it and members will note that the Digital Media Tax Credit has grown as well, it's another refundable tax credit that helps people in the digital and gaming industry. Similar but a little different, a separate criteria, separate credit, but they're often spoken of together. Definitely the process of reviewing them was somewhat similar and they came to the Department of Finance, a big problem has always been, I gather, the definition around interactive, that to be a game, to be considered for the Digital Media Tax Credit it can't just be its animation or that its done on a computer, it has to have an interactive component like a game would have, where you're playing it.

 

            People in the Department of Finance had a lot of difficulty, I think, with that definition by times. Certainly that was what I was asking about because in that time, which might have been about - perhaps it was in 2013 or 2012, I'm not sure what the member had said there - but there had been a question here during Question Period where I asked the minister what she was doing. I said it was important, companies are waiting for their money and we need to ensure that those refundable tax credits are processed and dealt with.

 

Again, I remember meeting in my constituency with some of the digital media people and their concern was they had done all the things they needed to do and had submitted all they needed to submit, and many months were passing and there was a backlog in the Department of Finance. That was the concern and that was the context for that question at the time, and so I would say it was addressed because soon after I arrived in that department we did look at the backlog and the member opposite might remember Mike DeCoste, who was the executive director, he's retired, he retired just a few months after the Liberal Government was, I guess, introduced and sworn in.

 

He was there at the time and we spoke about the urgency of moving that along and not delaying, because the important thing to note is when the refundable tax credits are actually paid out is after a production is done. One thing that's important to note is that these productions are usually financed based on the credit that the money will come, this is the collateral for financing. So every time there are delays of months and weeks that add extra cost, a big carrying cost, much like I talked about the Government of Nova Scotia paying over $800 million a year for our interest costs, those companies are carrying interest costs, and so the sooner they can get their money released from the government then they can pay off the outstanding debts and move forward with marketing their products and so on.

 

            So it has a cost, time value of money, it has a cost to them and that was something that we looked at and I said that I didn't want this to be a big fight, that we weren't going to be as nitpicky perhaps as we had been and we needed to move them along - if they met the criteria of interactivity, we would move them along. There has been success on that, and I think that has been good.

 

            In fact, the first meeting that I had with some representatives of Screen Nova Scotia that included digital, they remarked on the fact that had been improved. So I'm pleased on the processing side, which I think was question two - has the processing been approved, was that what I was talking about at the time? Yes, it was, and it has been improved.

 

            The third part is a very important question that the member is asking, and that's about transition and what happens during this transition period when we have the Film and Creative Industries office closing, officially closed on Friday. We know there are, again as I just explained about digital, the same thing with film, they needed to get their final approvals in order to have paperwork come to Finance and Treasury Board and have a cheque go to the various producers that have made films. So there was a process that was interlinked with Film and Creative Industries.

 

            We recognize that there needs to be a transition and there is a transition in place. I spoke today to the new Minister of Business who said they're in a 15-day transition period. I know on Friday that Laurel Broten attended a transition meeting specifically as the office was officially closing to ensure there is going to be continuity and I understand there has been some lack of communication because the phone numbers that were still listed were not indicating who to call in the meantime.

 

            We've been receiving calls at the Department of Finance and Treasury Board and have been redirecting people to the NSBI office so that their applications will be collected and understood and picked up. We know, I just spoke about the time value of money - if the productions are done, if they need to be completed on our end, we want to ensure that happens. I spoke to the Minister of Business who said it was a 15-day transition and that they are definitely looking at all the priority files - that would be the productions that are in the works that need to be moved and advanced along.

 

There's a great recognition on his part and on NSBI's part that we need to pick up exactly all of those files which are not just files, they are individual productions waiting for funding. Productions are done; they need to be looked at. Some of them might be new ones that are coming in the works and we know that's important as well. The Minister of Business is taking care of that. The Department of Finance and Treasury Board is certainly following and playing our role, but we don't do that first point of contact; we will be there to play our role as soon as that's presented to us, as soon as the files are sent to us.

 

            As we said earlier, these productions are carefully scrutinized afterwards. They know there's a high level of oversight and I understand up to four audits are taking place. CRA, which is our Canada Revenue Agency, it was done at Film and Creative Industries so now it will be NSBI reviewing that as well as Department of Finance and Treasury Board -  and I'll have to find out why there was a fourth one. Maybe there's an earlier one done, but the industry participants told us that there are up to four audits done.

 

            MS. MACDONALD: Madam Chairman, I want to thank the minister. I know my time is drawing close to an end here in terms of the first hour that I have. I did want to ask a question about Community Counts, but before I do that I want to just continue on with respect to the Film Tax Credit and the discussions that are underway - and I'm reasonable and sensible enough that I'm not going to ask the minister to disclose the discussions. I recognize there's a news blackout and so it makes it very difficult to have any discussions about the discussions.

 

            I accept that and respect that. It is a difficult time, but this is my question - I think it's a significantly different question than around the discussions and my question is about what ability does the minister have with respect to adjustments in this budget if those talks result in changing the direction and the assumptions that the government has embedded in the budget that was presented here on April whatever - is the minister and the department discussing this? Are you looking at what latitude you have and what might be required as these discussions proceed?

 

MS. WHALEN: Madam Chairman, I had a couple of questions really embedded in there as well about what ability do I have or what latitude do we have to make changes. I think the first and most important one relates back to an earlier question the member asked and I don't think I answered completely. Why didn't the Film Tax Credit appear under program review and I would say that probably the main reason you don't see it there or under any list like that is that it's next year's budget. This year's budget, the same amount of money is in the budget, $24 million, so you wouldn't be counting anything that had altered. This year's budget remains at $24 million, I already explained earlier why, because of the time delay of the projects that we're committed to.

 

            That is really, again, where we would be for changes to the work that we're doing. It has an impact on our fiscal plan. The fiscal plan is the four-year outlook that we provide every year. It's very important, I talked during my opening remarks about the rating agencies, how we're regarded, whether they see the path and the progress that we're on and how it works. The fiscal plan is audited by the Auditor General; they look at the revenue side so they look beyond this year but into the future years as well about how much revenue we're likely to have and how this is going to look. So they do, I guess, involve themselves in the out years as well as the current year. The impacts, if any, that would change would be in that year and I guess we would see it next year at this time when we come in it would be having an impact then.

 

            We are on a path, I talked a lot in the beginning about the need for fiscal control because we feel it is urgent to turn around the accumulating debt which in 2012, when the Auditor General spoke about it, we were at $13 billion; today we are just about $15 billion. It had been growing fast. At the time, the Auditor General raised the alarm, and said it was too high. I think, you remember being at Public Accounts, we heard that. We are $2 billion more in debt today. We feel very much that it is essential that we stop this slide and begin to get control of our finances so that we can address the many needs that I sat at Treasury Board saying we can't do that; I'm sorry, we can't do that; we have no capacity to introduce any big, new programs.

 

We're struggling to keep the programs we have right now. We're doing program reviews to look at where perhaps we could do it differently or the same aim could be achieved by doing it another way, or maybe another level of government could do it or whatever. We're looking for solutions and efficiencies and a rationale for everything that government does.

 

            I want to just make it clear that it is difficult, and I know the member knows it's a tough thing to look at turning it around. The fiscal plan is important to us; the affordability of all of our programs are important to us. I suppose, to make a long story short, we have some latitude because it's in an out year. We certainly have a little bit of latitude to consider other ways to do it, but I still preface it by saying there is a compelling path that we're on to try to get to a balanced budget. The balance that we show for next year, the surplus a year out is $22 million, and we all know how precarious any balance is. The previous government had a balance of $16 million because of prior year adjustments that were huge, quite honestly, and went in the wrong direction, and because of the pension decision as well from the Auditor General which cost $300 million in one year. We know we ended up close to $700 million in the negative.

 

            There are so many things that fluctuate through the year, and I speak again about the mink industry. I don't know if members had a chance to speak to the Agriculture Minister, but we're part a federal-provincial agreement that stabilizes agricultural income. If an industry has a big decrease in their profits and their income, we stabilize it. The mink industry is considered agriculture, its animal, they raise animals, and this year it was $10-plus million to stabilize that industry. We had no choice; we are signatories to a federal-provincial agreement.

 

One thing like that or a bad winter with bad snow and you've taken your $20 million and you have no surplus and you're in deficit again. We know the aim has to be to get to the point where we have a cushion and a surplus that is enough to withstand some of these annual, almost regular business, that can swing either in your favour if you have a year without much snow, or to your detriment if you have a year like we just had.

 

            We need to be able to build some resiliency into our finances and that's why we're taking it very seriously, the path we're on and the out year does not have as much money as this year in it. I think that members know that there is also the creative industries fund which allocates funds not only for some of the other arts like publishing and sound recording and music, but also films, so there is some latitude to look at that because that's also being announced for the next year out. The parameters will be put in place, the funds will be decided - how that will be done. I know it's a really exciting fund for a lot of those other arts that we haven't talked about much, sound and publishing, and music recording, because those areas have shared a very small pool - I think about $800,000 in the past, and   there will be more when this $6 million fund is outlined and the parameters are outlined, and there will be more for those other elements of our cultural and arts community.

 

So that's important, but we're very well aware that a portion of that was allocated for animation and for film, so there will be that money as well and we need to include that and it will be included in our discussions.

 

            MADAM CHAIRMAN: Time has almost elapsed, there are a few seconds left for the NDP. We'll move back to the Progressive Conservative party for one hour.

 

The honourable member for Inverness.

 

            MR. ALLAN MACMASTER: Thank you, Madam Chairman. Minister, my first question has to do with the Film Tax Credit. I know you had a meeting last Friday and from what I hear there was some progress made. Could the minister indicate how soon she thinks that that matter will be resolved?

 

            MS. WHALEN: Thank you very much and thank you to the member opposite and welcome to the discussion. Again, we've served on Public Accounts so we've been in many sessions where we've had these questions back and forth and I know you have a good understanding of the financial pressures of the province, so again happy to have you asking questions.

 

            Now your question was with the film industry tax credit, how soon. It's really hard to pre-empt what's going to happen and I certainly don't want to add any undue pressure on the process. What we do know is that already time is very important to the industry and they've made that clear, because I think what's important - and it may have been a little bit lost in the discussion earlier - is that this year there is money in the budget as before, but what I've understood clearly is that they are busy having discussions about filming projects over the next two years. They are two and three years out and they're doing really long-term planning. A lot of these producers have a five-year plan, so it's important for them that they could be sitting down today trying to arrange a filming project here, they need some certainty.

 

            I've heard that and I think that's really important, I've said earlier with the media we're having a better understanding of each other's needs, and that is important. The certainty element is really important to them and it isn't good for them to have those discussions when they don't know what the credit will look like. If we're going to change it, if it's going to have any change in its parameters, they need to know.

 

            I think there is already enough concern on both parts that we want to move it forward but not to put any additional pressure, if you like. There are no hard deadlines right now but decisions will have to be made. I think one thing that's encouraging that I can let you know is that Wednesday morning will be the next meeting of the group. And I already mentioned - I don't know if you were here in the House when I said the last meeting went for four hours, a full afternoon on Friday afternoon. I think the way we feel is that we certainly believe it requires our attention and they're taking their time to have a group of senior executives and Screen Nova Scotia members and executives coming together to work for a solution that will find a common ground, and that's where we're headed.

 

            MR. MACMASTER: I did notice in the budget, I think this year there is a similar amount budgeted as there was for the credit last year and I had a chance to give some remarks on Friday and one of the things that I had mentioned was if there is a similar amount budgeted this year without knowing myself, of course, that there may be liabilities coming up that are going to draw those funds down, but just looking at the numbers, if there is a similar amount this year, available this year, as there was last year, I thought maybe things can stay as they are at least in the near term, perhaps provide some security and some peace of mind.

 

            I'll move on, minister, from that topic but we're all, of course, watching to see what will happen with that credit.

 

The next question I have has to do with VLT revenue and it was interesting actually, I was walking out of the rink in Port Hawkesbury and a gentleman came up to me and he asked me about the VLTs. I said well one of the things we did see was the government made a decision to get rid of the card system.

 

            Of course the card system was designed to help people who are gambling to make sure that they don't lose control and gamble too much and lose a lot of their money. I know the government made a decision to get rid of that system and I remember telling him, I said I'll tell you what I'll do, I said I'll watch in the budget to see if VLT revenues are predicted to increase and if they are, well, that would concern me because it would be suggesting that the government is recognizing that they're getting rid of this system, that it may actually mean there are more people gambling and perhaps the gamblers out there who have problems may be gambling away more of their money.

 

            I did look on Page 1.4 and it just shows Nova Scotia Provincial Lotteries and Casino Corporation and it may be under that line item - I may have that wrong, but there is an increase in that line item of about $4.5 million and I would expect there to be some increase with inflation, but it has been about $100 million, actually forecast about $107 million, so I think there's a little more than an inflation figure there. Minister, can you provide some comment on that? I guess my concern is we like to see revenues going up but not necessarily at the expense of people who may be having problems with gambling, and that was a concern raised to me by the gentleman. I'll let you comment on that - why it appears like the number is going up, and is this a concern for the government?

 

            MS. WHALEN: Madam Chairman, this is a really good question on the VLTs, I appreciate that. I know in some of my earlier years here in the Legislature, members will remember there was a lot of talk, the earlier Liberal Leader, Danny Graham, felt very strongly about gambling and the harms of gambling, so we had a lot of discussions when I was a new member of the Legislature and I know it came to the floor of the Legislature and Public Accounts and other committees.

 

            I have, I think, an answer that is good from the health point of view about this because I know gambling has a lot of troubles, if you like, or a certain percentage of people have problems with it. The card system that you are referring to, the My-Play card system we brought in, I guess it was done a few years ago as a means to try to track gambling and help people know how much they were gambling. My understanding is that the people who have a problem didn't like to obviously have it tracked, so they would get a new card every time they went to the bar or to the place where they were going to gamble. They would just throw out the card they used and get another card, so they weren't really using it to track their gambling.

 

But having to have a My-Play card discouraged casual gamblers. You and I who might want to go just occasionally, well, we don't have a card and you need a card to play. It's just enough to say well I don't want to be bothered. So a lot of casual gamblers which we would say people without problems but did put money into the system and did enjoy playing occasionally, they actually seemed to have stopped playing. So there was a loss in revenue from that, but it wasn't traced to actually having helped those with problem gambling. That's one thing, and I also was just told that there are some new games, new machines that were introduced. I think that might also have led to a little increase. Perhaps people found that it's something different and new that always has a novelty factor at first, so perhaps that's why more people were gambling and profits are up.

 

I would really attribute the increased revenue to people who just go in a casual way, once a month or a couple of times a year who go out and enjoy gambling. Thanks.

 

            MR. MACMASTER: Madam Chairman, I know gambling, I suppose we would be better off without it given the people who do have problems and how they are affected, and the cost of that. The age-old debate has always been should we, if people are going to gamble anyway we might as well service those people and maybe then we also have a way to perhaps, if we know who they are, to be able to give them treatment if they are encountering problems. Where if it's completely underground gambling then there's perhaps less ability to recognize those people. With the elimination of the My-Play system, have we lost the ability now to identify those people who are having problems with their gambling?

 

            MS. WHALEN: What I was just looking at are probably the supports that are left are in other departments, like the Health and Wellness Department, I'm thinking of addiction support and gambling help lines, that sort of thing - they remain in place.

 

            I think perhaps the fallacy in the question is really that the My-Play system did not track the problem gamblers. Those with a problem did not consistently use the card, they got new cards and if we were looking at the data we wouldn't have seen the extreme outliers, the ones that were really running into big problems or racking up debt or going beyond what would be a normal play.

 

            I also wanted to say to the member opposite I thought it was very good that you're calling it gambling. I've always kind of been annoyed by the fact that the official term is "gaming" and that we think it's fun and it's gaming - I'm not a gambler. So I don't really enjoy the fact that it seems to be whitewashed when you consider it as a game. I know some people can enjoy it just socially. I don't like losing money, so that's probably why it's good that I'm Minister of Finance and Treasury Board. I do think that gambling is the right word, so I applaud you for using it.

 

            MR. MACMASTER: I guess the thought that comes to mind though is, was that system being utilized properly? Was the My-Play system being used properly because if it was I would think there would be a way to track people; I would think there would be a way to ensure people weren't using more than one card. It was an expensive investment for government to make and I would think if it had such significant shortcomings, I can't imagine the government would have invested that much money in the system to begin with if it had such obvious shortcomings - was the system used properly?

 

            MS. WHALEN: The question we had was which part of the Gaming Control Act or gambling Act do we have? Part I of that gaming rests with the Minister of Energy. It's just one of the responsibilities, not that it has anything to do with the Energy Department, but one of the responsibilities with that minister. They would have been responsible for the introduction of that under the previous government, I would say it was something in place and already in use when we became government in the Fall of 2013.

 

            Part II of the Gaming Act is where you collect the money, and that's what you'll see in the budget that you're looking at before you from the Department of Finance and Treasury Board. I know there have been questions in the House before where it says Part I and Part II and we have to look at each other and see who is really responsible. It's a little confusing. Definitely that's not under the Department of Finance and Treasury Board and so when we get into the particulars of how the system worked or whether or not it was fully functional - did we use all the functionality that it had? I don't know; I'm not sure. I do know that it's a Nova Scotia company and perhaps you know that too because the company that makes that system is in Cape Breton, and I would say our province had an interest in, if we were going to look at it, to use a local firm.

 

            It is interesting to note that other - you know we're all in the same Atlantic Lottery organization, and our partners in that organization - P.E.I., Newfoundland and Labrador, and New Brunswick - did not choose to introduce that function. They obviously looked at it and perhaps didn't think it would have the desired effect. I leave you to draw your own conclusions to that.

 

            MR. MACMASTER: I certainly respect that the responsibility for that system does fall under another minster, so I certainly respect that, but I was of course just seeing the line item here in getting on a chain of questions.

 

            I'm going to move on to Pension Valuation Adjustment on Page 1.7 of the   Estimates and Supplementary Detail. It's about $90 million, Madam Chairman, the pension valuation adjustment, that's what's budgeted for the coming year, and I recall when a few years ago the indexation was changed on the provincial pension plan, there is still some indexation, but it was reduced and at the time that was going to save about a billion dollars and the government chimed in with about a half-billion dollars to top up the plan.

 

            One of the points made at that time was that that was going to reduce the annual liability for the government and I believe it is the pension valuation adjustment, the liability that was referred to at that time and back then I think it was about $160 million a year, so it is reduced but it's still quite high and it's also growing it seems.

 

            I know that depends every year, depending on what the return is for the pension plan and it wasn't as high a return this year as it was last year, but you essentially have some of the other variables that are the same. You've got, I suppose, fewer workers each year contributing and you've got a growing number of retirees. That may be the answer to the question, but my question is, if those measures were taken a few years ago to help reduce this annual cost for government, why is it starting to grow again?

 

            MS. WHALEN: Madam Chairman, could you tell me how much time is left in the four hours today?

 

            MADAM CHAIRMAN: Until 9:05 p.m.

 

            MS. WHALEN: Okay, great. That's good, there is time for a good answer here and some more to come. This is really good actually. Recently the Auditor General, as you know, to the member opposite, the Auditor General wrote about some of the retirement benefits that were very expensive and highlighted some of them. Well I understand they are buried in this $90 million annual charge.

 

            An interesting point that was just made was our Public Service Superannuation Plan, which was the one that was - can we say it was certainly adjusted, I don't know if it has ever been fixed but it had a big-time adjustment a few years ago with the $500 million and the new rules around indexing and stabilization. With those rules we are now obligated only to pay our matching costs for employees, so we're not going forward. From that time forward the Government of Nova Scotia and the taxpayers of Nova Scotia aren't paying any additional costs above and beyond their matching contributions. The plan, I believe, is fully funded and it's still very close to 100 per cent, in and around 100 per cent, so that is stable.

 

The other costs that you are looking at here in this $90.6 million is very close to last year's estimate, it actually looks like the forecast was coming in lower but it was $90.5 million last year so we're in the same ballpark there. It includes all the other pension liabilities that are not funded, where there isn't money set aside through employee and government contributions, and there are quite a number of them so they're a liability for retirement health benefits that are covered. The Long Service Awards, as you recall, a couple of weeks ago were frozen for public servants. That's the amount where a public servant could earn up to a half-year's salary I believe it is - right, you had to work many years. Not the one for members as well, but this is the one that was frozen. The Long Service Award is in the government contracts so it's in the collective agreements for our unionized employees as well. This is what was done for non-unionized employees.

 

            It includes a medical plan for retirees, health benefits, and basically all the liabilities that are not otherwise funded. It would be for teachers, for members, our own members of the Legislature and former members of the Legislature, and health unions and their benefits, but not the Public Service Superannuation Plan.

 

            MR. MACMASTER: Madam Chairman, I have another question on that, but I think I'm going to withhold it at this time. I'm going to move on to - I appreciate the answer, Minister, it sounds like there's a lot of other items in there, it's not just topping up the public superannuation plan, there are many other items including health benefits, retirement allowances, and whatnot.

 

            I guess I just recall when I was originally Finance Critic about five years ago, looking over the years it was generally about $160 million to $200 million a year. It has been reduced and I think that's because of the actions taken a few years ago. I know as time goes on those amounts are going to go up in terms of even with inflation and whatnot. Okay, I'm satisfied with that answer.

 

We'll move to, the other item that has always been a perennial question for me is on the FTEs. I even know the page number off by heart. It's Page 1.14. It's that page every year. Taking into account the new Crown Corporation for Tourism, there are about 100 employees there, that being the case, the budgeted number for FTE's for the coming year is about 288 more than the forecast for the year that has just ended.

 

I always ask this question, and perhaps the minister may even remember me asking it of the previous government, why do we need more FTEs in the coming year than we did with the year that just finished? And the reason is often given well it's not an inexact science, there are positions that aren't filled, but I always notice the variance and, Minister, perhaps I'll let you offer some comment on that. It's certainly something that's relevant for the Department of Finance and Treasury Board and for budgeting because of course human resource costs are significant in government, so I'll let you offer some comment.

 

            MS. WHALEN: Just for starters, I've got some of the answer there and I hope maybe we'll continue the discussion. We have a little bit of time.

 

            One thing that's interesting to note, I talked about our mid-year mitigations and we asked every department for every two vacancies you can fill only one. Further to that we said you can't just choose the one that's the most expensive. So if you had a $50,000 job and a $100,000 job, there might be a tendency to fill the expensive one, we said that only 50 per cent of the cost could be replaced. So you could replace up to $75,000 for the two positions.

 

There were some constraints placed on every department for that. It was particularly hard on small departments, they don't have a lot of people to continue to do that and they did. But at a certain point as we were coming into the year, because you are looking at where we are this year, we asked each department to - not only had that been done but to just give us a 1 per cent across-the-board FTE reduction. It had to be in addition to whatever reductions had already been found through program review.

 

The major restructuring at ERDT, for example, which saw huge changes in the number of FTEs, some moving to other departments and, unfortunately, many not, or now no longer with government or hopefully we'll be able to reintegrate them in some other vacancies. We had a lot of movement, a big reduction in our actual positions through that.

 

            I think the 1 per cent across-the-board is important, so we just use our department, the Finance Estimates which are before us now. We did cut the Community Counts program. That would have been part of program review, looking for those kinds of savings. But we also found two other positions within our department which we're not going to fill. That will give us two more reductions in our ongoing FTE count. So there was a little bit over 1 per cent that we contributed to that because we only have roughly 100 employees, so probably one would have sufficed for the FTE reduction of 1 per cent, but every department.

 

What I wanted to really make the point with the members present is that every department did that. The deputies had a hard job to do and they went out and found a contingent of 1 per cent of their FTEs or positions were just taken out of the system, so I think we've done well.

 

            I think you really need to look at the estimate over estimate; there's greater certainty there when you look estimate to estimate. As the year went down, I think the reason it was 9,892 in the middle probably had a lot to do with that because that was the forecast, that was that restraint we put on with the two positions only being allowed to replace one. That actually had quite a dramatic effect in the eight months or so of the year that it was in place.

 

            MADAM CHAIRMAN: I'd like to remind the members of the House to please keep the chatter down. During the minister's last answer there were at least seven to eight conversations going on. It must make it very difficult for her to keep her thoughts in order.          

MR. MACMASTER: Thank you, Minister. While I certainly think about people who are losing their jobs and feel badly for them, and I know I've seen it even in my own constituency, the thing that always comes to my mind is attrition. I remember at a committee meeting at one point a few years ago it was said - the Public Service Commission was in - they said there are about 600 people who leave government each year. I thought well, gee, if there are 600 people leaving each year, there's lots of opportunity for government to be reducing the size of the civil service without impacting people personally.

 

            I know there are some changes here where you've obviously made government smaller. I know sometimes that can be difficult because it's not just what you want to do, you have to balance other interests at the table. I wanted to raise the question because each year we see the forecast. Well if we see the forecast is around that - this time next year if we see the forecast coming in is similar to what it is here in the book then I will have to come back and ask you, Minister, maybe we should have had a budget estimate that was closer to the forecast from the previous year.

 

            But I'll save that question for next year if the opportunity arises. I flag it there perhaps to raise it for your own interest, it will be asked again and maybe the next year's estimate will be more like the forecast that's coming in for the year previous. And if I haven't confused you or myself on that, I'm going to move on to the next question.

 

            This is about petroleum royalties. I know years ago, this was a significant revenue for the province, it was upwards of $400 million and now this year we're down to - the line item is not quite $20 million, so a significant decline in the offshore oil and gas production. I know there's some Crown share and there is some offshore accord offset payments worth about $44 million, which is nice to have. I must give credit to my predecessor, the former MLA for Inverness, for working on both of those items and we can see they're bringing some fruit to the budget now - a credit to Rodney MacDonald for negotiating those.

 

            To the minister, given this line item in the budget is so small now and at one time it was quite significant, what is the Department of Finance and Treasury Board doing with regard to this potential revenue source, and are you concerned by the position of the government with respect to resource development in terms of this being a potential source of revenue for the government? I know how challenging it is right now and how increasing this line item would make things a lot easier.

 

            MS. WHALEN: Just quickly on the numbers, a number of FTEs. I do remember last year your questions and the questions of your colleagues, particularly difficult questions coming from the Official Opposition about FTEs. Last year they were up about 100 and, if you remember, 70 or more of them were from Justice because of a new jail.

 

            What that points out is it isn't as simple as just saying one person can replace another by attrition - you mentioned 600 were gone. I said the same thing, why can't we find people elsewhere in government and move them to the jail in Pictou? Well, they don't have the right skill set, the minister understands that. We needed people with the right training and the right skill set.

 

            I talked about the two-for-one hiring, semi-freeze and hiring. That had a detrimental effect in the Department of Energy because they have energy experts, they have engineers and geologists and petroleum engineers and people who have worked in energy. You can't just say they're gone and we'll move somebody else who is a policy analyst in Finance and Treasury Board over there. Even though they're professional and have credentials, they don't have the right skill set.

 

            It does make it more challenging and that's a great question probably for the Public Service Commission but I'm aware of that just because I'd love to see us be able to just interchange the people and keep everybody working and all of that, but we can't do that with attrition alone. Often you'll hear a good argument that you need to go out and find the right person with the right skill set so that we as a province have the right people working for us so we can do the best, especially when you're talking about petroleum and going to the Energy Department. We need smart people who can negotiate, can make good arrangements, can understand the industry, and can work with a very international, worldwide industry.

 

            As you know we have two consortiums of companies: BP is one, and Shell - they are the two that have both committed $1 billion in offshore exploration. That has been a very good return on the money that was invested, and I believe it started under Rodney MacDonald to do better mapping and geological geophysical science and GIS information for the industry so we could say worldwide, here's what we have, come and look at the information we have.

 

            We put about $15 million out, at least we extended it by $15 million I know - these are questions for the Energy Minister whom I know is listening and will answer in his own time. I don't know if you called him for estimates. But because of that we still have some optimism, that's my point. There's optimism that more will be found and that the investments and the decision by an earlier government to do that was a good decision and has positioned us well. I think it also deserves credit because it did start us well and we have extended it, put more money into that because we believe it has a good return.

 

            The decrease in our revenue is a very sad story for Nova Scotia because in the mid-2000s, you're right, we had a year of I think $500 million, certainly $300, $400, or $500 million a year for that period of time when it peaked and we had money, particularly from the Sable project. It was great but, unfortunately, it didn't last very long and then we run into costs even while it's still producing, the arrangements we have with industry is that we also cover their abandonment costs. As they begin to ramp down and close fields that takes away from the revenue that they would otherwise pay for the royalties, and if the costs are too great, it can even eat into royalties you already received. They can say you owe us for that because there isn't that much in royalty this year and our abandonment cost is greater.

 

So imagine that. These are some of the things that I said can hit you from out in left field when you're trying to work to a balanced budget. Again, that $22 or $25 million surplus can be not pretty fast if suddenly the arrangement with your offshore means that they're looking for millions more for abandonment cost. It's just another one of those wild cards that we try to have a good handle on, we try to understand what it will be and I know that the Department of Energy watches that and, again, that's another area that's audited and watched very carefully and they work together with the industry. That's why we need smart people and people with the right skill set working in that department to try to look after our interests as a province because, literally, tens of millions are at stake when they make decisions.

 

            The offshore accord that you mentioned and the Crown share agreement that John Hamm arranged with the federal government were definitely great successes for us and in December each year, I've had twice that I have gone to the Finance Ministers meetings in Ottawa where all the Finance Ministers meet with the federal Finance Minister and at that meeting they give us an allocation of how much we will be getting in the coming year as equalization payments and our calculation always includes another line which is the Crown share and the adjustment that's made for our offshore. That's an important thing and it's still an important component of the money that we get from the federal government.

 

We do look forward to that each year. Even this year at $20 million, that's probably half of what we had in last year. I didn't look precisely, but it was over $40 million last year. The difficulty in the Deep Panuke has had a direct impact on the amount of money that we have been able to balance, put towards our budget revenue this year.

 

            I should mention that these numbers are all provided to us by the Department of Energy so, again, they calculate what the value is of our royalties. That isn't something that within the Department of Finance and Treasury Board we are able to calculate, so our staff would be going to the various departments that know the impacts, in this case the Energy Department, to be able to say how much can we reliably put in our budget for the revenue from the offshore. These are the figures that, one by one, are carefully audited by the Auditor General. Again, I mention, it has always been something of an interest to me that successive governments would be proud of the fact that the auditor signed off on our budget; it's really the revenue estimates that are signed off by the auditor. They look very carefully and this would be one of those items that would have been carefully scrutinized.

 

            MR. MACMASTER: Yes, Minister, I actually wasn't aware that those offshore companies could actually claw back royalties already received. I have learned something new this evening, so that's good. It is a bit troubling because you hate to think that some of those revenues to government might be lost at some point in the future. But that's the nature of the agreements, and their nature is likely that way because they help to attract business and companies like BP and Shell to come here in the first place. That's the way it is; I don't expect that to change, but it's interesting to hear about that.

 

            Minister, I have another question, the Pension Regulations Division has come over from the Department of Labour to the Department of Finance and Treasury Board. I want to raise this, this was raised in Public Accounts. I have a concern about how defined benefit pensions are monitored in the province. We had a situation in the Strait area with NewPage, the paper mill where there was significant lack of oversight, where decisions were made for the plan, there was a vote held in one instance and there was no record of the vote, how people voted, and there was a major decision made with respect to the plan. These changes came at a time just after the plan had suffered significant losses, as all plans did when the stock market crashed in the latter part of 2008.

 

            I was very disappointed with the lack of oversight. It was raised at Public Accounts, I know the Auditor General had done a review of that office a couple of years prior. I raise this as a concern for you to keep an eye on. What happened there could happen again and I know the pensioners had a loss of 30 per cent of their pensions with the changes to the plan. It exacerbated it further because they had early retirements that drew more money out of the plan just at a time when the markets were recovering and the plan should have been recovering.

 

            A lot of those pensioners ended up with a 40 per cent reduction in their pension. You can look back at the transcript from that session of Public Accounts. We had some of the pension plan members in the gallery that day and nothing really came of that other than to highlight the fact that I think it could have received better oversight. Now it is under the Department of Finance and Treasury Board and, Minister, I know we've only about two minutes left here, if you could offer some comment on that, and perhaps provide some assurance that defined benefit plans in the province will be properly monitored and that will not happen again to anybody else in the province who has a defined benefit pension plan. Thank you.

 

            MS. WHALEN: Just thinking about the situation, it sounds terrible from what you're saying about votes taken and no records of it and so on. We're looking at the people that do the regulation here and they look at the reports that are filed each year, they ensure that all of the plans - and I'm looking here, there are 461 registered plans in Nova Scotia and they cover almost 85,000 workers. There are 23,000 that are in other provinces, so they are elsewhere but they are covered.

 

            MADAM CHAIRMAN: Order, please. The time allotted has elapsed.

 

            The honourable Government House Leader.

 

            HON. MICHEL SAMSON: Madam Chairman, I move the committee do now rise and report progress to the House.

 

            MADAM CHAIRMAN: The motion is carried.

 

            [The committee adjourned at 9:04 p.m.]