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HALIFAX, TUESDAY, OCTOBER 6, 2009

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

4:06 P.M.

CHAIRMAN

Mr. David Wilson (Sackville-Cobequid)

MR. CHAIRMAN: Order, please. I call the Subcommittee on Supply to order. We're currently reviewing the estimates for the Department of Finance. I'd like to now recognize the honourable member for Kings West with an hour of questions.

The honourable member for Kings West.

MR. LEO GLAVINE: Thank you very much, Mr. Chairman. I wanted to start off with a question which, over the six years I have been in office, is one that a number of people have asked at different times. It's one of those, I suppose, nagging kinds of questions around an organization, even if it's a charitable organization or the community rink, they get grants. I'm just wondering, does government maintain some kind of oversight of the money that is given to organizations building a facility and so on? How is that monitored?

HON. GRAHAM STEELE: I don't think there's one answer to that question that would be true of all funded organizations. The most that I could say, unless you wanted to be more specific about a specific organization or a specific grant, is that there would be a whole spectrum of accountability. Sometimes, for example, just one that for some reason popped into my head, the rink revitalization grant, the money was handed over to the rinks and it's my understanding that there was no requirement that the rinks report back to government about how the money was used. They could quite literally use it as they deemed best.

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There would be other organizations where the money is given for a particular purpose, and the funding unit of government would require some kind of report to a greater or lesser degree of detail, just to certify or to ascertain that the money was used for the intended purpose, because of course the departments themselves have accountabilities as part of the audit process, part of departmental management or otherwise. Then you would get other large transfers of money, for example, to the district health authorities where there are fairly substantial reporting requirements and accountabilities. Really the answer to your question would be, it depends.

MR. GLAVINE: A lot of times we are asked, are there audits? I hate to bring that word back up here to the committee after last evening, but are there audits? The reports from the association or non-profit organization come back outlining how the money was spent, you've dealt with some of that. Are there occasions when they require documentation - for example, copies of cheques, accounts, etc.?

MR. STEELE: It's a very good question because - let me talk about the audit, first of all. For example, the Auditor General does not have any jurisdiction or authority over third-party entities, that is entities that are outside the government. For example, universities - to use another example that's in the air - are not accountable to government in the audit sense. The Auditor General can't go out and audit a university, they are simply not part of government, but they do receive substantial amounts of money. The Auditor General, or any auditor, may ask for the participation and co-operation of funded parties but only to the extent that is necessary to complete the audit of the public entity. The Auditor General can't reach outside government and audit the recipient of funds in that sense.

MR. GLAVINE: It was just one of those things I wrote down because I had heard it a number of times over the years, how those kinds of monies were accounted for. Going back to the assistance to universities, one of the things I noted there was according to the MOU, $348 million was supposed to be paid out in 2010-11 but $341 million was moved through the budget process. So I was wondering, what happened to the remaining $7 million that was promised?

MR. STEELE: There's a short answer and a long answer to that question. Which one would you like me to start with?

MR. GLAVINE: Well, I was asking about the assistance to universities and I would like the long answer.

MR. STEELE: It's good, I appreciate that. The reason for the difference in the amounts, and a number of different amounts get used at different times, is simply because the university MOU has a number of different components to it and the $341 million that has been most talked about is only one component of a funding agreement. I look at the briefing note in front of me that has 10 different elements to it, and the $340 million is only one.

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So the long answer would go as follows. The amount of money in the 2008-09 estimate was $230.5 million. Then you have to add back to that a 2007-08 year-end funding initiative to the tune of $72.45 million. There was an increase in the funding for 2009-10 to the tune of $30 million but that was something done by the previous government. Then there was a decrease in 2009-10 negotiated during the budget process, the previous government's budget process, of $1.5 million. Then there was the transfer of money from this year to last year to the tune of $256 million. Then we get to the one item that we're responsible for, which is what we call the buyout of the 2010-11 university's MOU funding of $341.6 million.

That's most of the big money but then there are some smaller ones. The provincial share of the Knowledge Infrastructure Program represents a transfer, there's another $18.5 million; the flow through of the federal share, $18.1 million. Then there are other smaller things like the Atlantic Veterinary College MOU, $1.5 million; Mount Saint Vincent University, the Learning Disabilities Program, $200,000; and Cape Breton University, Bachelor of Education Program, $347,000. So when you take the original estimate of 2008-09 and add and subtract all those different things, you end up with the estimate that is actually in this year's budget which is $455.8 million. That's the long answer.

The short answer is, the difference between the $341 million and $348 million that you talked about is the Agricultural College because, remember, I explained yesterday that the reason why the previous government kind of picked universities as the vehicle to do this multi-year funding agreement that allowed them to shift money around was because universities are outside the government reporting entity. They are not part of government but the Agricultural College is part of government and so their funding of $7 million was left in the budget.

MR. GLAVINE: Just to get clarity on that, there is a point in time where the Agricultural College will no longer be an arm of government, is that correct?

MR. STEELE: There is a rearrangement of the governing structure of the Agricultural College and part of that rearrangement was that a piece of legislation that was approved by the Legislature prior to the last election, that changeover hasn't happened yet but it's currently being worked through. You're right, member, that will eventually come to pass so that it, too, is outside the reporting entity, is my understanding.

MR. GLAVINE: Mr. Chairman, as I reviewed some of the budget documents - and, of course, we got an outline from your department, a briefing during lock-up, on the major variances from May 4^th to the Fall budget. I can't quite put my hands on announcements and so forth to say, there's now a planned cutting process in place but cuts have already taken place. So I'm wondering, is the Finance Department going to be like a central agency to reduce expenditures, because that's what it's seeming like, or are you going to table

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documents, for example, possibly through Public Accounts, that will be directing other departments to make cuts?

[4:15 p.m.]

MR. STEELE: The short answer to that question is no, Finance doesn't play that kind of a central role in government in terms of being the ones who are quarterbacking a government-wide expenditure management system. The entity really that looks after that kind of initiative would be the Treasury Board, a committee of Cabinet, not the Department of Finance.

MR. GLAVINE: Mr. Chairman, I was wondering if this process is starting now, because we do have six months remaining. You've obviously had some cuts through the remainder of this year. You also had some revenue adjustments that were able to be gained for the finances of the province through the short-term investments during the election process, slowing down some of the capital work. So is this process starting now or is it really going to have its impact next year - the review process, of course?

MR. STEELE: I think, broadly speaking, there are two processes that are, to a large extent, independent of each other and the process that has already happened and is already essentially finished is the cost of never-ending process of government departments managing their budgets. So most of the savings identified in the budget to pay for our Party's election commitments, I would say, would come from the normal everyday, very normal process of departments managing their budgets, forecasting expenditures, and so on. So that's one process that will go on regardless and always does go on and having been in government now for four months, I can assure you that certainly in the area for which I'm responsible, every penny is watched very carefully and expenditures are watched with an eagle eye all the time.

The second process which is independent of that ordinary management of revenue is what I would call the expenditure management review. That is something interestingly that was started by the previous government but hadn't progressed very far by the time the election rolled around. So in the budget documents on Pages 1.15 and 1.16 of the Assumptions and Schedules book, there is an explicit reference to this process and says:

"Government is developing strategies to reduce expenses over both the short and the long term. The government will phase in changes needed to modernize government and secure cost savings to balance the budget in the future. A formal process will include:

• a comprehensive expenditure management initiative to achieve increased efficiencies in government departments and agencies
• [Page 315]
• a review of programs to ensure that they continue to meet government policy objectives
• a review of relationships and accountability arrangements with partner agencies . . ."

So that process, I would say, is in the early stages but it is definitely underway. That process will be led by Elizabeth Cody, the ADM of the Department of Finance. She will be on secondment to that program and I would expect that secondment could last for as long as two years. That's going to be a very thorough and comprehensive review of expenditure management.

MR. GLAVINE: So what you just outlined, the three broad strokes there, that is essentially the terms of reference? Or are you, as minister, going to put some other criteria into the review process?

MR. STEELE: I would certainly not describe what I read as terms of reference, because they're not. They're more in the nature of a broad description of the focus of the initiatives. That expenditure management review will have much more extensive terms of reference. We're developing those now and the process is really getting going now.

MR. GLAVINE: So would there be benchmarks for efficiencies that this review is supposed to uncover, or is it still, again, early and that can be adjustment pieces as the process goes along?

MR. STEELE: It's too early for that. I haven't seen anything in the nature of targets or benchmarks, although they'll have to be developed because you can only really evaluate the success of this program or any program by whether it meets its objectives. There aren't any fixed targets yet.

MR. GLAVINE: I was thinking about guidelines, measurements, and so on. As part of this process - and Elizabeth Cody has been seconded, and her work and her history are obviously critical to the process - are you going to engage the public? Is there going to be some aspect of a public process with this?

MR. STEELE: Well, there's going to have to be, because the kind of change that is needed to put the province's finances back on a sustainable path is something that is only going to be possible if the public accepts it. So the kind of changes that may be necessary are not the sort of thing that you can just come out of a backroom and impose on people. They have to understand why it's being done and they have to understand why it may actually represent an improvement in service, even though it's a change from what they're used to.

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So yes, I would say there has to be public involvement, although it's too early to say what that will be. What I would suggest is that because it's going to be very much a multi-faceted process, the nature of the public engagement will vary from initiative to initiative. There's not one process that will fit every aspect of the initiative.

MR. GLAVINE: To move on to a different topic, and one that was raised in Oral Question Period today, the province is offering a 1 per cent reclassification adjustment for some public servants not represented by collective agreements in this year, and they are offering a further 1 per cent increase for next year. Basically, we hear a 1 per cent raise to Nova Scotia Community College workers.

Is this 1 per cent settlement offer going to be standard operating procedure for all contract negotiations that are coming up?

MR. STEELE: I just don't think a question that fits within the scope of the estimates for my department. I don't think it's appropriate for me to answer that question.

MR. GLAVINE: Well, I differ on that, because it is going to have an enormous impact on what happens in this six months and where you're going to go with your budget for next year. I'll take my time with this, and I'll put on the record: the Department of Finance has estimated as wage increases for obviously future negotiations this year, and yesterday we heard from you, Mr. Minister, that worst-case scenario, one-half of the $54.7 million restructuring fund, could in fact go to H1N1, which doesn't leave tremendous dollars there.

So there are 45 open or soon-to-be-open contracts in this fiscal year. Before the end of the fiscal year there are more than 45 contracts either open or about to be open for renewal for about 22,000 workers. Those include contracts of about 500 support staff at the Annapolis Valley, Tri-County, and South Shore Regional School Boards; a contract for about 150 group home workers with the Regional Residential Services Society in Halifax; a contract for 140 security, information technology, library, and secretarial staff at Saint Mary's University in Halifax; and a contract for 120 support staff at Mount Saint Vincent.

By the end of October contracts will be up for about 400 corrections officers at the province's jails; 1,100 employees at the IWK Health Centre in Halifax; and 7,600 employees of Capital District Health Authority, including nurses, clerical staff, and social workers. As of the end of December about 400 Workers' Compensation Board employees will also be preparing for contract talks. By the end of March contracts will also be negotiated for 7,300 public servants, 1,100 home care workers, 400 community college support staff, 1,000 Nova Scotia Liquor Corporation employees, 600 public health and addiction workers, and 500 clerical staff with hospitals.

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On Monday, October 5^th, Joan Jessome clearly stated that she is expecting to see raises. The expectation on her behalf is perfectly reasonable, considering that the NDP has been repeating over and over that there will be no layoffs, no rollbacks, no freezes. She said that she considers a zero to be a freeze and she is correct on that point.

Excluding energy, the CPI went up 1.4 per cent in Canada between August 2008 and August 2009. Food prices in Nova Scotia - and this is the crunch for all Nova Scotians and we're going to hear a lot about this in the coming weeks and months - have risen by 5.2 per cent over the past year, meaning that on balance, food is becoming more expensive in general. A 1 per cent increase in pay means that food is going to take up a larger portion of people's pay - the less money that they make already, the more expensive food will become.

A few questions. Is 1 per cent going to be the template for all contracts that are currently open or will be open this year? It's going to have a huge impact come March 31^st and as you file another budget.

MR. STEELE: Thank you. First of all, let me compliment you on the research you've done. There's not too many people who realize just how complex the collective bargaining situation is here in Nova Scotia. It is amazing to me, in a province of less than one million people, that we have in the public sector alone over 450 collective agreements. It is almost unbelievable that there could be that much variety and complexity.

You have those agreements coming due at all different times, for different lengths of time, they have different histories, different relationships. Some are done at a provincial table, some are not. The one you mentioned that actually we're not responsible for, the universities, because they're not part of the reporting entity, but that's just a small detail. The list you read is accurate and it's incredible that there is this variety of collective agreements in the province.

With respect to the consumer price index, the thing is that you can pick different numbers. We talk generally about CPI but the reality is, as you know, as you've alluded to, there is more than one kind of CPI: energy in, energy out; food in, food out; the volatile items in or out, year over year, month over month, it depends how you look at it.

The best forecast assumption that we have and the one that is actually incorporated into this year's budget is on Page 3.52 of the Assumptions and Schedules document. Based on the best information the Department of Finance has, the consumer price index for Nova Scotia, for 2009, will be minus 0.5 per cent. So it does vary from month to month but we have to look at the long-term, bigger picture and not pick one month in particular. For instance, August to August it may be one number and you could have a completely different number next month or the month before but, for the calendar year 2009, that is the best estimate of the Department of Finance, folks, minus 0.5 per cent.

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Having said all that, I'm here today to speak to the estimates of the Department of Finance and I cannot, should not, and will not speak to the government's overall bargaining strategy. This is just not one of the resolutions that's on the table here today.

MR. GLAVINE: Mr. Chairman, I'll just then phrase it another way to bring this to a conclusion. If 1 per cent is given to all of these contractual agreements that will be coming forward, have you budgeted at least that amount?

MR. STEELE: For the same reason, I really couldn't answer that because that would imply an answer to the earlier question. We will approach bargaining in good faith, which is our obligation under the law. We are committed to living within our means and we will do that. Beyond that, I really can't say.

[4:30 p.m.]

MR. GLAVINE: I would just like to return, perhaps, for the record with one of the areas that I went yesterday, because I think Nova Scotians are not fooled on this one. That, of course, is with the New Home Construction Rebate, the Homeowner Rebate. We know from Statistics Canada that by the end of June we were getting close - I think 1,200-something new homes were under construction by that time, permits were granted. Here we have most of the homes at that point, in other words, that are going to get this tax credit, so in many ways it became a bonus for doing the work.

I don't see how it was an incentive to push the economy. I mean, maybe you can explain it differently, but when I look at those statistics and then what is even, I guess, a little bit more wondersome, and it could reflect and maybe you would want to reflect on whether or not the recession in Nova Scotia is catching up with us more now than in earlier months, because since the program came in, the number of housing starts have gone down in each month since the program came forward. Part of it, of course, is I think people realized that by the end of July 1,500 homes had started in Nova Scotia and there was nothing coming for them.

So I'm just wondering how you can give credence and credibility to this program as part of the stimulus package for Nova Scotia, because the way I read an incentive, it's designed to encourage people to more or less do something. This was a bonus that rewarded people. You didn't alter behaviour in Nova Scotia to stimulate the economy. So again, it perhaps related more to an election process than true benefits for the Nova Scotia economy?

MR. STEELE: I know I'm not here to ask questions, but how do you know that? I mean, you're asserting something as a fact, and I'm just wondering - look, let me be the first one to say it's a legitimate point of discussion, but you've asserted a fact about the impact it's having on buyers, and how do you know that to be true?

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MR. GLAVINE: Well, there will be a day I'll answer that, but I came here to ask you - I need to go the other way, minister, but the statistics are coming out, whether it's Statistics Canada or whether I do an inventory of each of the building supply places up and down the Valley, from Digby to Windsor. They can tell me what's going on and what's not going on.

We now have nine months behind us, from January 1^st to the end of September. Most of the people don't mind sharing what the trends and patterns are. I don't ask for their specific financial details, but they don't see this. In other words, there's nobody else who is coming into - in fact, two of the largest building supply places contacted my office for forms. The forms went out to the builders who built homes in January, February, March, April. They had a record of all their big-, small-, and medium-size construction companies. So I'll go another route then, you know, we could hit on Friday double digits of unemployment in Nova Scotia - we're going to be very close. So what are you planning then, within the context of this budget, to work to stimulate the Nova Scotia economy, or will we be in stagnation for awhile?

MR. STEELE: Let me first of all return back to the New Home Construction Rebate Program. When I looked on the Web site last night, what I saw was there were almost 900 applications and that represents a potential value of somewhere in the neighbourhood of $6.3 million. Now, not all of the applications would qualify for the maximum benefit, of course, it depends on the value of the house. I saw the building permit statistics today and Nova Scotia - shares with a number of other provinces - has suffered a drop in the number of building permits, but I don't think anybody can say that this program, therefore, should be written off as a failure because what I would say to you is just imagine what the number of building permits would have been if there wasn't this program.

Now, we made the decision to extend the program to a certain amount of inventory, not all of it but a certain amount of it. We had a count at that time of how many units in inventory this program might apply to. Now, I don't have that figure right in front of me but it was substantially less than half of the 1,500 rebates that are available. I don't remember the precise number but substantially less than half.

So we know already that - let's suppose just for the sake of argument, something that we know is highly unlikely to be true, which is that every single eligible inventory unit was sold. There still are hundreds of people who are taking advantage of this rebate and so, as I said yesterday, I think a year from now we'll be looking back on this program, we'll have all the information available, and then we'll know whether it accomplished its objective or not. To us the objective is simple. We want to keep builders building. We want their workers, that skilled workforce to stay in Nova Scotia, which is a real problem here in Nova Scotia, getting our skilled workforce to stay right here.

Now, what I would also say to you is that we set an upper limit on the number of rebates available because it is the responsible thing to do, and we said there would be a

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maximum of 1,500. We are nine months into a - I believe it's a 15-month program period or is it 12? Does it go to the end March? (Interruption) It goes to the end of March, so we have a 15-month program period and nine months are gone, which is 60 per cent, and we have almost 900 rebate applications out of 1,500. I would say that we are exactly on track to hit our targeted number. After 60 per cent of the period is gone, 60 per cent of the rebates have been applied for. It sounds like pretty good forecasting to me.

MR. GLAVINE: I'll just leave one other little area of concern with you, Mr. Minister. I know it's always difficult to manage every single aspect of a program like this, and I know the Nova Scotia Home Builders Association was big on this program. You've hit the two areas - construction companies and workers, and keeping them working - and we did have some inventory, but is it the homeowner who may not benefit as much from this program as, in fact, the contractor who takes out a permit? There is no guarantee that in some of these cases the homeowner will actually benefit. Isn't that the case when you build it as, you know, the homeowner?

MR. STEELE: The program was carefully designed to ensure that the homeowner would get the benefit, and as in any competitive market there's always scope, I suppose, for builders marking up their price by an amount equal to the rebate, but let's remember the new home sales market is highly, highly competitive and it's very unlikely that would happen. So the way the system has been designed and who gets the benefit of the rebate, I think you can say with some degree of certainty that it is precisely the homeowner who gets the financial benefit and, of course, what the builder gets is a buyer for their home. I don't think we have to distinguish between this group that wins and this group that doesn't. Everybody wins when builders are building and buyers are buying.

MR. GLAVINE: Mr. Chairman, I was just going through the budget as well. I'm wondering what you see in the budget as true tax incentives. What would you identify for Nova Scotians as even a one, two, three, to say, here are tax incentives for you, this is a better deal than the May 4^th budget and here is why?

MR. STEELE: Let's start by bearing in mind that this budget was substantially the same as the budget introduced on May 4^th. The things that we've added are the expanded HST rebate on household electricity. I personally think that that's a great thing and I know that when people talk to me in my constituency, that's the one that they ask about, that's the one that they see. That's the one that they appreciate because it applies to every household that gets an electricity bill in Nova Scotia, which is to say, virtually 100 per cent of the households in Nova Scotia. I think that's a good benefit, that's a real benefit and it applies to everybody.

There's the New Home Construction Rebate, which was intended as a time-limited stimulus measure. There is the Graduate Retention Rebate, which replaces, expands and improves the old Graduate Tax Credit. There is the Manufacturing and Processing

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Investment Credit, which is worth a substantial amount of money to our manufacturing and processing sector. There is the higher Equity Tax Credit, which makes more investment money available to Nova Scotia small business. Those would be the main ones.

MR. GLAVINE: I guess without going through all that you have listed, of course, we'll have to judge over time whether or not the Graduate Retention Rebate, in fact, is an incentive, especially with what it's designed to do. New Brunswick and Manitoba combined have spent about $100 million on retention in the past five years and they don't see a difference in their rates. As you know, the Council of Maritime Premiers tracks university graduates very closely so they're able to give some credence to this so I'm wondering, first, why you went down that road but also whether or not it will be an incentive.

One I will draw attention to is EnerGuide, and I think it was a September 29^th article by Roger Taylor where he asks if it's an incentive or a bonus and he seems to lean that it's on the bonus side because the program basically provided for work that many people were going to do anyway. Again, I'm not sure whether some of the things you've outlined here - you know, the electricity rebate puts a few dollars in people's pockets, but the New Home Construction Rebate I question. I'm just wondering, you know, at the end of the day whether or not there is real incenting from these for Nova Scotians to actually put more money into the economy.

MR. STEELE: Look, it's a very legitimate question and it's a real question, it's a real issue because, let's face it, the amount of money that we have available is limited. We have to make sure that we make the absolute best use of every dollar that we have available to us and, as the Minister of Finance, I worry about these things. To say that if something is acting more as a bonus than an incentive then maybe we need to rethink it. We entered into these programs believing that they were the best use of the dollars but nobody should think that these programs are frozen in time and immune from review. We will monitor them, review them, and if they're not working in the way intended, we'll make the changes that are necessary. For now we believe that these things are the right thing to do and we believe that time will show that we made the right choices, but if the facts turn out otherwise, we'll make different choices.

MR. GLAVINE: Mr. Chairman, one of the choices made, as Nova Scotians are finding out, is that there's little or no Fall program for paving, that some of the Fall programs have fallen by the wayside. So with $29 million taken out of the budget there, I would like to know - and maybe it's a question that will have to go to Question Period, to the Minister of Transportation and Infrastructure Renewal - but I do find again, concerning that, if you're going to get a stimulus and you're going to be able to align with federal programs, many are surprised to see that $29 million has been cut from the highway program.

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[4:45 p.m.]

I see this as one of the major ones, along with the Colchester Regional Hospital. I can see the cuts have started, without question, and we'll see them inflicted in a whole number of ways. So are you going to use the soft approach or are you going to be very direct? Living within our means is something that I don't think Nova Scotians will be averse to, but when members in your caucus - and I as a member now have to tell my people that the NDP has cut $29 million from the highways' budget and the roadwork will not be done this year.

So is that just a local decision, or is it a fallout from $29 million coming out of the budget? I know - and I am a little bit easier on the 100 days in office than some of my colleagues, but have we gotten the most from the federal programs that were available? That's a really important question to Nova Scotians. There are hundreds of millions of dollars that are coming across the country, federally, and have we gained the most there? So I've given you a couple of questions, as you're aware of, so could you address that highways' issue as much as you can within the context of the Department of Finance?

MR. STEELE: Mr. Chairman, I do particularly enjoy it when members answer their own questions and I think you know that kind of question is best directed to the Minister of Transportation and Infrastructure Renewal, not even so much in Question Period because this kind of stuff doesn't lend itself to the sound bites of Question Period, but that minister's estimates are coming up later in the main Chamber, and they're good questions, but I do want to foreshadow what I know his answers are going to be by saying that understanding that $29 million as a cut just simply misunderstands what went on here. There were no cuts. There were some projects that for technical reasons could not go ahead. That doesn't represent a cut in any reasonable sense of the word, but the Minister of Transportation and Infrastructure Renewal will, I'm sure, take you through that.

We also have - I can say - we've also leveraged all of the federal money that was available. For example, we now have every single nickel that was available under the Building Canada Fund and we have worked very hard - that was one of our commitments - to make sure that we take advantage of the opportunity offered by the federal government's stimulus program. This is an opportunity that comes along once every 20 or 25 years, where the federal tap is open, and then you make your decision - do you go with it, do you put in your share, or do you just say no thanks, we can't afford it? We've made the decision that for purposes of the stimulus, in the midst of one of the most severe recessions we've seen since the 1930s, that it is better to go ahead with stimulus and to do it by leveraging as much federal money as it is possible to have and we will benefit from that for decades to come. So we've gone ahead and done that.

The last thing I want to say, I wanted to go back to something that you talked about and that's the EnerGuide program. This came up in Question Period today and I just wanted to touch on this a bit. The first thing is that I don't mind when people criticize what I do or

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when people criticize what the government does. What I do mind, and I mind very much, is people misquoting me, putting words in my mouth that I never said.

In Question Period today the member for Dartmouth East put words in my mouth that I never said and I don't like it and I don't appreciate it. If anybody is going to criticize me, criticize me for what I've done and what I've said, not made-up things. I think there's enough challenges in politics without people making things up. So I did not say, never said, never would say that the EnerGuide program should be cut.

I want to make very clear what my complaint was, the one recorded by Roger Taylor and in that column that you refer to, and that was very simply that as Minister of Finance, when I walked into the office I was presented with a bill for over $8 million that the previous government had not budgeted for. It was one of many reasons why the supposed surplus on May 4^th of $4 million ended up being a very large deficit. There were a number of items that the Progressive Conservatives could have predicted, should have predicted and didn't. That's my objection to the way the previous government handled the EnerGuide program.

As a program and of itself, it's fine, but as we talked about here last night, you do have this issue of bonus versus incentive and I think the jury is still out on the EnerGuide program. If it is helping people, incenting people to make their homes more efficient, that's great, it just should have been budgeted for.

MR. GLAVINE: Mr. Chairman, I'll give Ms. Mullally a chance to maybe join with the minister. I know he's responsible for that. Having enjoyed a very fine professional relationship with the head of the Nova Scotia Gaming Corporation, I would like to ask her a few questions - or the minister, sorry.

Some time ago now, and I didn't look up the exact date today, the questions were asked in the House and the minister of the day spoke in terms of working with the Gaming Corporation to do an investigation on a number of outstanding issues around retailers. The winnings that they had recorded seemed definitely out of line with normal practices. I was wondering, who is paying for that investigation? Also, at what point now are we in that process? I am the Gaming Critic - or the gambling critic, as I like to say. I occasionally get asked about that. I get asked by retailers and by constituents alike - not necessarily in my riding but I get an occasional e-mail - was anything ever decided?

It was a big issue at the time and so where it hasn't been brought to a conclusion in our province, I'm wondering, is it again a process that government is paying for some of this? Where are we in the scheme of things, Mr. Minister?

MR. STEELE: That's a good question but the first part of it, I'm a little puzzled - you're asking who is it who pays for the investigation? I'm not sure that I understand who could pay for it other than the ALC and, therefore, the Gaming Corporation. I'm just not

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sure. Perhaps you might want to clarify that, that if there's some other party that is available to pay for the investigation, you could say that it becomes just a cost of doing business for the ALC and any cost, of course, then moves through to the bottom line. Perhaps the member, if he wants to, could clarify it.

MR. GLAVINE: Mr. Chairman, the agreement is with the four Atlantic Provinces and governments are the beneficiaries of the gaming, of ALC. Therefore, I was wondering if it would be again part of profits that would normally come back to the province, that will be used for that investigation, or is it a stand-alone, paid-for item by ALC, which still affects taxpayers whatever way we look at it, so that's why I am asking the question. Taxpayers in one way or another are on the hook for this.

MR. STEELE: Well, sure they are and that's why I wasn't sure where you were going with it because at the end of the day, ALC is simply an agent of the Gaming Corporation, therefore an agent of the Government of Nova Scotia.

Under the shareholders' agreement between the four Atlantic Provinces, if ALC legitimately incurs an expense, there's a formula for how that is shared among the Atlantic Provinces. For example, if it's in respect to something that happens only in Nova Scotia, then that would be deducted from Nova Scotia's share and if it is something that happens in all the Atlantic Provinces, as the retailer wins are, it would be deducted proportionately from each province's share.

Now, moving to the second part of the question, what is ALC doing? ALC has done a number of things in light of the retailer win issue. As members will remember, they commissioned a study which showed that the level of retailer wins was statistically improbable. Since then they've taken a number of steps to deal with the situation. There is now an automatic investigative process for any wins over $1,000.

For anybody who buys lottery tickets, you will have noticed self-checkers at retail sites so that you don't actually have to hand your ticket over to the retailer. The allegations around this were that that's where a lot of the problems probably happened, where you'd hand your ticket over to the retailer who would then, in a way not necessarily visible to the consumer, purport to check the ticket. They would be told it was not a winning ticket, so the retailer may have had an opportunity to hang onto tickets that they knew were winners. So these self-checkers just eliminate that handing over of the ticket. There are also customer-facing screens that show if the ticket is a winner, again avoiding that problem.

The one remaining issue on which there are differing opinions is whether retailers should be permitted to buy tickets themselves or whether they should be permitted to cash winning tickets in their own stores. ALC is not of the view that that is something that requires a change at the moment although other provinces, other lottery corporations have talked about or are implementing a policy of saying that retailers can't cash a ticket in their

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own store, can't buy a ticket in their own store. That's something we'll look at but that hasn't been identified as really the particular source of the problem.

MR. GLAVINE: Just to come back to the question of the outstanding investigation of retailers in Nova Scotia, that is costing taxpayers money one way or another. Where does that currently stand? It does have an equation, it has an equation of so many dollars and we can talk about it here today or we can talk about it in the Chamber.

MR. STEELE: Again, I'm not sure what the member is referring to. There was an investigation, there was an analysis, but it's over. The recommendations in the report have been implemented by ALC on behalf of the province. It's normal, it's natural - I'm having a hard time getting a sense of whether the member is bring critical of the expense to taxpayers but it's like when you identify a problem, what else would you do except investigate it, which necessarily has an expense.

The investigation of the issue is over, the recommendations have been implemented. There is no ongoing investigation.

MR. GLAVINE: Mr. Chairman, I can leave it at that for now but I don't think there was ever a public statement made which said, here is the RCMP investigation of the retailers in Nova Scotia who are under suspicion because of the number of wins they've had in a period of time. I'm asking it here but maybe it's more appropriate for me to ask the RCMP about it. I don't ever - I have no record of when that final statement was made, that these retailers who were investigated, that there was absolutely nothing with them or there was something that is still inconclusive. Is there a final report that I can take a look at, of those retailers who were investigated?

[5:00 p.m.]

MR. STEELE: There's two parts to the results. One is the report that was done for the ALC with 52 recommendations; that's public already. In terms of criminal investigations, it's my understanding that a few files were handed over to the RCMP for investigation, but it's in the nature of a police investigation that at that point it's out of our hands. There would be no formal reporting mechanism by the RCMP back to the ALC because at that point you are in the realm of the criminal justice system, which deals with the public interest inherent in criminal law, and so any reports or accounts of where those investigations stand is something that wouldn't be available to the ALC. That is something that you or I or anybody else would have to ask the RCMP. I have no information on where those investigations stand.

MR. GLAVINE: Mr. Chairman, thank you very much for that.

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Of course, the area that's now history is the venture of KENO in the province. I know that not just the Nova Scotia Lounge and Bar Association but all the way down to individual proprietors, they weren't keen on the game of KENO from the beginning, but government did introduce it. However, I'm just wondering now, what did it cost the province?

First of all, I do applaud, and I've said this publicly now on a couple of occasions, having removed KENO. What did it, in the end, actually cost the province?

MR. STEELE: The cost figure is the one that has been previously announced. The total cost to the province - which, by the way, is represented in the budget presented on September 4^th - was $3.4 million, which was a combination of write-off of assets and a small amount of operating losses.

MR. GLAVINE: Thank you, Mr. Chairman. I was wondering, Mr. Minister, if you could tell me, in terms of future revenues, whether or not Nova Scotia is in line with the other provinces in terms of online gaming, or have we ventured or not ventured into that particular area? A very growing field in terms of, we can say "revenue generation," as well as some issues around it from a gambling perspective. I'm just wondering where Nova Scotia relates with the rest of the Atlantic Provinces, where we are in terms of that particular revenue stream.

MR. STEELE: Thank you. It's a very good question. It is a very interesting subject, this whole area of Internet gambling. I guess the short answer to your question is, we are in exactly the same place as the other provinces because we are part of a four-province agency, the Atlantic Lottery Corporation, and it is generally in the nature of Internet gambling that what is offered in one province has to be offered in all. Although the ALC is exploring the possibility of - or seeing what technological solutions are available to try to identify the location of the person who signs on, that's not simple. But they're exploring the technological options.

If such a solution were found and I don't think I know enough about the technology to know that there would never be any 100 per cent foolproof way of ascertaining location. If a location could be ascertained, then in theory you could have different Internet offerings in different provinces. Right now, the Atlantic Lottery Corporation's Internet offerings are done through the vehicle known as PlaySphere. So if anybody who goes on the PlaySphere Web site or signs up will see what offerings are available but I think it is fair to say that the offerings on PlaySphere are fairly limited. There is nothing coming anywhere close to the offerings on international offshore gambling sites.

One of the questions that is before ALC and the Gaming Corporation is precisely this thing, how far down that road do we really want to go? If, as we believe, young people are going in large numbers not to the casino but into online Web sites and if we want to make

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sure that there is a regulated local presence in that field, how far are we going down the site of offering things that match what's available?

For example, you could say that if you go all the way down that road, every computer becomes a mini casino and that there is a mini casino in the house of every Nova Scotian with a computer, is that where we really want to go? But if we don't go there then we risk being left behind as irrelevant and where the bulk of Nova Scotia's spending on gambling goes to offshore unregulated sites, that's the challenge that the ALC and Gaming Corporation are constantly struggling with. But right now the Internet offerings by the ALC are limited and represented entirely by what's available on PlaySphere.

MR. CHAIRMAN: Thank you, the time allotted for questions from the Liberal caucus has ended.

The honourable member for Argyle.

HON. CHRISTOPHER D'ENTREMONT: Mr. Chairman, thank you and I look forward over the next hour or so to ask questions of the Minister of Finance. Maybe subsequent to that, maybe this evening or Thursday morning I can ask him questions as far as Acadian Affairs as well. I don't know if you're ready later today or how that's going on. We'll spend a good hour here on Finance and we'll see how it goes from there.

First of all, I want to say that I know we had a lot of fun talking about audits and financial reviews. I know that the honourable member for Cape Breton North would love to be here to ask him further questions on that one and I know he's taking his time to ask other questions to other people.

First of all, as I missed last night due to a family commitment, I thought maybe you would take an opportunity, because I didn't hear your comments or your start-up or a lot of things that you want to bring forward during these estimates. So allow me to give you another opportunity to talk quickly about the financial reviews/audit and maybe some of the underlining issues or recommendations that that audit brought forward and then I'll maybe start asking some questions about that.

What did you find in that audit/financial review to be important for your decision-making process as you rejigged our budget of last May?

MR. STEELE: Let's be clear, it was not an audit. It was never intended to be an audit, is not an audit and I'll spare you from reading portions of the financial review that verifies what was requested of Deloitte and what they delivered.

I guess the main thing that I personally got out of the first phase of the Deloitte report was that the province was on an unsustainable path. We cannot continue as we were before.

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I think that is the primary message of the report, that if we went on with business as usual, the deficit of the province would reach $1.3 billion in three years and the deficit would reach $16.7 billion in three years. That is not sustainable for an economy the size of Nova Scotia. So that's the message: business as usual is no longer possible.

Now, there are a number of other things, lessons big and small, that could be drawn from the report. Another one, an important one, is that if you have variable sources of revenue, you really ought not to use those to pay for programs that are just going to get more expensive as time goes on - the major one, of course, being the offshore royalties. Everybody knew from the time Sable started that it was going to be a bell curve kind of revenue. It was going to go way up and then it was going to go way down, and now we're on the downward slope - very much on the downward slope - and as Finance Minister, I'm dealing with $300 million less than was available to the government just on that one item alone.

Yet the programs put in place by the previous government don't show the same bell curve profile. They show up, up, and away into the future, so you have climbing expenses matched against dropping revenues. I think probably the main lesson I take out of the report is: don't do that.

MR. D'ENTREMONT: Mr. Chairman, I know we could probably debate a long time on what's sustainable and what's not sustainable. What I took from that report was that the numbers that were being provided by the Department of Finance in the previous government were as close as they possibly could have been at that point in time. My point is that we spent $100,000 in order to verify the numbers of the province. We had been saying for a very long time that a lot of things we were doing were very expensive and very difficult to pay for. I don't think anyone spoke against that or said anything different. The challenge - let's take the loan program for licences. You know, one that your Premier tried to take credit for today in the House of Assembly - well, it was on the urging of this NDP caucus. Well, again, another one of those programs that we had to book in order to fund.

So as much as the pointing game/blame game can go, I think that we all - all Parties in the House - have something to say or some responsibility for the programs that were brought forward, the deals that were made in the minority government situation that we were in. I am not going to blame the minority situation, but the game is different when you're trying to pass pieces of legislation, pass programs, pass budgets. There are a lot of programs in there that actually belong to the NDP and belong to the Liberals, and a lot of them belong to the Progressive Conservatives as well - some good, and that helped Nova Scotians, because every program in there helps Nova Scotians in one way or another. But what I get out of the Deloitte report is that at the time the numbers were as accurate as they possibly could have been, and there were a couple of recommendations in there - and we'll talk about those ones in a little bit - that already seem to have gone astray.

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Let's talk about funding for universities. Actually, no - I've got to take a pick on the audit verus financial, because in this document, which is the Better Deal 2009, which is, of course, the Darrell Dexter document that I'm sure every one of you knows, because I'm looking at a lot of members of the NDP sitting right across from me now: No. 7, "Live within our means." I highlighted it here for you. "The NDP is committed to ensuring that Nova Scotia lives within its means, starting with a smaller Cabinet and an independent audit to find out the true state of the province's finances." So much of it is semantics; it's a fun little game that we'll probably play over the next bit, if it is an audit or not an audit.

My question around funding for universities is why you decided to place the $353 million payment to universities in this fiscal year, and maybe conversely, is that since it was really already paid, because the monies had basically already flowed for that commitment on the surplus dollars of 2008-09. Basically it was an end-of-year funding initiative, so those dollars would already have been spent. I'm just wondering - I see Byron back here and the deputy - and I just want to understand a little bit of the accounting of what's different from what we've done, or did, and what you've done.

[5:15 p.m.]

MR. STEELE: Sure, I'd be happy to explain that. I explained it at some length yesterday, but I don't mind explaining it again. It keeps coming up, and as long as it keeps coming up I don't mind explaining it. Before I do that though, I do want to touch on something that the member referred to earlier and that was that the Deloitte report found that the numbers produced by the previous government were more or less accurate. I don't think that's what the Deloitte report says.

There are three major reasons why the supposed $4 million surplus on May 4^th became a $592 million deficit on September 24^th, and I'll get into in a second about the university MOU, which is the biggest of the three reasons, and the second was a drop in revenue. Even from May 4^th the forecast changed by $125 million and the largest part of that was a further drop in the forecast revenue from offshore royalties, which I don't think the previous government could reasonably have foreseen.

The third largest piece are things that the previous government should have budgeted for and didn't, so in terms of accuracy of numbers, why did the previous government not allocate enough money for H1N1? We all knew it was coming. I think the members here remember that there was even talk before the election about how bad it would be to have an election and everybody going around knocking on doors, shaking hands, because H1N1 was coming. Why was there no budgetary allocation for it? That's a major portion of the deficit that we're now incurring because we've had to do the job the previous government didn't do.

We were talking about EnerGuide earlier. When I walked into office I was presented with a bill for $8 million. I don't mind the EnerGuide program, I like the EnerGuide

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program, it's a useful program. What I do mind is when governments implement programs that they don't budget for. Why is it that the government did not budget for the cost of the EnerGuide program? That's another part of the reason for the deficit. What about civil service settlements? We've never said out loud how much the previous government set aside in the May 4^th budget for civil service. I don't know if the member wants me to say it right here on the record, but I would say to the member, that member and all the members in this Party, don't start telling us that the numbers in the May 4^th budget were accurate or we might just say, on the record, how much they set aside for civil service wage settlements and let me just say, it's considerably less than what we set aside.

All right, let's move on to universities then. Why did we do it this way? What happened was that the previous government entered into an arrangement with the universities for a multi-year funding agreement, which is fine. Multi-year funding agreements are good things in the right circumstances, so the objection, of course, is not to the multi-year funding. But what that multi-year funding agreement allowed the previous government to do was shift money around between fiscal years. Of course, the reason they were able to do that is that universities are not part of the consolidated reporting entity.

You can't do it with school boards, you can't do it with DHAs because shifting money around inside the entity doesn't produce any net effect. The government needed some entities that were outside of government and yet received large transfers of government money, so of course the natural party to do that with was the universities. The universities simply wanted stable money that they could count on, which allows them to do their planning, so whatever happened is no fault of the universities.

Then the government started shifting money around between fiscal years so that in 2008-09 there was the better part of two full years of funding. Now, let's think about why the government would do that. I can't get inside the heads of the former government. I can speculate about why they did it and I can talk about the effect that it had. Well, you say it had this effect so it was probably part of the reason. There was a double purpose in shifting money back into the 2008-09 year. One was that there was going to be a much larger surplus in the last fiscal year and under the rules then existing, if there was a surplus it had to be applied entirely to the debt.

So we had the government on the verge of what they were almost certain was going to be an election and it looked like there was going to be a very large amount of money that was just going to go on the debt, which was, for political purposes, not useful. It was much more useful to be able to go out and spend the money. So they did, reducing the GAAP surplus for last year to as low as it could possibly be, without actually going into deficit. So we ended up with a surplus for 2008-09 of just $19 million. I say just $19 million because on a $9 billion budget, $19 million is very, very small, in accounting terms it's not material. Even though to you and me and everything body else, $19 million is a heck of a lot of money, in government terms it's not.

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So the government didn't transfer all of this year's funding to last year, just enough to get it as close to zero as they could without actually going over. So that means for this year, they had, essentially, a clean slate - not entirely clean because they couldn't transfer the whole thing over, because that would have put them even into a GAAP deficit, only enough to give them what they needed and then leaving a little bit for this year.

So when we came into office, we were faced with what I would call a double distortion of the province's books. There was the distortion of the 2008-09 books, which had the better part of two years' funding, and this year's books, which had practically no funding. Both of them are distortions.

The Liberals rail on and say, oh, you should have just left it the way it was. But there is no special virtue in substituting one distortion for another. We believe that the way the university MOU was used by the previous government was complex, unnecessarily complicated and led to distortions not only in university funding, but in the state of the province's books. So we made the decision that we would bring that agreement to an end, we would fully pay it out - you can use whatever term you want: buying it out, paying it out, unwinding it. We just said we're going to bring it to an end and that's what we did. That explains why this year's budget includes the rest of the commitment to universities up to the Spring of 2011.

People say we should have left it and just paid it next year or whatever. I still fail to see why that is inherently more virtuous than what we did, because leaving no university funding, or almost none this year is, in itself, a distortion and is, in itself, not an accurate representation of the books. What we did is return the idea of one year's funding and one budget.

However much people complain about that, I think the general public understands that one year's funding in one budget is the only truly accountable way to go ahead. When it comes time to renegotiate with the universities, we'll do that, but I don't think that we'll say the same kind of - well, the word in my head is "manipulation" and manipulation may not be the right word - but want to return to clear, accountable, annual payments to universities. That's why we did what we did.

MR. D'ENTREMONT: Mr. Chairman, at one point we were prepaying something, we were paying something forward for two reasons: one, so we wouldn't impact the books for this year, so we could actually have a little more room to pay for the other services that everybody finds more important; and secondly, to have the dollars available to the universities so that they could try to find dollars through Bell Canada and the other programs that were available to them with the infrastructure stimulus program.

So at one point you're admonishing us for prepaying something in last year's budget, but yet you did it again this year. Did you not prepay that fund - because basically there will

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be no payment in next year's budget - so you can find a little bit more room to make the deficit, right now, look a little smaller when the new books come around, when your budget comes out in the Spring?

MR. STEELE: No, that's not what we did. I had exactly the same discussion with the member for Kings West in here last night. I understand, for their own reasons, that the Opposition has an interest in portraying it a certain way, although I think the general public will have a hard time seeing what the political import is of prepayment versus not prepayment. Prepayment is a technical accounting term; it is not actually a prepayment. What we did was we bought out the MOU, we unwound it, we brought it to an end. It was complex and unnecessarily confusing. We thought it was time to end it, and that's what we did.

MR. D'ENTREMONT: All right, so it is bought out, prepaid, we did it, you've done it. At the same time, it is hard to take the admonishment of, god, how could you possibly, it's your fault, you did it, when ultimately you've done the same thing because you realized the same thing that we did: the MOU needed to be adhered to. The universities had an opportunity that needed some funding and the budget was such that there wasn't enough room to do all of those things, and to utilize some of those dollars that were available to us at the end of the year was a smart thing to do. Ultimately, as a public citizen, if you have money left in a bank account, you're not going to go out and borrow money, are you? In effect, that is kind of what you did.

So I'm just wondering, because of the size of the prepayment - the buyout, whatever you want to call it - at the end of our fiscal year, at the end of that fiscal year that you've admitted right now that we came in at a GAAP surplus, where did those dollars go? Did those dollars now end up on the debt?

MR. STEELE: Let me start by addressing this issue of the cost of borrowing, which is something that keeps coming up and I'm just going to have to keep knocking down. There is no cost of borrowing represented by the way that we dealt with the MOU. I'm going to go over why that is the case again.

I think the piece that is missing from the Opposition analysis is the time value of money. That's not something they teach you in elementary school, but when you're dealing with the large amounts of money that the province is dealing with, it is essential to take it into account. The simplest way that I can explain it is, if I hypothetically owe you $100 a year from now, Mr. Chairman, I have a choice. I can say, I will wait for a year and pay you the $100, or I will say to you, but if I pay you $98 now, it's exactly the same, depending on our mutual assumption about the rate of interest; $98 today and $100 a year from now are exactly mathematically equivalent, if you take into account the fact that money has value over time.

The only debate then becomes, what is the appropriate rate of interest? You might say, Mr. Chairman, well, no, it is really $99 today instead of $100 a year from now. You can

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have that debate and the professionals will very quickly settle on what the appropriate rate of interest is, but the basic idea is $98 today is exactly the same as $100 a year from now. It is not a deduction; it is not a reduction. It is just mathematically the same.

The math gets more complicated, Mr. Chairman, if instead of saying that I owe you $100 a year from now, I owe you $10 a month for the next $10 months. But this is like regular business for the money people, and in the Department of Finance we have some very, very sophisticated money people.

So here's how it goes. When you pay something earlier than had otherwise been intended - because that was what was being done under the MOU. Instead of paying $341 million over 10 equal instalments over the course of 2010-11, we're paying it all at once at the end of the fiscal year, and that has a value.

What is the appropriate value? Well, the money people in the Department of Finance advise that the most appropriate interest rate for understanding or judging this kind of thing is the short-term money market rate. The province deals with very large sums of money, sometimes in the hundreds of millions, sometimes in the billions. There is no direct connection between any particular borrowing and any particular expenditure. The province is borrowing money all the time and spending money all the time. That kind of cash flow analysis about how much money they need, and when, is part of the sophisticated operations within the Department of Finance. But the opportunity cost that is being missed here is really the short-term interest rate at money market rates.

Now, the thing we all need to know is that money market rates today are at historic lows. They are the lowest they have been in history. So the appropriate rate, they tell me, is 0.25 per cent. Now, if you do the math on 0.25 per cent comparing the lump sum payment of $341 million on one day or 10 equal instalments over the following year, you work out to a cost of $425,000. So that is the notional cost of paying it in this way. It is not any of the more ridiculous figures that have been thrown out, because depending on the math skills of the particular member of the Opposition, I've heard a number of three or four or five different numbers on how much it costs. The actual cost is $425,000.

[5:30 p.m.]

But even that is a notional cost because, again, for the people dealing with sums of money, all you do is take into account the net present value of the dollars, you simply deduct that amount from the $341 million. Just like the example that I gave earlier, Mr. Chairman, it is precisely mathematically equivalent to those 10 instalment payments that were promised to the universities. There is no cost to the province. There is no cost to the universities. The province is paying exactly what it promised and the universities are receiving exactly what they were promised.

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MR. D'ENTREMONT: Mr. Chairman, I thank the minister for that answer but he is trying to equate it with the MOU and the equal payments versus how we had chosen to pay it, which was at the end of your funding initiative, using cash left over, in order to pay the obligation.

So there is a difference in that payment. If he had paid it over time, as the MOU called for, then sure, statistically, it probably washes out. But by paying it up front - and I forget the number that we paid up front, and I apologize for that - with cash left over, cash in the bank, things we can go out and spend on, paying something as important as the MOU with the universities, how does that equate to the original MOU, the original payment schedule that was put in place? You're comparing it to the original MOU payment plan when we paid it far differently than that at the end of the year funding initiative. Did we not? I mean, we paid it with dollars left over from the previous year.

MR. STEELE: I'm sure I don't follow where he's going. I think I've explained it, that the two, now paying it one way or the other way, are precisely, mathematically equivalent to each other. There is no deduction, reduction, I'm just not sure what in what sense that you're suggesting the numbers are different.

MR. D'ENTREMONT: Just statistically or not, thank you for the number of $425,000; $425,000 in my community means the completion of the community centre and $425,000 does mean other dollars that may be available for other programs.

I mean, you gave me a number and then I'm going to use it. Ultimately, at the end of the day, the little dollars - and this is what you're going to find aggravating the odd when you start to work on your next budget - every little tens of thousands of dollars, the $10,000 here, the $50,000 here, the $425,000 here, add up to big numbers that you're going to have to say no to in the preparation of your budget.

So I'm just giving you a heads-up that that $425,000, as much as it statistically washes, as you admitted that $19 million is really worth nothing, because of the way the surplus was, that $425,000 means something to real Nova Scotian families.

So I'm going to move on, because I see the member getting frustrated with trying to explain this in normal Nova Scotian-speak. It is a difficult one to explain GAAP accounting and I'm not asking about an explanation on GAAP accounting. I'm asking, why is it different to have spent the money our way verus their way and why, at this point, would you overly inflate your deficit? That's going to flow into some of my other questions of this large deficit.

MR. CHAIRMAN: Order, is that a question you want to . . .

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MR. D'ENTREMONT: It's a comment but he can answer it, I'm sure he's got an answer.

MR. STEELE: Look, when the Liberals started doing their math and threw out a figure of - I forget what it was - $10.2 million, $10.3 million, the member for Bedford-Birch Cove stood up and said, I could have built the 4-pad rink for that amount of money and you're saying you could have built whatever it was you said you could build. It is not a cost to the province. There is no loss of $425,000. There's not $425,000 that would otherwise have been available to do anything else. It is a notional amount, which when you take into account the time value of money disappears. It is not money that the province has spent that if we had done things differently could have been spent a different way.

I don't know how many times, how many different ways I need to say that. There is not $10 million for a rink, there is not $425,000 for a community centre. It is mathematically a wash. The universities received exactly what they were promised, not one penny more or less, and the province is paying what it promised to pay, not one penny more or less. I just hope that member or no member goes around saying that we could have built a "this" or a "that" in my community for $425,000. The money does not exist and I don't know how many different ways I can say that.

MR. D'ENTREMONT: Mr. Chairman, I will save him from his frustration and I will move on to my next line of questioning. It revolves still a little bit around this deficit of $591 million. Okay, so we take that $341 million, or whatever, out and there's still a fair amount of deficit there. That deficit, of course, goes on the debt of the province and our debt servicing charges do have a cost, close to a billion dollars a year in debt servicing.

I'm just wondering, maybe to give a quick rundown of the other charges or the other flows to that deficit, what are the other things that are there? What I see compared to our budget, especially when it comes to grants and contributions and also when it comes to restructuring - and I can go a long time on restructuring funds and what's happening there. I'm wondering what the other pieces are that add up to your deficit of $591 million.

MR. STEELE: It's a good question and I'm happy to provide the detailed information on that. Let me start with the shorter form of the answer and then I will move into the more detailed answer. The purported surplus on May 4^th was $4 million. Now, there were five - in very broad strokes - adjustments that had to be made in order to get down to the final deficit figure that was contained in the September 24^th budget.

The first one was a drop in revenue, all revenue including government business enterprises of $125.1 million less than had been forecast in the May 4^th budget. The second item was increased program expenses of $455.2 million, naturally by far the largest portion of that was the university MOU. The third item was a further adjustment in the pension

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valuation adjustment of $6.6 million. The fourth item was savings to debt servicing costs. This would be in the plus column of plus $13.5 million.

Finally, the famously complex consolidation adjustment, which is a negative $22.7 million, has to do largely with the way money flows from central government to controlled entities like the district health authorities, and then the way it's consolidated back again. It goes out in the form of capital grants and then gets amortized. It's extremely complex, but that's $22.7 million, and if you add up that column of figures you get the final deficit number, which is $592.1 million. I would like to drill down there a little bit and give some indication of, for example, the drop in provincial revenue.

Delivering a budget on September 24^th means that our forecasts were naturally able to be more accurate than they were on May 4^th. So the forecast for personal income tax revenue was down by $29 million between the two budgets. The corporate income tax was up, but only by $3.5 million. Harmonized sales tax receipts, down by $19 million. Offshore petroleum royalties, down by a further $44.9 million. When I say "further," the difference between last year's actuals and this year's estimate is $300 million, and so this was a further deterioration of almost $45 million even from May 4^th.

Tobacco tax, down $5.6 million from the forecast. Motive fuel tax, down $1.9 million from May 4^th. TCA revenue, tangible capital asset revenue from the federal government, down $41.6 million. Other federal sources, down $6 million. Then there were recoveries plus $26.7 million. Government business enterprises, net income $3.6 million, which was largely the decision to do away with KENO, and sinking fund earnings forecast, down by $1.4 million. So that's on the revenue side.

On the expense side, the increase in assistance to universities was $353.4 million. As I was mentioning to the member for Kings West, there are actually nine or 10 elements in the final grants to university figure, and our decision to buy out the MOU, worth $341 million, was only one of about 10 separate items. The final total was $353.4 million more than was in the May 4^th budget: the restructuring fund, an increase from May 4^th of $54.1 million; Labour and Workforce Development, increased federal funding of $26.9 million; increased federal funding to Service Nova Scotia and Municipal Relations, $17.2 million; increase in IEF and other Economic and Rural Development funding, $15 million; increases in the Public Service, about $8.4 million, largely or almost entirely election-related costs and also severance-related costs following the election.

Increase in the EnerGuide expenses, which we talked about earlier, $8.2 million over the May 4^th budget and an increase in Natural Resources of $5.8 million for silviculture and other things. Health was down $32.5 million from May 4^th. Health Promotion and Protection was down $4.6 million. So those are the major expense variances, and when you take all those things together, that explains the difference from a purported $4 million surplus on May 4^th to a $592.1 million deficit on September 24^th.

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MR. D'ENTREMONT: Mr. Chairman, I thank the minister for those numbers. The forecast - and I'm going to share some of my aggravations of sometimes sitting around a Cabinet Table, especially when the Department of Finance came in and gave us presentations - not to speak too much of what happens in Cabinet. Ultimately, unless you nail down a budget, the numbers continue to flow, to flow and fluctuate and change. Especially in this recession, you know, the numbers that you continually see are different from minute to minute.

We have some wonderful forecasters in this province. We have some wonderful staff at the Department of Finance and, of course, Treasury and Policy Board. I know they were trying to do their best in providing us with the best possible numbers that they can, but it's very apparent - we were doing pretty good, I think, from what we tried to present in our budget in May versus what continued to happen in our economy. There are a lot of things that, as a forecaster, you cannot foresee. I mean, you're trying to forecast, but some of these things happened, and they happen.

That's a problem that I think any government has when they lay down a budget, especially for some of these provinces that lay down a budget in December, they actually have no forecasting built into it and they try to manage to that number. Do they succeed all the time? Do they not succeed all the time? Well, maybe, maybe not, but the $125.1 million forecast doesn't surprise me a lot, just from what we had seen presented to us as time went on. In a way, it's funny that it's probably not more, especially with the performance of our economy.

Luckily, I think our province is still well shielded to the fluctuations of that economy. So it's less of a question than a statement - trust the forecasters that you've got, but they're going to change. I just want a comment from the minister on that.

[5:45 p.m.]

MR. STEELE: Yes, it is true that there are so many elements to the forecast that there's only - it's like taking a photograph, it just takes a moment in time and then immediately following, the numbers start changing again. It's just the nature of the business.

What I will say about the folks in the Department of Finance, though, is forecasting is a difficult business by its nature, but they put a great deal of effort into it. They have some pretty sophisticated models. They get the best information available and they monitor all the other forecasters to make sure that they understand where those other forecasters are going. Then, based on all of their experience and expertise and the resources available to them, they make the very best forecast they can. It's never exactly right, although I would enjoy, just once, having the forecast lower than the actuals, rather than the situation I'm dealing with now where it's always going down. That will change as the economy recovers and the finances of

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the province recover, there will be times when the forecast undershoots reality. Right now the recession is a little longer and deeper, probably, than most people had forecast.

That reminds me of another point, I was going to take the opportunity to talk about this for a second. Now, the member has said or alluded to the fact - particularly around the university MOU - that we're trying to make the books, this year, look as bad as possible and trying to clear the decks for next year's budget. I understand why the Opposition says things like that.

Let me just say to that member, or any member who wants to make that case, that when it comes to the forecast for GDP growth in Nova Scotia this year, we are at the upper end of the range. The other forecasters in the business range from a negative 1.8 per cent growth to 0.3 per cent and the number incorporated in our budget is 0.3 per cent.

There are two things I want to say about that. First of all, if I was trying to make the numbers look as bad as they possibly could, you can bet your bottom dollar I would not be coming in with a GDP forecast at the top of the range. I would be somewhere comfortably in the middle, nobody could complain about it, and it would make the numbers look quite considerably worse than they actually are because they would lead, inevitably, to a drop in personal revenue, corporate income revenue and so on and so on. We haven't done that, we've come out of the top end of the range and we are confident that our forecast is as accurate as it can possibly be.

There are some reasons for that. One is that some of the other forecasters' predictions are somewhat dated, haven't taken into account the latest information that is available to us, haven't taken into account the stimulus element of this budget. Let's not forget there's a substantial stimulus component to this budget. Some of the other forecasters, from the banks and others, haven't taken that into account. So we are at the top end of the range, at 0.3 per cent growth, which by any measure is very modest growth. I did want to make that point that for anybody who says we're trying to make this year's budget as bad as possible, make the deficit look as big as possible, it is simply not the case. It is simply the most accurate representation that we can give of the state of the province's finances.

MR. D'ENTREMONT: Thank you very much, Mr. Chairman, and thank you very much, minister, for that. It is always a challenge. Government has to state things the best they see them, but they have to stay optimistic, as well, because a lot of industry takes the lead from government on performance issues, on spending issues. So we continually - as much as forecasts tend to change and, of course, the last couple of years have been negative - we still have to stay as optimistic about our economy and optimistic about our finances as we possibly can.

I think that was the benefit of bringing in no deficits. You're saying to your community, you're saying to your businesses, you're saying to your economy, that we're

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trying our best and we expect the same from you. By taking 0.3 per cent, I commend you on that. That's great because it's showing that you're optimistic about them. You're optimistic on how they're going to be. So I think, as much as I can pick away at maybe little line items and things you're not doing, and things we're not doing, and things we had, us versus yours, you know, I think that's a great piece of news.

I can go on on some other things here, too, and maybe just some quick snappers. In questions around the HST, the HST reduction on our electricity, I'm just wondering what the full accounting of that is. I know through a number, $10 million was being floated around, but I'm just wondering what the annualized cost of giving everybody a $10 tax break per month is going to be worth to Nova Scotians.

MR. STEELE: The answer to the question, which I believe is contained in the budget bulletin that was released, is that for this partial year the sum allocated is $15 million and for a full year it would be $30 million. We believe that those forecasts are very accurate because it's just the nature of the electricity consumption that they're very predictable and also, of course, the fact that the program has previously been instituted. So we have a very solid idea about really how a rebate like this does or does not affect electricity consumption. So we had it in place for awhile before the previous government removed it.

MR. D'ENTREMONT: Mr. Chairman, again there's going to be some blame game but, you know, I'm a big boy and I can take the blame, as well, on behalf of my colleagues in the House. Ultimately, as we looked at it, we were giving a $10 per month cheque to Nova Scotians - every Nova Scotian - whether it's the member for Guysborough-Sheet Harbour, the member for Lunenburg, or Lunenburg West, or heck, even the member for Halifax Fairview. We, all, as members in the House, including all other Nova Scotians that utilize electricity, not electricity for heat but electricity, will be receiving a rebate that's worth $10 million this year and it will be worth $30 million next year.

Our challenge, especially when you look at it from a Poverty Reduction Strategy, there are other programs out there that can get a heck of a bigger bang, can help people on low income, for $30 million. That's why we, as a government, when we were in your seats, took that decision that, maybe at this point, we should redirect some of those dollars in other places and especially when it comes to really looking at the virtues of the Poverty Reduction Strategy which, you know, I'm looking forward to my questioning to Community Services when that time comes in the Chamber. So I was just wondering if maybe you had further thought, whether at the Cabinet Table, whether with your colleagues, whether before the election, you know, on this whole discussion of HST rebate, whether maybe those dollars can be redirected in a better way to help low-income Nova Scotians.

MR. STEELE: Mr. Chairman, I have a couple of thoughts on that question and it's something that I think we've all thought about a lot because there has been a considerable amount of debate because this program has been around for quite awhile. We proposed it, it

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was implemented, it was repealed. We proposed it again, we've implemented it again. So the debate has been ongoing and it's an interesting and useful debate around this kind of thing but here are the two thoughts that I have on that question, which is a very good question.

The first one is that it has never been to the NDP, first and foremost, a poverty reduction program. I can understand that if a government were looking at it as a poverty reduction program, there are better ways to spend the money, but that is not ever the way that we looked at it or that we described it. The debate about that aspect of the program is a debate that has been created by others, not by us. For those who believe that is what it ought to be, I understand that debate. It is not the best way - except for the second point, which I'm about to make - to get hands into people with lower incomes. We have always described it as a simple matter of tax fairness. The necessities of life should not be taxed and that is not something that is directly related to the income of the recipient.

That brings me to the second part of my answer, which is - and I believe this very strongly - there are very few programs anywhere in the Nova Scotia Government that reach more people on low income than this rebate, because it applies to everybody, without an application. Every single household that gets an electricity bill gets this rebate.

Here's the problem that I see with things like the energy rebate program, which was implemented by the previous government. It's an application-based program and so you have a lot of people who do qualify but never apply, and the answer is, well, why? I think there are very few people who look at it and say, I could qualify for that but I don't need the money so I'm not going to. The real answer is, the reason why the take-up rate on those application-based programs is so low is because it doesn't take into account the reality of people's existence, which is that many of them are illiterate, many of them are semi-literate, they're functionally illiterate. Any kind of a government form defeats them. They can't fill it out; they don't know who to submit it to. They're not able to manage their affairs in such a way to collect all their bills together, staple them to a filled-out form and then mail it in to a government office. That defeats a lot of people just all by itself.

It goes beyond literacy to the fact that there are very many people who are simply disconnected from their government and what governments tend to do for programs like that is they advertise in the newspaper. Well, what about all the people who don't read the newspaper? It tends to be, on the whole, people at the upper income ranges who read the newspaper, who might hear an ad or see an ad on TV. There's a whole group of Nova Scotians, the most disadvantaged who never hear about this program, that would apply to them if they knew about it, but they don't know about it.

I would challenge, and have challenged, anybody who criticizes this program on poverty reduction grounds and say that this program reaches every single household in Nova Scotia and that's a good thing, whether from a poverty reduction point of view or otherwise.

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MR. D'ENTREMONT: Mr. Chairman, this sort of flows into a discussion of the Heat Smart Program. I don't know where it really sits within this budget, exactly what kind of dollars are put aside, but a quick comment to making people aware. I can tell you that the job of the MLA for Argyle is wanting to make sure that everybody in my constituency knows and whether that's through phone calls, whether that's through letters. The literacy still stands true in the Municipality of Argyle, but I can tell you that my office worked non-stop for the Heat Smart stuff, making sure that the correct information was available, making sure that the applications went in. That's my job, that's your job, and that's the job of the people sitting around this table, to make sure that people do know about it regardless of whose program it is or whose program it isn't.

If some people are not filling it out, well maybe those MLAs aren't doing a very good job, because I know I worked my arse off trying to get that done. I want to make sure that should there be a new Heat Smart Program that my constituents will know about it and will have the applications filled out. I'm just wondering where that is within this budget.

MR. STEELE: What I can say for sure is that program is not within my budget so I really shouldn't get into commenting on items that are probably better addressed because the other ministers will know a lot more about it than I do. What I can share with the member, and all members, is that there has been no change in the allocation made by the previous government in the May 4^th budget, which was in the order of $15 million, that's still in our budget.

MR. D'ENTREMONT: It revolves around the restructuring fund. I know we talk a lot about the $54 million addition to the restructuring fund, but I'm just wondering, what's the total number for the restructuring fund?

[6:00 p.m.]

MR. STEELE: I could say facetiously that it's $54.1 million, plus whatever your government allocated. The total number, I know, is in the $170 million range. One of the things I learned in law school is never try to memorize everything, the important skill is to know where to look. I'm surprised that I actually remembered this number, it is actually $178.8 million compared to the May 4^th estimate of $124.7 million.

MR. D'ENTREMONT: I'm wondering from that amount, the $178.8 million - that is the total restructuring fund - how much of that do you foresee being spent on H1N1 and how much do you foresee that on regular contract negotiations and the such that, of course, it's all supposed to fit within the restructuring fund?

MR. STEELE: I think the member for Kings West is smiling because he asked the same question yesterday and I'm going to give the same answer. The restructuring fund is intended to deal with things that are contingencies or are subject to some element of

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negotiation. We made a conscious decision to put our allocation for H1N1 into the restructuring fund, because it's our belief that it is not useful to reveal a precise number. However, I will say - and I've said this publicly on a call-in radio show so I don't hesitate to say this here to a committee of members of the House - that the substantial majority of that $54.1 million is for H1N1. I don't want to be any more precise than that other than to give you another hint, which is that it is on a per capita basis commensurate with the allocation made by other provinces for H1N1.

Based on those comments, there is a local media outlet that has made an educated guess about how much of the $54.1 million is for H1N1, and I would say that guess is pretty close to the actual amount. But there are a couple of reasons why we don't think it's useful to say the exact number and that is because, first of all, it is a contingency. It is for an event that may never occur, or may occur to a different degree, larger or lesser degrees and, therefore, we didn't think it was useful to allocate it to particular departments. It is in the nature of a contingency, which is exactly what the restructuring fund is for.

The second reason is that it is the nature of this particular forecast pandemic that there will be or may be competition for scarce resources, and in that environment we didn't think it was helpful for us to let potential suppliers know precisely how much money we have available. So for that reason I've given you some pretty strong hints about the relative amount allocated to H1N1, but I've also given you the reasons why we don't want to reveal an exact figure.

The last thing I would say is that there was a media report saying that the entire $54.1 million was for wage settlements and I want to make it very, very clear that is absolutely wrong.

MR. D'ENTREMONT: Mr. Chairman, you know, having been Minister of Health, making sure that we had the correct stockpile of gowns, masks, and those kinds of things is one very accountable piece. The unaccountable piece is when the wave comes, how bad the wave is, what the impact is going to be on our broader - not just the money that we're going to spend, which I'm sure there will be over time, there will be other equipment and supplies that are going to be required - but the true cost to our economy.

I'm wondering whether that kind of impact had been factored into the dollars and cents of the province. In a worst-case scenario, up to 60 per cent of our population will be sick with H1N1, or in another world, some kind of pandemic, should we be hit by some kind of pandemic which will impact every facet of Nova Scotian life, whether it be the food service industry, whether it be trucking, it goes on and on - everything beyond our health system and everything beyond the broader public service.

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I'm wondering, number one, are those contingencies there - and I thank you for the hint - is there a calculation, should one hit, what will be the economic impact to a province of our size?

MR. STEELE: That question, which is a very good question, goes far beyond the scope of the estimates of the Minister of Finance and I think it would probably be best if I not even attempt an answer other than to say that we are confident that the allocation that we've made is enough to assure Nova Scotians that the preparations for a possible pandemic are well in hand, although I can't resist, now that the time is coming to a close, to ask - although it is not my place to ask - let me ask rhetorically, if it were that important, which it is, why did the previous government not allocate enough money in the May 4^th budget?

MR. CHAIRMAN: The time allotted for questions from the Progressive Conservative caucus has ended. I'm just wondering if the minister would like a five- or 10-minute break.

MR. STEELE: Thank you, 10 minutes.

MR. CHAIRMAN: We will take a 10-minute break.

[6:06 p.m. The subcommittee recessed.]

[6:16 p.m. The subcommittee reconvened.]

MS. VICKI CONRAD (Chairman): I now call the Subcommittee on Supply back to order. The time is 6:16 p.m.

The honourable member for Kings West.

MR. LEO GLAVINE: Madam Chairman, I'll pick up the questioning and maybe I'll just give Mr. Greg Beaulieu an opportunity in case the minister may need any further detailed information. Obviously, I don't have the figures in front of me in terms of the Nova Scotia Liquor Corporation and its sales and revenue generation, but I know it's pretty strong, I would say, overall. I was wondering if the minister could give at least a little bit of a projection there in terms of revenue from the Nova Scotia Liquor Corporation for this year, then I'll have a more specific question moving from there.

MR. STEELE: The projected revenue from the Nova Scotia Liquor Corporation for this fiscal year is $217 million, which is essentially identical to the estimate that was provided in May.

MR. GLAVINE: One of the developments in fairly recent times, and it came when Rodney MacDonald was actually minister, I do believe, it was a projection of creating eight

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agency stores. It has now moved to 58, I believe. I'm wondering, could you provide what would be average revenue for the Nova Scotia Liquor Corporation from agency stores?

MR. STEELE: The member is close, there are, in fact, 55 agency stores spread throughout the province in what were previously underserved areas. The total agency store sales last year were $34.9 million over - let's assume that the same 55 were open in the last fiscal year, so it's just simply a matter of mathematics to work out what the average would be per store. Based on the few agency stores that I've personally been in, I would suspect that the revenue varies very widely around the average, depending on the location and the size of the store.

MR. GLAVINE: Thank you very much, Mr. Minister. The total amount in relation to revenues is fine, that's a figure that I can live with here. This is obviously experiencing considerable growth and I'm sure the minister is aware of this. I'm just wondering if your government sees agency stores with this kind of revenue generation as one of the areas on your radar, that you will maintain this level of service or, in fact, see it as having further expansion possibilities.

What about potential conflict with Nova Scotia Government liquor stores in small communities? As you know, with agency stores, you're not looking at staff and pensions and you're not looking at overhead of a building. I'm just wondering, in the early days of your government, how are you viewing agency stores?

MR. STEELE: Thank you very much. That's a very good question and I know it is of great interest to members, particularly in constituencies that have some remote areas. So I do want to take a little bit of time on the answer to this. In broad terms, as the Minister responsible for the Nova Scotia Liquor Corporation, I believe that the agency store program is working well. I do not anticipate any substantial changes, either reducing the number of outlets or increasing them.

I would say that, in my view, the purpose of the program was not primarily revenue generation, it was more convenience, because each agency store, as one of the criteria that have to be met before any approval can be given, has to be at least 12 kilometres distance from the nearest Liquor Corporation-run liquor outlet. So they're not really competing with each other. What it does do, of course, is mean that people don't have to travel as far as perhaps they once did.

In broad terms, the agency stores fall into three categories. One of the categories is the one to which the program has already been extended and those are the 55. If the member is interested in any particular - I'm not going to rhyme off the 55, although I could. I'll just mention that in Kings County the only agency store is in Canning, but I suspect that rather has to do with the fact that Kings County is reasonably well served by local population areas. Whereas if you look at a bigger place, places with much more remote locations, in

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Cumberland County there are six. So that's the first category, the 55 places where there are already agency stores.

The second category is where Cabinet approval has already been obtained, but there's not as yet a qualifying location, that is the Liquor Corporation applies a set of criteria and they have to meet the criteria, the distance from the nearest outlet being only one of them. There has to be - it just has to fit the profile that is suitable for selling liquor in Nova Scotia.

So let me mention, because I do think this is interesting to members, if you see an expansion in the program, it's most likely to be either in this category, the third one that I'll get to in a minute, and that is that Cabinet has already approved - now, I don't mean the NDP Cabinet, I mean the previous government - has already approved certain areas, but no qualifying location has been found. I just want to mention them, there are about 20 of them. If a suitable location is found, I anticipate that Cabinet would look favourably on the extension of the agency stores. But so far, nobody qualifying has been found.

The list is as follows - these are the locations for which Cabinet approval has been obtained, but no acceptable proposal has been received: the Lismore-Arisaig area of Antigonish County; Big Pond and surrounding area of Cape Breton County; Homeville-Port Morien area of Cape Breton County; Earltown in Colchester County; Lower Economy in Colchester County; Ecum Secum, Guysborough County; Goshen-Lochaber area in Guysborough County; New Harbour-Coddles Harbour area in Guysborough County; northeast Beaver Bank in the east Uniacke area, Halifax County; Peggy's Cove-Indian Harbour-Hacketts Cove area, Halifax County; Port Dufferin, Halifax County; Margaree Harbour and Pleasant Bay, Inverness County; West LaHave, Lunenburg County; Fourchu and Gabarus, Richmond County; Lower, Middle and Upper Ohio, Shelburne - that's the very distant inland area. In Victoria County there are four areas: Big Bras d'Or and surrounding area, Cape North area-Englishtown-St. Anns, and Indian Brook-North Shore-French River.

Those are all areas where, if a qualifying location could be found, it is more probable than not that an agency store would open.

The third category that I want to mention is the communities that were not on the Cabinet-approved list but someone in the community, whether they have a retail outlet or not, has expressed interest in having an agency store in those locations. There are about 10 of those and I'd just like to mention those for the interest of members since some of the members here, I think, represent some of these areas. So these are areas that the Nova Scotia Liquor Corporation is evaluating to see if it meets the criteria and if there is a qualifying location that could be an agency store and the Liquor Corporation felt it was suitable, a recommendation would go forward to Cabinet and the final decision would rest with the current Cabinet.

Those locations are: East Bay and Eskasoni in Cape Breton County; in Lunenburg, Blandford; in Inverness County, Cap Le Moine; in Pictou County, the Greenhill-Alma area;

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in Digby County, Little Brook and Church Point; in Halifax County, Lake Charlotte; Victoria County, North Shore; Shelburne County, Clyde River; and in the Annapolis County-northern Queens County area, Maitland Bridge. Those are the three categories: the ones that are agency stores, the ones where the area has been approved but there's no location, and the third category is where there is no approved location but interest has been expressed.

The final thing I would mention is that if there were any expansion of the agency store program, we'd have to take into account the fact that in certain areas of certain counties, namely Annapolis, Kings, Colchester, Cumberland, Shelburne and Queens, a plebiscite may be required.

MR. GLAVINE: Thank you very much, that was very detailed, more detailed than I anticipated, actually. One of the areas that I remember from conversation with a member of the bargaining unit for Nova Scotia liquor store employees was that - and I may just need a correction on this, or explanation - was that some of these agency stores, it may be in the early-going days as well, they weren't serviced by central warehousing but from regional stores, therefore, that actually would impact on work allocation, hours, possible casual staff and so forth.

I'm just wondering if that is a concern, if it's an issue with the Nova Scotia Liquor Corporation, and where that stands at the present time.

MR. STEELE: I just need you to clarify for me, member, if you could, your question ended up a little differently than where I expected it was going to go, was whether it is a concern to the Liquor Corporation. What exactly is the concern the Liquor Corporation might have? I'm not sure that I understand.

MR. GLAVINE: No, actually, I was really wanting to express, I suppose, a concern in terms of the employees who could be affected in certain areas.

MR. STEELE: Thank you for the question. It is a fact that, over time, more of the distribution to the agency stores and, indeed, to some of the lounges and bars has been done out of the central distribution warehouse rather than from the local liquor store. I had a meeting with an owner up in northern Nova Scotia who mentioned this change and that in some ways it was good and in some ways it was not. He found it, on balance, that he was happier with the old way of doing it because what it meant was that he could just go to the liquor store and get the product when he needed it and he would move it himself.

So I would say that, for example, the agency stores, the vast majority of them would be supplied out of the distribution centre. I'm not sure if your question was focused entirely on the agency stores, but there's no question that when you have a move toward more distribution from a central point, there may - I emphasize "there may" - be an impact on the local store depending on what percentage of their volume would go to those licensees and that

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would vary from store to store. I would say that in some stores there would be no impact on employment. In other stores there is no doubt that there could be some impact.

[6:30 p.m.]

MR. GLAVINE: Madam Chairman, just one final question. One of the - perhaps it's a more recent development with the Nova Scotia Liquor Commission - is the arrangement, again, with a speciality store like Bishop's Cellar. I'm wondering if the Nova Scotia Liquor Corporation and government view that as a successful experiment and is there a possibility of such stores, as part of the future and revenue generation for the province, cultivate a strong wine industry here?

MR. STEELE: Again, that's just a really good question and so it doesn't lend itself to just a simple answer, but it's a really good question and I'll tell you my view on that. Again, like the agency stores, the private wine stores are not first and foremost a revenue-generating mechanism, in fact the opposite, because their profit has to come from somewhere and essentially, in theory, it subtracts from the Liquor Corporation's bottom line. So it's not a revenue-generated - far from it. In principle, it's a revenue loser.

However, it's a little more complicated than that because my personal view of the private wine stores is that they have helped introduce an element of competition for the Liquor Corporation, which has in turn caused the Liquor Corporation to up its game in the sale of wines and it's an expanding category. There's really good promise for revenue generation in the sense that now if you go to a liquor store outlet, a Port of Wines outlet, just really any regular liquor store outlet, you're going to get more variety. You're going to get better service. You're going to get more knowledgeable staff and at least some of that change in culture at the Liquor Corporation. Some of it, not all of it, I would attribute to the fact that the private wine stores have just raised the whole level of wine sales in Nova Scotia.

I don't think that we would see a large expansion of the private wine store system in Nova Scotia. There are pros and cons to it, and certainly from a revenue point of view, if it were strictly a matter of revenue, I would say it wouldn't happen, but there are these other indirect benefits. I, personally, as Minister responsible for the Nova Scotia Liquor Corporation would never say never. If there is any expansion, it will be very small, perhaps a store here, perhaps a store there.

I know one of the ideas that has been floated around is a private wine store in the Valley area because all of our private wine stores right now are in Halifax, or in HRM. Because of the fantastic growth in the Nova Scotia wine industry, particularly in the Annapolis Valley, there may be an opportunity for some synergy here between what's happening in the Valley, which is a real success story.

[Page 348]

I mean if you look at the agricultural sector, wine growing is like the big success story and that's a great thing for all of us. It's a great thing for the Valley. It's a great thing for all of us. It may be there's an opportunity for some synergy there between what's happening in the Valley, in particular, and opportunities for a private wine store, but that's something that first and foremost has to go through the Liquor Corporation. They would evaluate it, they would make a recommendation to government. I can tell you now that there's no recommendation to that effect on the table, but it may happen in the future.

MR. GLAVINE: Madam Chairman, I want to thank Mr. Beaulieu for his input with the minister on those questions.

Just to turn to a different line of thinking and questioning here, one of the areas that has become apparent in the early days of your government, minister, is the use of consultants. I'm just wondering, how many consultants have been hired to date by your government?

MR. STEELE: It won't surprise the member if I say that kind of government-wide question is far beyond the scope of my estimates and I'm not really in a position to answer it. The only answer that I could give is to talk about the consultants that have been hired as part of the budget of the Department of Finance. The only substantial one that's out of the ordinary course of business, of course, would be the Deloitte report. The department does hire consultants. I'll mention, in particular, the CIS area, what I referred to in my opening remarks as the SAP project. It's just the nature of that project that there will be consultants needed from time to time but that's something that's just business as usual. The only consultant I'm personally aware of that was not business as usual was Deloitte.

MR. GLAVINE: Madam Chairman, no, that's fine and the other areas can be drilled down on through departments and other lines of questioning. One of the other areas I wanted to take a look at was TCA purchase requirements for the Department of Finance. They've gone from $1.665 million in the estimate to $7.017 million and I'm just wondering what these are. This is a considerable increase and I was wondering if the minister could outline where Nova Scotians can possibly see some of that realization of that much money.

MR. STEELE: I want to thank the member for the question. I felt a ripple of excitement among my staff when there's a question that is really truly about the Finance estimates. This is very exciting to people in the Department of Finance because all of this stuff has to do with the SAP project that we talked about. The Department of Finance leads the public sector in computer systems that standardize certain functions across government, so I can say to you that the increase from last year, which I agree with you is substantial, break down as follows.

There are five TCA projects in the Department of Finance - all of them falling under that broad heading of the SAP - $2.2 million for just a general SAP upgrade and if the member wants, I can give him excruciating detail for each one of these items, but let me give

[Page 349]

you the top level first and see how far you want to go. I shouldn't say excruciating detail, I'm sorry. The SAP upgrade, $2.2 million; SAP business enhancements, $3 million; SAP controls and audit software, $450,000; EH &S module, which stands for employee health and safety, $802,000; Nova Scotia school boards, SAP Phase II, $500,000; and the grand total there is the number that you see in the estimate, which is $7.017 million.

MR. GLAVINE: Like you, minister, I believe in trying to gather in the resources of everybody in a room even if it is on estimates on the budget. No, I just wanted to see, that is a considerable increase and I wanted to get the big picture of where most of these came from. So that's fine, I didn't want to drill down any further and I would take the minister up, however, if you could provide that document to us at some point or even just some of the detail on that if that's a possibility.

MR. STEELE: All the material that my staff have available to me in estimates falls under the category of advice to ministers, which is not, in principle, releasable under the Freedom of Information Act or otherwise. However, I will say to the member, I will examine it very carefully to see if there's any reason why I shouldn't release it and if there's any possibility of doing so, I will do it. I think it's useful, certainly for me and for all members, to see the detail that's available.

MR. GLAVINE: I want to move on to user fees. As a basic statement around user fees, if they are more than the actual cost of providing the service, then they're really hidden taxes. It doesn't matter if the 3 per cent is a CPI or inflation adjustment, they should have cost-recovery data in depth in Finance. Most user fees and government charges are increased by around 3 per cent. Are these fees based on a cost-recovery basis? Do you see that as going forward?

We know that we've had 500-plus user fees increased. I'm wondering if they're just based on a cost-recovery basis; otherwise they're a hidden tax, as we all know.

MR. STEELE: Thank you for the question. Just for clarification, you're referring to fees within the Department of Finance or more broadly across government?

MR. GLAVINE: Generally those 500-plus fees that provide services, bring in revenue to the Department of Finance. How do you see these as going forward? We did have an increase in these in 2009.

MR. STEELE: Again, I would say to the member that I'm really not in a position in the course of estimates debate to speak to or explain matters that fall within other departments. But I will give an answer for what does fall within my department. Frankly, I think the answer within my department is the same as other departments, but I don't want to be taken as speaking on behalf of the entire government. I'm just not able to do that as part of the estimates. I can speak to the 14 resolutions that are in front of us.

[Page 350]

The answer, in short, to the question - which is a good one - is yes, they're based on the cost of service.

There is a Supreme Court of Canada decision that is widely misunderstood by people. I want to make sure that people understand clearly what it is that the law is and what the law isn't. What the Supreme Court of Canada said in that case was that the probate fees charged by the Province of Ontario were not authorized by law because they hadn't been set by regulation and because they were far in excess of the cost of service, they represented a tax.

The case is widely cited for the proposition that you can't charge a fee if it doesn't match the cost of service, that's not what the case says. It just says if you're going to do that, it needs to be done by the Legislature and not by regulation. For example, the probate fees here in Nova Scotia, just like in Ontario and everywhere else, do not match the cost of service. That's why they're in Statute and that's why they're legal.

But for all the fees for which I'm responsible, it reflects the cost of service. I'm not responsible for the probate fee in the sense that I'm not the minister for the Probate Act. By and large, I would say that all the fees for which I'm responsible match the cost of service. When instructions are given to civil servants about fee increases - bear in mind the instructions for this year were given by the previous government, not by our government. My understanding is that they were told that it should be a 3 per cent increase provided it fit within the framework of continuing to reflect the actual cost of service.

Since last year the overall civil service wage increase was in the order of 2.9 per cent, I don't think it was in any case very difficult to make the case that the cost of service had gone up by 3 per cent.

MR. GLAVINE: So then is it too simple a reduction that going forward with contract negotiations around the 1 per cent, that Nova Scotians can expect the 1 per cent increase in our user fees?

MR. STEELE: That would be something that would be determined as part of the building of the 2010-11 budget, which is a process that hasn't started yet, so I don't want to try to predict or preview the result of a process that hasn't started.

[6:45 p.m.]

MR. GLAVINE: I had a few other questions relating to the Nova Scotia Gaming Corporation. I was wondering, first of all, if the Informed Player Choice System smart cards have been implemented right across the system. I know we went through a trial period. Based on the observations to date, does it look like it will have an impact on revenues? The other side of that, of course, is player participation and so forth, but right now, VLT revenues are

[Page 351]

the winner for the Nova Scotia Government in terms of gambling revenues for the province. Does it look like the Informed Player Choice Card will impact on that revenue negatively?

MR. STEELE: The Informed Player Choice System, or IPCS, was field-tested in the Mount Uniacke area and is now being rolled out in a staged manner. Stage one was implementing it in the Sydney area. It has not been rolled out any further than the Sydney area at this point, as we sit here, but it is expected that it will be fully rolled out across the province by the end of next year.

The question about revenue is difficult because one of the reasons for doing it in stages is precisely to gather that kind of data. My understanding is that the Gaming Corporation has hired someone to investigate that very question, but the early prediction is it will have an impact on revenue. I've seen different predictions because - remember, with the system not fully rolled out it's difficult to be sure, but it's anticipated that the impact on VLT players in the full-province rollout is in the neighbourhood of $7 million to $8 million per year.

MR. GLAVINE: It will have an impact on revenues, then, so right now the system will be voluntary. Is there any thought that it would become a mandatory program, which again impacts on VLT play and revenues that the province may anticipate from VLTs?

MR. STEELE: I should have added something to my previous answer, and that is that the predicted impact of $7 million to $8 million would apply only if the system is mandatory. If the system is voluntary there's no reason to think that the impact would be other than minimal, and so the question then becomes, well, is it going to be voluntary or mandatory? Currently in Sydney it is voluntary. When the system is rolled out across the province it will continue to be voluntary and what we're going to do is evaluate the system for a year on a voluntary basis, but the previous government had determined that at the end of that year it would become mandatory, and the year hasn't started yet. The stage one rollout in Sydney doesn't represent a start of that one-year period. When the system is fully rolled out across the province, the clock starts ticking, as it were, and then at the end of the 12 months, the previous Cabinet had decided that it would, at that point, become mandatory.

MR. GLAVINE: I was wondering, looking at this a little bit further, from the point of view of the contracts with Techlink - I believe that's the company - are we able to break down what it costs Nova Scotia taxpayers? We talk about things being done through ALC, but this seems to be a Nova Scotia experiment, I believe, to date. What is the size of the contract that would have come out of our revenue generation from the cost to purchase the equipment from Techlink? What was the cost of the purchase to date?

MR. STEELE: I am advised that the cost of the system to the province, for the full provincial rollout, is in the order of $12 million and that there would be an operating cost per year of between $4 million and $5 million.

[Page 352]

MR. GLAVINE: Just to clarify it a little bit, as well, was the idea of a $50 gift certificate, is that something that the Gaming Corporation saw as part the Mount Uniacke experiment? Does it go on in Sydney? Will it go on as the rollout comes across the province?

MR. STEELE: The system has been rolled out on a voluntary basis and so it's standard procedure in circumstances like this that you have to offer some kind of incentive for people to participate, because otherwise they just won't and you get no valid information. So the $50 gift certificate is something that the Gaming Corporation is still employing as a means of giving people an incentive to participate in the voluntary program, but there are a couple of things I should mention about that.

I was there in the Legislature the first day that this issue was raised. A great deal was made of this and a lot of misinformation was spread around, about how that program worked, by the former Leader of the Liberal Party. The gift certificate is not redeemable in cash. It would typically be at a local retailer. It is also something that has passed the highest level of ethical review and social responsibility by people who review these things. It is not considered to be a negative factor. It's just considered to be normal practice, as it would be in any focus group type of setting where you need people to participate in order to have any kind of valid result.

MR. GLAVINE: I won't ask the minister what he personally thinks of this, I'll have another occasion for that. But anyway, in terms of the operating budget in May, we see now an increase of $111,000 in the operating costs line item in the estimates. I was wondering what this increase in funds is actually used for.

MR. STEELE: I'm sorry, could the member please repeat the question?

MR. GLAVINE: The question is, in terms of the budget estimates from May 4, 2009, there's an increase of $111,000.

MR. STEELE: It's not clear to us which line you're referring to.

MR. GLAVINE: Operating Costs, $11,400, sorry, I used the wrong number. No, I'm sorry, no, I missed a page here. My mistake, sorry about that. I was looking at another question and I did take the wrong one here.

To the minister, I'm wondering, in terms of the Gaming Corporation - this is a huge investment that the province is putting out, and I'll be the first one to compliment any government and the Gaming Corporation when we see real social responsibility taken around gambling. I could easily go on for another hour about the devastation that I am aware of as I am in very close contact with several organizations.

[Page 353]

At what point will we really take a serious look at this and say, $12 million ongoing fees, is this where we need to be as a province?

MR. STEELE: Sorry, $12 million in ongoing fees, I'm not . . .

MR. GLAVINE: Sorry, $12 million to purchase the equipment and then an ongoing fee.

MR. STEELE: I'm not quite sure how to answer that. I mean, it's an investment. We're trying new technology that has been developed in Nova Scotia, and I guess the question I have - I mean this rhetorically, I don't mean it any other way - if not this, then what? There is no other system on the market that will do this thing that the Techlink system will do and this is leading-edge technology, not just here in Canada but around the world. There is a cost associated with that and all I would say to the member is every single member in the House is aware of the devastation that gambling can cause to individuals, to families, to communities.

In this province we are national and international leaders in social responsibility. I know sometimes when we're dealing with this stuff day to day it's easy to forget that, but this province has just received the highest level of social responsibility certification from the World Lottery Association. That's something we need to pause and recognize, so what I would say is, well, if not this, then what? I'm not sure how else we should go about dealing with the addiction problems caused by VLTs, other than this Informed Player Choice System and all the other things that are already underway.

We do not take the stance that prohibition on VLTs is the answer. That's not our stance, it's not the stance of the previous Progressive Conservative Government, it wasn't the stance of the previous Liberal Government who brought the existing gambling structure into place in this province. Let's not forget who brought this level of organized gambling to Nova Scotia, it was the Liberals.

Prohibition is not the answer and so the answer is some level of management of the risk. Let's be very clear as well, it's a very small portion, a very small portion of the overall population that are at very high risk. The analogy that I use - actually, I better not use the analogy that I use. Let me just say, it's a small proportion who are at great risk, and a substantial amount of resources are directed at dealing with those at-risk gamblers. The vast majority of Nova Scotians can gamble for fun and with no risk, so removing VLTs has never struck me as being the answer any more than prohibition was the answer with the difficulties that people experience with alcohol.

The answer is management. It will be a constant struggle to find the right level of management of the risk. I would be the last one to downplay the devastating consequences that gambling can have on at-risk gamblers, but a substantial amount of resources are devoted

[Page 354]

to dealing with that group, and this investment in Techlink is yet another example of the kind of investments that are being made to deal with at-risk gambling.

[7:00 p.m.]

MR. GLAVINE: Thank you. I just wanted to have some of your thoughts on the record around this issue, around this investment. I'm not making a value judgment on the investment. I'm just wondering how far we may go along with this investment and its fees and so on. I hope we're prepared to again do a science-based, strong evaluation as to the effectiveness and so on of the system, so I wanted to have that early on the record.

One last question in this part of your responsibilities, minister. You did talk about the on-line gaming which, as we know, is perhaps not so much for our province, but it has become a considerably significant area in the gambling empire. What revenue generation did we have in Nova Scotia last year, and is there a trend upward or are we satisfied where we will be involved?

MR. STEELE: In the last fiscal year, 2008-09, a revenue from PlaySphere to Nova Scotia was $5.5 million. That gives you a sense of the order of magnitude. It is what I would characterize as a very limited offering in comparison to the most popular offshore poker casino gambling sites.

It is going to be, in my opinion, one of the most challenging aspects of being the minister for the Gaming Corporation. There are many, but this is going to be one of the most challenging, this tension between do you try to follow the on-line sites and be as interesting and as attractive to the public as those offshore sites are, in order to make sure that the offerings are regulated and locally based? Or does that represent too great a risk in putting what is essentially a government-sponsored mini-casino in the home of every Nova Scotian with a computer? Is that going too far? And if we don't go that far, then are we running the risk that the vast majority of gambling done in Nova Scotia is going to be done outside our knowledge and outside our regulatory authority?

It's a constant tension, difficult to know where the right balance is, especially as technology merges, because just when you think you have a handle on on-line gambling, the technology develops and there are a whole new set of questions that you have to answer.

There's no quick or easy answer on this issue, but certainly one that I know the Gaming Corporation and ALC are well aware of.

MR. GLAVINE: Thank you very much. Thank you very much, Ms. Mullally. Going back to the estimates, this is under Finance, Page 11.7 of the Estimates Book. There's an increase from the May budget in the Operating Costs line and I was wondering what that represents.

[Page 355]

MR. STEELE: I just want to make sure that we're talking about the same thing because you referred to Page 11.7 of the Estimates Book but, of course, the Estimates Book doesn't contain any reference to the May 4^th budget. So I just want to make sure that I know exactly what it is that the member is referring to. (Interruption)

MR. GLAVINE: Yes. So it's the operating costs of the Finance Department. I'm just wondering what that increase would represent. The PC budget was $11.289 million and it goes to $11.4 million.

MR. STEELE: I'm having trouble locating the numbers to which the member is referring. However, having said that, the information that I have is that the increase in the budget . . .

MR. GLAVINE: Of $111,000.

MR. STEELE: I have different pages in different books here so I'm not sure what the member is referring to but that $111,000 increase is an increase in operating funds that is attributable directly to the TCA project that we talked about earlier, the SAP school board's Phase II. Because the project is expanding, the operating funds required to run it also have to expand.

MR. GLAVINE: There hadn't been any increase as we know in salaries. So, therefore, I was wondering where that in fact was part of your budget.

MR. STEELE: I'm sorry, I didn't hear the question.

MADAM CHAIRMAN: Was that a question?

MR. GLAVINE: You provided the explanation so, no, that's fine. In terms of, there was one specific question where it was by my critic area in Natural Resources but not specific to Natural Resources. Again, the expense variances from the May 4^th budget shows $5.8 million in Natural Resources, federal funding for silviculture and community and development trust transfer. I was wondering if you could just provide again an explanation of the accounting of that $5.8 million.

MR. STEELE: Thank you, member. It took us a second. One of the difficulties here is that usually we're dealing with estimate to estimate or actual to estimate and this year we have a whole new set of documents thrown in; namely, comparing it to the May 4^th budget. So it's a little difficult sometimes to locate the comparisons. You wouldn't believe how much the Department of Finance puts into this kind of preparation and this year they have not only the usual set of comparisons but the whole new set of comparisons of the September 24^th to May 4^th. It's a tremendous amount of work that goes into preparing for this which is why they're so excited when you ask questions about the estimates.

[Page 356]

The answer to your question, member, is that the increase is made up of two parts. The first part is an increase in federal funding, specifically ACOA funding for silviculture in the amount of $3.5 million, and that's what in the department is referred to as money in and money out. It's an increase in federal money which is then duly spent and that's why it shows an increase in Natural Resources. The second item is also money in and money out from the Community Development Trust Fund in the amount of $2.5 million. That was the one that was announced as funding for Bowater.

MR. GLAVINE: Thank you very much. With that kind of preface for your staff, I'd say you were moving well beyond a 1 per cent increase this year. That being said, I do (Interruptions) It's okay, minister. It's been a long day since Question Period.

There was one area that created a savings for the province and that was $13.5 million savings to debt servicing costs. In the initial explanation during the lock-up, it was presented as debt saving, short term, during the election period. Is that the case? Is it a confined period of time that we're talking about? That's a considerable saving to the province.

MR. STEELE: It was related to the election, but indirectly. That is that during an election period, particularly when there's a period when there is no provincial budget, it is not possible for the province to go to the long-term borrowing market. The member will recall that I referred yesterday to the bond rating agencies and the fact that they simply won't rate us when we're having an election and before we have a provincial budget.

Now that we've introduced a budget, the bond rating agencies are very interested in talking to us. That's why I said to you yesterday that I think we'll know what our new ratings are within a period of two to three weeks.

Because we're not rated, we can't go into the market and we're not borrowing at the usual five- to 10-year rates that we would normally borrow at. What we're doing, what we have been doing, is borrowing at the money market rates, which I said in an earlier answer are at historic lows, you know, running in the range of 0.25 per cent. It's not a long-term borrowing strategy to stay short. It represents an increase in risk, but it just so happens that because the long-term rate is considerably higher than the short-term rate during this so-called black-out period, this represents a fairly substantial saving in debt servicing costs.

MR. GLAVINE: With that, I've concluded my questions and I want to thank the minister and his staff for a very fine discussion during this period of time.

MR. STEELE: Thank you. In response, I would like to thank you and your staff for what I thought were excellent lines of questioning and I just wanted to say for the record that it's relatively rare in our work that we get true back-and-forth debate over an extended period. I very much appreciate it, the work that you've obviously put into this task today, so thank you very much.

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MADAM CHAIRMAN: The honourable member for Argyle. The time is 7:12 p.m.

HON. CHRISTOPHER D'ENTREMONT: Thank you very much. I have until what time? Of course I have until 8:12 p.m., but does that expire or is there some time after that? When is estimates over?

MADAM CHAIRMAN: Estimates is over at 8:15 p.m.

MR. D'ENTREMONT: I'll give you some time for closing, maybe I'll give you a little more than the three minutes that are allocated there.

I thought I'd kick some stuff off here, as much as I want to look at estimate to estimate and our book to your book and all that stuff, I think everybody has tried that and the numbers are the numbers and we'll leave those as they are. I thought we'd take a little bit of time and talk about gaming for a few moments. And maybe we'll talk about the Liquor Corporation a little bit after and some of your other items. I know Thursday we'll kick off a little bit of Acadian Affairs as well. I figure if Ms. Mullally is here we should ask some questions. I know the deputy is always looking forward to some questions as well.

I want to ask some pretty broad questions and give you the opportunity to talk about them and we'll see where the hour brings us. Over the last number of years we've had tremendous debate over the number of VLTs in our province and I know the responsible gaming system that is being piloted is one that I think will have some profound results but I'm just wondering - and I don't know if you presented these to the member for Kings West as well - maybe where your thoughts are on the next two or three years, where is gaming going to be going? What kind of revenues are we going to be expecting? Of course, we continue to see some decline in revenue there, but where do we see our revenues going and maybe an over-thought, a greater thought, of the number of VLTs, and is there a possibility to bring some of those numbers down?

[7:15 p.m.]

MR. STEELE: I do find it the wisest course of action not to speculate too far in the future or sort of think out loud or deal with hypotheticals. What I would say in answer to that question is that the previous government's five-year gaming strategy expires in April 2010. At that point we are going to have to decide, first of all, whether we need a fully formed explicit gaming strategy to replace it. My personal view on that is that we do but I think the question logically needs to be asked first and if we decide that a new gaming strategy is required, well then we'll just have to develop one. The questions that the member has asked really go to the heart of what the next gaming strategy would be.

The last gaming strategy included things like how many VLTs and it was part of the gaming strategy, that there's a substantial reduction in the number of VLTs in Nova Scotia.

[Page 358]

Is that going to be part of the next gaming strategy and again, members may get a little tired of me saying this but I don't want to try to predict or preview the results of a process that hasn't even started yet. I would say, for the information of members, just in case they're wondering how many VLTs there are, there are 2,234 off-reserve in Nova Scotia and 590 on-reserve for a grand total of 2,824. That's how many VLTs there are licensed in Nova Scotia today.

MR. D'ENTREMONT: VLTs are always a big discussion around any table, the utilization of them, the distribution of them, and whether they're good or bad. I think if you go and talk to a community group that has a couple of VLTs that basically their community club is surviving on it. I use the example of Le Club Acadien down in my riding and if it wasn't for the - I believe there are three, they might have four, I'm not sure - VLTs, I don't think that club would continue to exist. Yet at the same time, I know the member for Kings West was talking about the challenge and the difficulty that people fall into should they become addicted to VLTs. Sometimes they're a curse and, of course, sometimes they are a benefit to what's happening.

As we try to remove from the system - maybe some kind of monetary fund that we would sort of supplement what a club would be losing if they were pulled out - are there going to be, as we try to continue to bring the number down, because I think all of us would maybe agree that maybe 2,800 or more is still a number that is too high. Two or three in a place is one thing; these mini casinos are completely another discussion for another day. Is it your thought that we should try to bring the number of VLTs down? If you bring these VLTs down, where are the VLTs going to be coming from and should they come from a community club, are there going to be some dollars available to them to soften the blow as those are pulled out of the system?

MR. STEELE: Another statistic that all members may find interesting - I know I do - is that those 2,234 machines that I talked about earlier are spread out among 368 retail locations. So you can do the math and say that on average they have six each. But of course that range from one or two, there is one location here in Halifax that has 20, or I think it's actually more than 20. The 368 locations include 228 private organizations; 42 groups which, for want of a better term, I'll call community-minded groups, typically the small non-profit kind of group; and 97 Royal Canadian Legions. Of course, that doesn't take into account the locations on First Nations reserves.

Honourable member, along with you, I don't have to go beyond the local Legion in my constituency to picture what those machines mean to that Legion and how important the Legion is in the community and then how important those VLTs are for the bottom line of the Legion. Now, it just happens that my local Legion is pretty healthy, they've got strong membership, they have other revenues, they probably could get by without the VLTs. But I know there are many VLTs, particularly smaller ones in the rural areas, let's face it, they could barely keep the doors open if they didn't have that revenue.

[Page 359]

Here's part of the problem. We have a whole sector of our economy, I'm talking about the lounge and beverage room owners associations and bowling alleys and things like that, which absolutely depend on their VLT revenues to stay open. Let's suppose we do something that we're definitely not going to do, and that is go for prohibition and ban all VLTs. There would be a wave of closures from one end of the province to the other of long-standing lounges, beverage rooms, bars, whatever you want to call them, because the revenue from these VLTs has become so much an integral part of their businesses, of there bottom line and they couldn't survive without them. I think that's regrettable that that degree of dependence has developed.

So whenever we're talking about changes in VLTs, we have to be acutely conscious of the impact that it has on our local communities. There is that whole other stakeholder side that we don't talk about very much and that is the organizations and businesses that depend to a greater or lesser extent on the revenues from the VLTs. I don't want to predict or preview what the next iteration of the gambling strategy is going to say, whether we have the right number or don't have the right number. I would rather focus not on the number of VLTs but on the number of at-risk gamblers.

Of course, the industry standard is to rate people in four categories: high, medium, low and no risk. The vast majority of the people are in the no-risk category. But I really want to focus on the degree of prevalence and only really enter into debate about the number to the extent that it impacts on prevalence.

We could cut down on the number of VLTs substantially and have no impact or very little impact on the number of high-risk gamblers or the amount of money that they've spent; that, to me, misses the point. If the vast majority of Nova Scotians can gamble at no risk - when I say the vast majority, I'm talking well north of 90 per cent, that's what the prevalence studies show - then we need to focus on those at-risk gamblers and what are the changes that will actually have a real impact on that group. Those are the people we should be after.

MR. D'ENTREMONT: Madam Chairman, as we move around the gaming products that we do have, maybe you can give us a bit of an idea of how strong our two casinos are and what the long-term sustainability of those are. Are our revenues up or down or what kind of operations are we doing? I know there was a discussion about some layoffs there a little while ago. Where do we think our casinos are going and are we expecting some better revenues from them as time goes on?

MR. STEELE: Of course, I can't look too far in the future because we're only dealing with the 2009-10 budget. I can tell you what is in the budget of the Gaming Corporation for this fiscal year and just by way of comparison, I'll talk about the actual numbers for last year.

The sales at the Halifax casino last year were $66.4 million and the budgeted sales this year are $68.6 million. Of that amount, the payment to the province last year was $22 million

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and the budgeted amount this year is $24.4 million. So that's an increase of $2.2 million or 3.3 per cent, which I would characterize as stable, stable in this economy and this environment. Yes, I think the best word to use is "stable." The Sydney casino, which is roughly a third the size of the Halifax casino, the actual sales last year were $23 million of which the payment to the province was $9 million. The budgeted amount this year is $24.6 million and the total payment to the province is budgeted to be $9.9 million. The increase between the two, of course, is $1.6 million. So in relative terms it's doing slightly better than the Halifax casino, but I would say probably the best word to describe the results of the Sydney casino is "stable."

Looking ahead, the biggest single challenge to the casinos in Nova Scotia is the planned opening of a casino in Moncton. There is a great deal of work being done at the casino and the Gaming Corporation to try to forecast the impact of the Moncton casino on the casinos we have here in Nova Scotia. There's a real question about where the people are going to be coming from, whether people may go to both, or whether people who already go regularly to the Halifax casino may go to Moncton because it's something new. It depends on a lot of different factors and they're trying to forecast that now, but because that goes beyond the current fiscal year, there are no hard numbers on that yet. That's going to be the biggest single change on the casino scene here in Nova Scotia.

MR. D'ENTREMONT: Let's look at other products that we have - ticket sales, 6/49 and such. If I remember correctly, they're pretty mature. Is there any growth in there or will those remain stable as well?

MR. STEELE: Ticket sales, which is just about the only gambling that I personally have engaged in, since becoming minister I've actually stopped because I thought if I won the big one - and after all, why would you buy a ticket if you didn't want to dream about winning the big one? - I'm not sure that I could claim the prize. I did check to see if I'm actually formally forbidden from winning the big one, but I just don't think it would look good, to be the minister and then win a jackpot of some millions of dollars, so I've actually stopped buying even the occasional lottery ticket. Although, I have to say, now that the CEO of the Gaming Corporation is here, I used to buy more 6/49 tickets than I do now. I used to like it when it was $1 each, it just seemed like the right price point for me and when they put it up to $2, I stopped buying lottery tickets, but I don't think the Gaming Corporation noticed because I won few enough anyway, but I've pretty much stopped buying lottery tickets.

That's all by way of preamble to your actual question which was, yes, I've heard the word "mature" used to describe lottery products. Now, the 6/49 goes pretty well, but the Super 7 lottery, the ticket lottery, was retired very recently, like within the last few weeks or the last month, because it was so mature that really sales were going down and in order to introduce a new and interesting product, ALC joined with other lottery corporations in introducing the new ticket lottery Lotto MAX. You've probably seen a great deal of advertising around about that. There has been a great deal of promotion. That is a substitute for the old Super 7 game.

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Because ticket lottery is considered to be a mature product, the actual revenue from that last year - these are sales - was $203.6 million of which the net income to the province was $37.8 million. The sales that are budgeted for this year are $203.3 million, the net income is $30.6 million. That's a decrease. If Lotto MAX does well, I think we can expect to see the revenues in this segment go up again, but for now it is a declining segment of revenue.

MR. D'ENTREMONT: Thank you very much, Mr. Chairman. It is a pleasure to see you here as well. Let me tell you how many times I've played these games - I had no idea that 6/49 actually cost $2, and Super 7, quite honestly, I never knew that we changed it to Lotto MAX, so there you go. I can't remember the last time I put a toonie or loonie into a VLT machine. I can tell you that really dates back to 1999, when I was executive assistant to the Minister of Finance at the time. I don't think I've played a machine since that point. Yes, what would someone say if you actually won? I don't know, I'd like to maybe try someday, just to know what the feeling is like. I do have a friend who won 6/49 down in my neck of the woods, a Nickerson fellow, and he is doing quite well with his new $4 million.

[7:30 p.m.]

Thank you for that and my point is, ticket lotteries - as much as we talk about VLTs and casinos, if we compare the cost or the revenue from those sources versus what ticket lotteries bring in, there's a definite difference. A ticket lottery is non-regulated, in a way. There are no times of period of play, really, you can buy as many tickets as you possibly want, on and on. I don't know where I'm going with that point, just to say that there's a huge amount of dollars that comes in on a ticket lottery with very little responsibility that goes along with it.

MR. STEELE: It's actually a very interesting point. This is a heavily studied area, the whole area of gambling. My comment on your point is simply that the studies show the degree of problem gambling in the ticket lottery segment is tiny, it is really, really small. It exists and we must not deny that it exists, but it is something in the order of 0.2 per cent of all people who buy ticket lotteries. So I take your point that it is not regulated as tightly as VLTs, but it also does not produce the same kind of problem behaviours that other forms of gambling do.

MR. D'ENTREMONT: Mr. Chairman, which leads me to, I guess, a dud that I got to announce when I was lucky enough to be Minister of Finance for a few weeks, just maybe give a quick update on Keno and the decision to turf it a little earlier than you had committed to.

MR. STEELE: Thank you, member. I've never heard you describe it publicly as a dud before. Keno is one of those things that when it came out, I personally was critical of it. As Finance Critic, it fell to me, at least in part, to comment on behalf of the Opposition on Keno and I was fairly harshly critical of it. I know a great deal more about it now than I did then. I could talk for a long time about Keno.

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I spent a lot of time on Keno since being the minister, a surprising amount of time on this one issue and I've learned a great deal about it. There are those who believe that by its nature, it encourages addictive behaviour and that is the continuous play element of it. The most addictive thing, as I understand it about VLTs, is that it just goes on and on. Players get into the zone, there's the lights, there's the sound, there's the constant feedback from the machine that you win some so you say okay, if I put in more money, I'm going to win again. It is the continuous play element that is most addictive. There were those who said that electronic Keno had the same features.

Now that I know as much about it as I do, I'm not sure that I entirely agree with that. I will say this, the Nova Scotia Gaming Corporation put a great deal of effort into making sure that Keno, if it was to be introduced, would be as socially responsible as possible. I know now how much work went into that social responsibility assessment, and I would say - meaning this only as a very slight dig at the previous government - that the reason I know it is because the previous government chose not to release the social responsibility assessment. When I became the minister and I became aware of it and became aware of how much work had gone into it, of course my reaction was, why would we not release this? People need to know how much work went into evaluating it. So we did release it, and it was very interesting to see what they did.

Originally, Keno was proposed three or four years ago, and at that time the Gaming Corporation said no. This time they said, yes, it's something we can recommend to government, but on a number of conditions that came out of the social responsibility assessment. So the game was slowed down, and that was a really important feature: instead of every five minutes, it was every 10 minutes. No, wait a minute, I haven't got that quite right, but anyway the game was slowed down. There was a break at the top of every hour and then there were a number of things that were done to make sure that it had as few of those addictive qualities as possible. So the game was introduced and sometimes I wonder - I shouldn't say this out loud, so I won't, because I shouldn't say it.

When I became minister I was faced with this game that was introduced. It was introduced without a great deal of public input, and I think that was another thing that could have been done differently. To my way of thinking there should have been an opportunity for public comment before the game was introduced, but the first thing that people in Nova Scotia knew about it was the government basically announcing that the game was here and was ready to roll. One of the things I've learned as minister is that the planning for this decision had started at least a full year before. Why did the government not take any part of that year to let the public know it was coming and invite comment? I don't know why they didn't, but they didn't.

So there was a lack of acceptance amongst stakeholders of the game, and then there was the other factor - it just didn't succeed. It was on its own terms, leaving aside all question of social responsibility. It was losing money, and there's only so long you can watch

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something like that lose money before you say it's time to stop. What had been suggested to us was that if only we spent more money, if only we did more marketing, if only we invested more in equipment to make the game more interesting, maybe it would work, but at this point, having invested all this money and having the game losing on operational terms every week and then to be told that the only way to rescue it was to spend even more money - at that point it became pretty easy to say, time to stop. So that's what we did.

MR. D'ENTREMONT: I can say when I was acting minister and got to introduce this product, we did a fair amount of explaining of why it was socially responsible, why it was different from version one of Keno, and I can say that version one of Keno was shot down by our Cabinet. We said no, we can't run it in this way, which is why version two came around. Whether version two - maybe it had too much built into it, that the flow wasn't any good and therefore it didn't kick out, didn't pay back, which is probably why it failed in the end, but I can say, you know, I did have a funny little hope in the back of my head that if Keno worked because of what was built into it, it might be a way to get rid of the VLTs. It could be a substitute, in a way. It's a weird little feeling, but it didn't work out that way. I think it was a shame that it was just an experiment, is really what it boiled down to.

I can say during my time I didn't hear a lot about Keno, nor did I even run into Keno. I can't say that since I announced it - when was that? Back in April, whatever it was, March, I can't remember when it was now - I still haven't seen one machine. I didn't even see one, nor will I ever see one. I'll probably see a couple TVs that the bar owners are able to keep, but in the end it's a shame it was a failed experiment, because I know a lot of work went into it and, as you say, the research that went into this and the work that went into it had some virtue, I think. But it's one of those products that just didn't work out for us.

I think I'm pretty much done on gaming if you want to maybe have a final comment on gaming.

MR. STEELE: I've had the opportunity yesterday and today to clear up a number of misconceptions that people have about various erroneous media reports or things that Opposition members have said that were factually incorrect. I do want to take the opportunity and talk in my keynote to address another one of those and that was the belief that the TV screens are just going to be left in the bars and basically given away. There was a media report to that effect, which really misconstrued what it was they were told, which is that they would stay in the bars - because, of course, there was a 30-day notice period - until a decision was made about what to do with them.

As minister for the Gaming Corporation, I'm not in the business of giving away things for free and I expect that any bar owner who keeps the screen in their bar, if they have another use for it, will certainly pay for it. That's certainly my intention. Why would we give away something like that for free? It's not my intention that that's the way it should be dealt with.

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MR. D'ENTREMONT: If I may make a suggestion for the use of those TVs, I'm sure there are a number of community groups, whether they be Scouts, whatever, that probably could use a TV so they could play DVDs and things like that - should you not be able to sell them - they could be disposed in a very responsible manner.

MR. STEELE: Thank you, good advice.

MR. CHAIRMAN: Your caucus has until 8:12 p.m. in this round.

MR. D'ENTREMONT: Thank you very much, Mr. Chairman. Really, the reason I was asking the question is because I know the minister would want to do some wrap-up. I know he was prepared for it but I will ask my questions to my allotted time of 8:12 p.m., which I'm trying to figure how to do that on the Liquor Corporation.

Let's go to the operations a little bit of the Nova Scotia Liquor Corporation and let's maybe just talk about the expectations, maybe what their targets are for the coming year.

MR. STEELE: I could give you any number of statistics, including gross sales, sales by category, so all that information is available to you however way you want it. Let me talk first then about income that is transferred to the province that represents revenue to the province. The target this fiscal year is $217,009,193, which represents a 2.1 per cent increase over the actual amount for last year, which was $212 million.

MR. D'ENTREMONT: I was just maybe wondering, maybe the breakdown of sales for NSLC and maybe by category, spirits versus wine versus beer, those kinds of things.

MR. STEELE: It's very interesting watching the changes over time, although the trends that you need to watch over a number of periods, but there's no question that over time the drinking habits of Nova Scotians are changing.

Let me give you a year-over-year comparison, which gives you a hint of some of the things that are going on. The sales in the spirits category this year are 5.2, 5.3 - I'm sorry, that's by volume. The sales of spirits are $163.8 million compared to $160.8 million last year, so a little under a 2 per cent increase. The sales of wine, which is one of the really growing categories - we're all drinking either a little bit more wine or, when we do buy wine, it's a little more expensive than it used to be when we were younger; I know that's certainly true in my case - the budget this year for wine is $109.8 million versus last year of $104.5 million, which represents an increase in the order of about 4 per cent. The beer category, which is the runaway winner in Nova Scotia, is $281.1 million budgeted for this year compared to $276.2 million for last year which, although the numbers are very large, represents an increase of just a little under 2 per cent.

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[7:45 p.m.]

In terms of volume, it pretty much tracks sales - the volume of spirits is actually down very slightly over last year, wine is up by 4.2 per cent. One of the noticeable trends is simply that Nova Scotians are drinking more wine than they used to. Beer is down 0.3 per cent year over year and the ready-to-drink category, which is the mixed drinks where you buy - liqueurs would be the classic example (Interruption) The member seems to know the ready-to-drink category quite well, the volume sales there are up 2.4 per cent. That is another growth category - Nova Scotians are going more for that kind of ready-to-drink category rather than just the spirits, the bottle of rum, the bottle of vodka and things like that.

MR. D'ENTREMONT: What are we doing to see that kind of 4 per cent growth in wine sales - are we bringing in different products, are we going at that market a little more aggressively, is it the wine stores that we tend to have? And as a second point, are we seeing that growth in our own NSLCs or are those being supplemented by agency stores?

MR. STEELE: The answer to your question is, yes, it's all of those things, and I think we do just have to imagine the experience that we have going into our local liquor store compared to what it was five or 10, or especially 15 or 20 years ago - there are more wines available, the layout of the store is more attractive, and the staff are better informed and are more customer-centred.

As I mentioned in an earlier answer, I think to the member for Kings West, the existence of the private wine stores, in my opinion, has caused the Liquor Corporation itself to up their game. So you have these excellent private wine stores that are educating the consumer more, so that Nova Scotians know more about wine than they've ever known before, and the more you know about wine the more likely you are to buy a premium bottle of wine and so on. There's a little bit of an increase in volume, but it's the full range of factors that has gone into the fact that wine is such a growth category.

MR. D'ENTREMONT: Maybe, I'm wondering, on more of a global scale, the revenues from agency stores versus Liquor Corporation stores, are we seeing a growth in agency or where is our growth being seen?

MR. STEELE: There are 55 agency stores, and I want to make sure we're talking about agency stores and not the private wine stores, but by definition the agency stores are really, really small. So in a previous answer to the member for Kings West, I gave the total sales figure this year - we're just looking for a comparison to see what the growth is. The total sales for last fiscal year were $34.9 million spread over 55 stores, but that's really a small fraction of the total sales in the regular Nova Scotia liquor outlets. There's really no comparison.

[Page 366]

MR. D'ENTREMONT: Just as a plug for agency stores, I've seen in my community of Tusket, with Carl's Store - and I know the member for Yarmouth has seen it in Carlton - we can go around the communities of where agency stores are now that have been of benefit to those communities. I can say that if I'm talking to Greg or Carl at Carl's store, they're seeing a good influx of customers who are shoppers, normally, and may be picking up a bottle of wine now, now that they have brought up a good selection of that, and vice versa, that some of the regulars are coming in to pick up their spirits and/or beer and picking up a loaf of bread, or what have you, out of the rest of the store. So I'm just wondering your thought of agency stores and maybe the expansion of it, or have we seen a bit of a saturation of agency stores in the province?

MR. STEELE: It's getting really late - I can't resist saying, this continues our theme of repeating answers that I have already given to the member for Kings West. I'm okay with that, although I resisted the urge to read to him the locations of the 55 existing agency stores. But I would note that in Yarmouth County, as the member has alluded to, there are three agency stores: Carl's in Tusket and Wedgeport. It is interesting, the counties with the most would be the ones you would expect, like Cumberland County, which is fairly remote. But in Hants County there are an unusually large number of agency stores. In Brooklyn, Cambridge, Ellershouse, Lower Vaughan, Maitland, Mount Uniacke and Upper Rawdon - unfortunately, the Upper Rawdon store is currently closed due to a fire. (Interruptions)

The member for Hants East has just suggested something that may explain why there are so many agency stores in Hants West, but I won't go down that road.

What I would say to the member is - and it is a good question - I don't anticipate any significant changes in the agency store program. It has been, to my way of thinking, a success; I don't anticipate a large expansion of the number of stores nor do I anticipate a large reduction. If there is an expansion of the stores, it would be in two categories. The first category is locations that have already been approved by Cabinet but for which no qualifying location had been found.

In response to the member for Kings West, I actually read off that list because I thought it would be of interest for members to know those locations. There are a significant number of them, about 20 of them, so if a qualifying location were found, I can't speak for my Cabinet colleagues, but I don't see why we wouldn't go ahead and award the agency store to those locations. It's just that a suitable location hasn't been found.

The other category is communities where some interest had been expressed but it hasn't gone through the evaluation process at the Liquor Corporation and there is another 10 of those, although I note quickly looking at it that none of them are in Yarmouth County. So if it goes through the Liquor Corporation's approval process and the Liquor Corporation decides to recommend it to Cabinet, I can foresee the possibility that there would be additional

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agency stores, but that's within the existing framework. I don't see us moving very far one way or the other outside the existing agency store framework.

MR. D'ENTREMONT: Mr. Chairman, in a lot of those places, they either don't have a store in order to attach to or have some kind of prohibition for that community and therefore need a plebiscite in order to remove that. If we take the instance of Port Joli - Port Joli, Port Mouton, and I think there was one that was in limbo there for awhile - you couldn't attach it to anything because there really is nothing there. But it would definitely benefit the folks that go camping, let's say, at Thomas Raddall Park or what have you. Out of those 20 that you listed, maybe there's an opportunity to redistribute. Just to put a plug in for one of my communities that is asking for one, which is East Pubnico, I believe it's called Amirault's Grocery - if it's not that then it's something else close to that - if there's an opportunity to do a small redistribution to communities like that.

MR. STEELE: Thank you very much for that. I would just note that the community the member just mentioned is not actually on the list that we have of communities that have expressed an interest, so I'm surmising that probably people in the community have talked about it but they haven't formally notified the Liquor Corporation of their interest, and I would suggest to them that they should do that. It would be either somebody who proposes that the agency store be located in their retail location, or really any community member can put the idea forward - it could be the local MLA, for example. But there needs to be formal contact with the Liquor Corporation to express the interest so that the process of evaluating that can start. Of course part of the evaluation is suitability of location, distance from the nearest liquor outlet, distance from the nearest agency store, and so on.

I know the member represents an area with some fairly remote locations, so distance may not be too hard a criterion to meet, but really I would encourage the people in that community, if they have an interest, to directly contact the Liquor Corporation because the note I have does not list that community.

MR. D'ENTREMONT: No, I'm aware of that, and I know there had been some representation - and I don't know when it actually happened that that community, that particular store, was interested. This would be Lower East Pubnico, I believe. What I'll do is I'll talk to the folks there and maybe they can push a little further into it.

It is adjacent - and the funny part is that as the crow flies it would be very close to one of our stores, not necessarily an agency store but a store, but because you have to drive around the harbour of Pubnico in order to get it - and I know the chairman would be aware that it is probably almost 14 kilometres from the nearest store, so well within sort of that distance of agency store.

MR. CHAIRMAN: Do you have a question?

[Page 368]

MR. D'ENTREMONT: Well I know he has a comment, so let's hear the comment.

MR. STEELE: One of the criteria is it must be at least 12 kilometres distance from the nearest liquor outlet, but knowing the geography of the member's area, I understand perfectly what the member is saying - and the 12 kilometres is measured by road, of course, not by rowboat, which would be much shorter.

MR. D'ENTREMONT: Mr. Chairman, I know that community wouldn't be beyond using rowboats either if that meant getting to the nearest liquor store (Laughter) - in complete jest. It would be very nice to maybe move that issue forward, as I know it's been a concern of the gentleman for some time now.

Just changing a little bit, to maybe go back to wine because this seems to be where I've matured to at this point in my life - and at some point I guess I'm going to have to go to scotch or whiskey, like Dad. But wine is where it is right now, and I was wondering where the offerings were coming from and, because of my attachment to French wine, I was wondering what are our offerings in French wine and then, maybe just generally, where our wines are coming from.

MR. STEELE: The staff continue to amaze me - no matter what the question is they pull out a chart with an amazing amount of information. I happen to have in front of me the precise figures the member is looking for. Who knew?

It's getting late. I could do this in quiz form, but maybe I won't. Where would you think that the highest volume of wine comes from? It is not where you think it is - the highest volume of wine sold in Nova Scotia, by far, is Canadian wine.

MR. CHAIRMAN: The chairman will not allow this to turn into a game show. (Laughter)

MR. STEELE: Okay, being serious for a second here. So the number-one wine, by far, is Canadian wine. I'm doing the math in my head - it is done in nine-litre units, but of course if you have twelve 750-millilitre bottles, that equals nine litres. So these are done in cases. The current year: 122,255 cases of Canadian wine in the five months to date; far behind that would be Australian wine, 58,000 cases; quite far behind that would be American wine at 38,000 cases; Italian wine at 32,000; Chilean at 22,000; French, 17,000; and South African, 10,000.

The others are a very, very small amount - for example, one of the local wines that I purchase myself, but is available in very small amounts would be Lebanese wine - Croatian wine and New Zealand wine. And the other one that I should mention as well, and I think we all can be very proud of this, is 24,236 cases of Nova Scotia wine - and that represents a 22 per cent increase over the same period last year.

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[8:00 p.m.]

As I was saying earlier to the member for Kings West, wine growing is a tremendous agricultural success story in Nova Scotia and it's doing very well and for good reason - it's of very good quality.

MR. D'ENTREMONT: Mr. Chairman, that leads me quite nicely into the next issues - or at least comments on - the Nova Scotia wine industry. I'm very happy that the Minister of Agriculture is sitting next to me and I'm sure he'll smile as I mention these success stories. It is a wonderful part of his portfolio and an attachment, of course, to your portfolio as well - as you end up being the guy that gets to sell it.

HON. JOHN MACDONELL: No sour grapes.

MR. D'ENTREMONT: No sour grapes here at all.

My best example right now would be my own uncle who is running a vineyard - you can't call it a winery, a vineyard - actually in the riding of the member for Kings West, and creating a wonderful white wine with L'Acadie Blanc grapes. For the first year he had, I think it was called the Middleton Centennial Wine and it was a white wine grown on his land and put together by Jost in very small quantities and was sold through the Liquor Commission in Middleton, which was unfortunately the only place I could actually get it. I don't know if there's any left, so we were lucky to get a few bottles of that as it flowed along - but a wonderful white wine. And if we go around the province, especially in the Jost products, they're doing very well; Sainte-Famille Wines are doing extremely well; Lunenburg Winery are doing pretty good; and Grande Pré wines tend to be doing very well.

My question really revolves around Grande Pré wines and the availability of Grande Pré in the Liquor Commission. I'm not sure, but there was a bit of an issue there for a while that I don't know whether Grande Pré, Hanspeter was selling to the Liquor Commission or the Liquor Commission wasn't buying it - are you aware of that issue?

MR. STEELE: One of the innovations that was carried out by the Liquor Corporation was to change the marketing structure for Nova Scotia wines and whereas before it wasn't particularly profitable for them to place their wines in the Nova Scotia Liquor Corporation stores, it now is. It's been a big win for everybody and it's just an example of how the Nova Scotia Liquor Corporation itself is evolving and changing and ready to accept new ideas, that the change in the marketing and pricing structure has had a tremendously positive impact on total sales. It's been good for the Nova Scotia Liquor Corporation and tremendously good for Nova Scotia wine growers. My understanding is that Grande Pré now does sell through the Liquor Corporation. It's something that it wasn't doing up until two years ago.

[Page 370]

MR. CHAIRMAN: I would inform the honourable member that you have a little less than 10 minutes left - nine minutes.

MR. D'ENTREMONT: Mr. Chairman, thank you for my 10-minute warning. It won't take me long to fill the remaining 10 minutes, and I know the member will probably want to do some closing remarks. I don't think the Liberal critic has any further questions.

Let's switch gears just a little bit, and this basically has to do with, and again this is from being the Minister of Acadian Affairs and you're meeting people who travel on a regular basis to France or to other countries and the issue of - and I apologize for not having done my research quite so well on this one - but basically import certificates and import licences to bring wine into Nova Scotia. Because let's say if I wanted to bring a case into Nova Scotia, or have a case shipped, I really can't do it - I would have to send it through a broker of some kind, if I understand the process correctly. I'm wondering if maybe you're aware of that issue, because I know that a lot of people have found wines and they would like to bring in a couple of cases and really can't because they need the aid of that broker.

MR. STEELE: I'm advised that it is possible to do it. There is a bit of paperwork involved, and it does, of course, have to go through the Liquor Corporation, but special import permits are available and there is no minimum amount. So it can be done.

MR. D'ENTREMONT: I'm just going to talk about the agency, and not the agency stores but the full stores now, the Liquor Commission stores, and as much as I want to talk about wine the rest of the night, I probably should move on to a couple of final questions before the time is up.

I'm just wondering, just as we pretty much replaced almost all of them - I mean a lot of our facilities, even if we take Yarmouth for instance, which is now adjacent to the Superstore, or in Liverpool which is now adjacent to the Superstore and you continually go through these communities, where do we sit with the infrastructure of the Liquor Commission now? Do we have a replaced stock at this point or do we still have some work in rejigging where some of these locations are?

MR. STEELE: I'm advised that out of the total 106 liquor outlets, all but 35 have been revised in the new format and that the Liquor Corporation has a five-year plan to refresh all of the stores. So I think for those of you who may have in your areas stores that do not meet the latest look of the Liquor Corporation, you can expect that to happen in your community. Every liquor store outlet is part of that refreshed plan to make it look good, look modern, look inviting, and look welcoming, so most people will have been in a liquor store and will have seen the new lighting and the new displays.

The other thing that I keep going back to, because I think it is worth emphasizing, is the change in culture among retail staff. You will probably have noticed that every time you

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go into a liquor store someone will approach you to ask you if they can help you - that didn't happen by accident, that is absolutely part of the Liquor Corporation's retail strategy - and if you do ask them for help I think you will find that they are very well trained and very knowledgeable, and that's a great change in corporate culture at the retail level.

So the retail program is not just the look of the stores, but also the training and knowledge of the staff. The two go together well and it has made the Nova Scotia Liquor Corporation one of the leading retailers in Nova Scotia, bar none - not in the public sector, not in the private sector, it is simply one of the best in the province.

MR. D'ENTREMONT: Mr. Chairman, if we compare the stores of today to let's say what they were when I start remembering liquor stores - and this was just the quick visits with your dad as he went to pick up something to either bring home or, if you were going camping, to bring a case of beer along. In Pubnico, I remember the wicket, and basically you went into the nondescript store, the guy standing there, and you basically gave your quick order and it was given to you in the brown paper bag and you went on your way, to today where you're seeing yet a true part of your grocery shopping experience. Really, that's what we brought to Nova Scotians.

So I think the Liquor Commission tends to continue to be a success story in the province and I think, compared to other provinces, we have a pretty darn good system. And this is only from some of my travels through Quebec, when you're looking at their system, or you're looking at the Ontario system in my short time when living in Ontario, which you could seem to buy certain things at certain places, but you couldn't buy all things in all places and it was always a pain. If you wanted, say, a bottle of rum or you wanted a case of beer, you couldn't actually buy it in the same place. I think we, as a province, have done quite well in giving the tools to the NSLC to move these things forward.

A final question that I really think we should talk about it, and again you mentioned the staff a little bit and I'm just wondering, how many staff are we running at this point - I know they are a unionized workforce - when is that contract coming due? They seem to be a very good bunch, so I'm just wondering, how is that relationship between the NSLC and the union?

MR. STEELE: The collective agreements at the Liquor Corporation come due on April 1, 2010. The number of employees are as follows: full time is 643; part time, 140; casual term, 768 - for a grand total of 1,551 employees. Those are broken down between three NSGEU bargaining units: there are 140 people in retail management; 487 retail clerks or in wholesale maintenance; and there are 30 office clerical staff. There are 894 non-union employees, executive management or non-management non-union.

Those figures do not include the recent change whereby many casuals are being brought into the regular workforce. So those numbers that I've just given are prior to that

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change, which is still in process and has not yet been completed but has been negotiated with the union. So it is a work in progress, but because it is a work in progress it is not possible to give more up-to-date numbers. So those numbers are the number of employees prior to the commencement of that change.

MR. CHAIRMAN: Honourable member, you have less than a minute.

MR. D'ENTREMONT: Thank you very much , Mr. Chairman, and I'll wrap it up this way - I congratulate the minister on his appointment as the Minister of Finance. It is a daunting task that is before you and one that I'm sure you will work closely with your staff. I know the deputy will provide you with as much information as you can possibly bear, but trust everything she does tell you because she is second to none when it comes to the public service in this province. Also, all around you, you have some phenomenal people and I know you speak quite often of the resource now that you find yourself amongst - trust them, they are very, very good.

With that, Mr. Chairman, I conclude the questioning of the Department of Finance on behalf of the Progressive Conservative caucus.

MR. CHAIRMAN: We have three minutes left for the Liberal caucus, if the Liberal caucus wants the three minutes.

The honourable member for Kings West.

MR. LEO GLAVINE: Actually, one of the last questions did trigger something. The minister pointed out contractual negotiations and such a variety of contracts in this province do create a very complex landscape, but I have indeed been bewildered by the fact that so many - in fact, as a case in point, the last contract, I believe it was up March 31^st and nothing signed until November. I had a delegation from the Kings County Rehabilitation Centre that were two years in arrears actually, after signing the contract, before they got their raises. It was just before Christmas and they were told, oh no, it will be in the new year. This is going back a couple of years ago and so it's not current, it's going back a couple of years ago - they were two years, absolutely, a full two years.

I'm wondering if you will work to make it a practice that these contracts, which impact on people who are our constituents we know face-on, that there will be a concerted effort not to have them dragged out months and years in abeyance either through a contractual period or after a contract is signed before they ever get their retroactive pay.

[8:15 p.m.]

MR. STEELE: It's a very good point but something really that goes far beyond the scope of my estimates, so I don't think I should purport to speak on behalf of the government

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about what we'll do. But it certainly is a very good point. When I came into government I learned something that I really should have known before but didn't and that is - the word used was "bewildering," which is as good a word as any - the bewildering array of collective agreements that we have in the public service. Every situation is unique and there are always reasons why things have happened - a contract over here is linked to that contract over there, some are done at a provincial table, some are done as one-off, and some are done as pattern bargaining. It is a bewildering array and really all I can say is we will do our best to make sure that the people who work in the public sector are treated fairly.

MR. CHAIRMAN: Honourable minister, is there going to be a continuation tomorrow or is there a resolution? I'm sorry, I've been out of the picture.

MR. STEELE: What I'd like to suggest - we can do this two ways. The answer to your question is, yes, there is a plan that I've discussed with the other caucuses to continue, but only on the subject of Acadian Affairs, which is one of the 14 resolutions that I have. I can do it either way - I can read the resolutions now or I can read them on Thursday when we resume. It's really all the same to me. I can do the 13 that I think we've agreed we're done with.

MR. CHAIRMAN: I would think Thursday. We've already used the time that we have. Perhaps your concluding remarks on Thursday as well, or do you have some remarks at this point?

MR. STEELE: If the four hours are up, I respectfully save them for Thursday.

MR. CHAIRMAN: Thank you very much, we all appreciate that.

[The subcommittee adjourned at 8:17 p.m.]