HALIFAX, WEDNESDAY, APRIL 4, 2018
SUBCOMMITTEE OF THE WHOLE ON SUPPLY
MR. CHAIRMAN: I want to get the estimates under way. The honourable Minister of Finance and Treasury Board to begin the Estimates with your opening comments, introducing staff, et cetera.
Resolution E8 - Resolved, that a sum not exceeding $23,446,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Finance and Treasury Board, pursuant to the Estimate, and the business plan of the Nova Scotia Power Finance Corporation be approved.
HON. KAREN CASEY: Thank you, Mr. Chairman. I am pleased to be here on behalf of the Department of Finance and Treasury Board.
I have with me my Deputy, Byron Rafuse; and the Director of Financial Services, Laurie Bennett. They have joined me at the table here today as we speak to the Estimates for the Department of Finance and Treasury Board for 2018-19 and the work that this department and its agencies do. Other staff are here in the Chamber for support as we work to address questions about the Estimates for this department. To the members who are here, I welcome your questions, and we’ll try to work through the answers.
The department staff work all year in a variety of different areas to ensure that the province’s finances are managed responsibly. Some of those roles of the Finance and Treasury Board Department include: providing day-to-day financial leadership to government; aligning government policy with the financial and fiscal agenda; providing financial accounting services to government; regulating the operations of more than 40 credit unions, loan companies, and trusts; regulating pensions in the province; regulating insurance in the province, which includes licensing more than 250 insurance companies as well as 5,000 individual insurance agents, brokers, and adjusters, and 500 agencies, brokers, and adjuster firms; providing economic policy advice and statistical services to help inform decision-making across government; and providing support to oversee certain Crown Corporations and agencies, such as the Nova Scotia Securities Commission, the Nova Scotia Liquor Corporation, and the Nova Scotia Utility and Review Board. Other responsibilities include managing debt, debt payment, investment, and other treasury functions for government, and providing transparent accounting of a government’s revenues and expenses.
Each year, Mr. Chairman, the department releases the annual budget. It keeps Nova Scotians informed through regular forecasts, and it reports the closing of the books through Public Accounts. In fact, in the last 12 months, we have released all three. This process allows for understanding of how tax dollars are spent and provides Nova Scotians with the transparency they need to hold their government to account.
One of the first steps in preparing for budget-building is to establish a set of economic assumptions. Those assumptions become the foundation on which the budget is built. It is critical that they be solid and that they reflect the economic conditions not only of the province but also at the national and international levels. A true test of those assumptions is when they are presented to an economic panel consisting of representation from the major banks, academics and private sector economists. This provides me, as the minister, with an independent assessment of the Department of Finance and Treasury Board’s economic projections. On January 9th, we joined the panel in Toronto by video conference, and we listened as each economist spoke specifically about the assumptions we had submitted for them to review. It was gratifying to have their unanimous support for our assumptions, which they described as prudent and reasonable.
The economic challenge and review attendees included representation from the Atlantic Provinces Economic Council, Acadia University, Canmac Economics, Dalhousie University, Saint Mary’s University, and the Office of the Auditor General, who were in Halifax with us; and in Toronto, representatives from the Bank of Montreal, Scotiabank, CIBC, National Bank, Royal Bank of Canada, TD Bank and the Conference Board of Canada. The purpose of the attendees on that particular committee was to have representation from those major banks and other institutions and to have them hear, review, and respond to our assumptions. Also, the purpose was to hear our forecast and contrast it to the forecast of the attendees and to identify any substantial differences they may note. The purpose of the conference was also to have attendees respond to the question of whether Nova Scotia’s forecast is a reasonable basis for making our fiscal plan or whether there needed to be adjustments made.
Mr. Chairman, I do want to share a few of their comments after they had reviewed our assumptions. These were some of their comments. These assumptions form a reasonable basis for fiscal planning. Major projects have a strong influence on the assumptions both positive and negative, and Nova Scotia needs to be sensitive to that. Both international and domestic risks must be identified. Nova Scotia has been prudent and successful in realizing a balanced budget and in building fiscal capacity over the last two years. Nova Scotia will be less exposed than some other provinces if there are changes in NAFTA. Nova Scotia is in an advantageous position with a balanced budget, increased population, including immigrants and other Canadians, and increased export growth.
Another observation, the profile of Halifax on the national scene is higher than usual, and they saw the Nova Scotia forecast to be conservative, reasonable and prudent. They also noted that the assumptions have a built-in protection for our economy and for our residents. Mr. Chairman, this is a good economic and fiscal story that they have told on our behalf about Nova Scotia. Those economic assumptions are central to the Office of the Auditor General, who had representation present in our room in Halifax and those economic assumptions in the review of, and opinion on the revenue estimates with the Auditor General, no matters came up through the course of the work that caused any concerns regarding the reasonableness of our assumptions. Mr. Chairman, those assumptions have formed the foundation on which we build our 2018-19 budget.
Our fiscal health in Nova Scotia is critical to our growth and our success. When we formed government in 2013, the province was borrowing money to pay its everyday bills. That path is not fiscally sustainable and it does not lead to good fiscal health for the province. That fiscal health Mr. Chairman, is critical for us to attract new business and new immigrants that will help drive our economy.
The Office of the Parliamentary Budget Officer has identified Nova Scotia as one of only two provinces in Canada that are on a fiscally sustainable path over the long term. Achieving that fiscal sustainability is important, as it gives us as a province the ability to make future investments in health care and education, while we still continue to live within our means. The investments we make today will be affordable tomorrow and will protect our children, and our grandchildren in the future.
Our government embraced stronger budgetary and financial management and I am pleased to report that three credit rating agencies have acknowledged our improved fiscal health, and they have recognized in their ratings for Nova Scotia. Those credit rating agencies have been downgrading some provinces, but Nova Scotia is seen as a province with a stable credit outlook. In fact, Nova Scotia is the only province whose credit rating currently has a positive outlook. These agencies are independent and their analysis, and ratings reflect their views on our province’s credit worthiness.
One measure, Mr. Chairman, of how a province is performing is the ratio of net debt to GDP. When we formed government in 2013, the net debt to GDP was 38.2 per cent. The One Nova Scotia Commission had challenged the province to reduce that ratio to 30 per cent by 2024. I’m proud to say that each year since 2014 when we formed government, that ratio has decreased from 38.2 per cent to 35.8 per cent in 2017. We are on track with our projections to achieve the 30 per cent target by 2024. Mr. Chairman, we are trending in the right direction.
With a strong, solid financial foundation, the positive and improved credit ridings, strong financial management practices, controlled departmental spending, together put us in an excellent position to invest in programs and services that Nova Scotians need.
Mr. Chairman, I will close with those remarks and entertain questions from the members.
MR. CHAIRMAN: We will begin with the PC caucus.
Mr. Houston, you have one hour. I’m not going to interrupt, I’m going to allow you two to have a conversation back and forth. My plan is to only interrupt when the hour has expired, unless I have to.
Mr. Houston, the floor is yours.
MR. TIM HOUSTON: Thank you, Mr. Chairman, I will try to make it so that you don’t have interrupt.
Thank you for the opening comments, thank you for three balanced budgets in a row and hopefully, time proves that out so, I do appreciate that. I do want to start off today talking about cannabis. In the budget that was tabled, the budget contemplates $10.4 million in revenue from cannabis tax. Can you shed some light on how the department calculated that amount?
MS. CASEY: Yes, I will. Thank you for the acknowledgement of the three balanced budgets, consecutive. Our projection for four years is a balanced budget for each of those four years.
I do want to make the comment before we begin, and I am sure the member would be aware, that there are certain parts within the Cannabis Control Act that are the responsibility of the Minister of Finance and Treasury Board, those being NSLC taxation and sale. All other parts are the responsibility of the Department of Justice.
The question was about how that number was realized as revenue. We don’t know, as we have said many times, what the consumption will be. We know that consumption in Nova Scotia is high, at this point, in an illegal market. We don’t know what the consumption will be when it becomes legalized.
However, in order to prepare for the July 1st date, which is what we were aiming for at that time, the Nova Scotia Liquor Corporation had to set aside an amount that they believe will meet the demand that they try and predict. Based on that, they identified they would need 12 million grams.
Based on the number that they had identified, we did our projections for revenue. There are still lots of unknowns, but we had to have a number. They had to have a number so they could order the cannabis, and they would have it ready for July 1st. We based our revenue on that number.
MR. HOUSTON: Would you be able to maybe walk us through the 12 million grams? I presume that’s at a certain price, at a certain tax rate, to get to the $10.4 million cannabis tax revenue.
MS. CASEY: When the NSLC purchases the quantity that they believe they will need, the excise tax is charged to the supplier. Based on the federal agreement that we have, the 75-25, we are looking at $1 per gram.
MR. HOUSTON: Roughly a dollar per gram. Okay. That’s when it’s purchased. When the Liquor Corporation purchases the cannabis, the supplier is responsible for a dollar a gram?
MS. CASEY: When the NSLC purchases it, the tax is included in the price. Then the supplier submits that to the federal government as part of their excise tax.
MR. HOUSTON: The budget also contemplates $10.4 million of HST derived from the sale of cannabis - to the end consumer, I guess that would be. It is the same figure. Is that a coincidence?
MS. CASEY: It certainly is a coincidence, not planned. If it was different, it would be easier.
MR. HOUSTON: The NSLC business plan contemplates $87.2 million in cannabis sales. At the 10 per cent provincial portion of HST, that would be $8.7 million. I’m just trying to figure out how you get from $8.7 million up to the $10.4 million. There’s a difference of $1.7 million there.
MS. CASEY: David DiPersio is joining us at the table. He is senior VP with NSLC. He would have been the person who did the math on that.
The 15 per cent was taken on the $87.2 million, and that was for nine months. We knew at that point that there may be a delay in that. That would have been the $13 million, so a delay of two months took us down to about $10.4 million.
MR. HOUSTON: Does that jibe though? The $87.2 million is just $87.2 million. It doesn’t matter if it’s one month or 10 months or 12 months - it’s revenue projection. The taxes shouldn’t fluctuate based on time period. It should just be a straight calculation, wouldn’t it?
MS. CASEY: Can you tell me where the $87.2 million is coming from?
MR. HOUSTON: I think that came from the business plan. That would be the Liquor Corporation business plan, I guess.
MS. CASEY: We have $86.5 million here. I want to clarify . . .
MR. HOUSTON: Okay . . .
MS. CASEY: No, I do want to clarify this. I am looking at it. There was a number change. The final number was $87.2 million. The anticipated delay, by two months, is what took us down to the $10.4. You are saying 15 per cent of the $87.2 million is $13 million.
MR. HOUSTON: I think what I’m hung up on is that the provincial portion of that should be 10 per cent. If it’s $87.2 million, then the provincial portion should be $8.7 million, but there’s $10.4 million booked.
MS. CASEY: Let’s try this. Take the 12 million grams, and they were calculating a sale price of that of $8.70 per gram, which would give you $104 million. Then if you take the 10 per cent tax on that $104 million, it gave you the $10.4 million. If there is anything more you need after, maybe we can find it.
MR. HOUSTON: That kind of works. The only reason that I’m kind of stuck on it is - so 12 million grams at $8.70, but the business plan doesn’t show that number. It only shows $87 million. That’s the disconnect in my mind. If the business plan shows $87 million, it’s hard to base the tax revenue collected off a higher number.
MS. CASEY: I’m not going to dispute the number that’s there. What I have just shared with you is how we at the Department of Finance and Treasury Board came up with the $10.4 million - based on the $12 million on an average selling price of $8.70 a gram for the $104 million and then took the 10 per cent off that.
MR. HOUSTON: Could it be possible that the Department of Finance and Treasury Board is anticipating higher cannabis sales than the Liquor Corporation has in their own business plan?
MS. CASEY: What I would say at this point is, we took their $12 million as a number from which we could try to estimate what that the revenue would be based on an average selling price. I have said this several times, the unknown is the consumption. We don’t know what those sales will be, but we needed to show some revenue in our budget projections. That was how we calculated the $10.4 million.
MR. HOUSTON: In terms of the revenue projections, the Minister of Justice has said that one in four Canadians use cannabis, with the average cannabis user consuming two grams per day. I’m just wondering if you could shed some light on the $12 million. In other words, how many Nova Scotians? I have heard it said in the House that Nova Scotian consumption is higher than the average in Canada. How many Nova Scotians did the projections suggest would consume cannabis and how many grams a day?
MS. CASEY: I didn’t hear what the Minister of Justice was quoting, but we have some numbers from Health Canada. The estimated number of cannabis participants in Nova Scotia is 172,876 users. This came from the Health Canada survey, so it would be based on those numbers that there would have been the projection of potential users. Then if you’re looking at what the projected usage would be - again, kind of unknowns, but I would expect those are the numbers that the minister was using.
MR. HOUSTON: So 172,876 users in Nova Scotia. For purposes of projections, how many grams a day was it estimated that the average user would consume?
MS. CASEY: We don’t have the projected number of grams each of those users might use in a day. If the Minister of Justice had numbers - I think you mentioned two grams per day - I don’t have that number here.
MR. HOUSTON: Do you have the number of days? There was talk of July 1st, and then that kind of shifted. When the projections were done, they came up to 12 million grams. I’m assuming it was 172,000 users times X grams per day times Y number of days equals 12 million. There was probably some formula there, so I’m wondering if you have the number of days that they were forecasting.
MS. CASEY: When those projections were made, and the NSLC determined what they thought the quantity should be, that was still looking at a July 1st start date.
MR. HOUSTON: Has the ship sailed on July 1st, or is that still the targeted date for the feds?
MR. CASEY: We have not been given any official alternative start date. We have heard that it may be delayed, but we have not heard any other date from the federal government.
MR. HOUSTON: The department doesn’t have any reason to adjust the numbers as of today?
MS. CASEY: We would certainly want to have something more definite.
MR. HOUSTON: I was trying to understand the components of the formula to try and get some sense as to how it might stack up against some of the other numbers that were out there. One set of numbers says one in four Canadians two grams a day, and it seems like the Health Canada numbers are still one in four Canadians. If the department’s projections were for just one gram a day, or were for five grams a day - I was just kind of trying to do a reasonability test on that, but I don’t have the full picture on that.
I wonder if you have anything from the NSLC that says how much of the market they would anticipate capturing in the first year?
MS. CASEY: One of the challenges that we have and all provinces have is how we can capture some of that illegal market. Of course, that is the goal. We don’t know how many of those who are purchasing on the illegal market will move to a legal market when it’s legalized. We don’t know what that number will be, and we don’t expect that transition will happen quickly. We think it will be a moderate transition, but with so many unknowns we can’t predict that. What we have to do is make it available through a legal market and focus on quality and safety and those kinds of things that the NSLC and the government have identified as priorities, and see where the consumer goes.
MR. HOUSTON: I know the Auditor General signs off on the revenue estimates of the province for budget purposes, but the reason this is so significant for these discussions is that the revenue from cannabis is a large part of the surplus. If that moves - if it were to move down, it actually wouldn’t take much to flip this to not a balanced budget. By the same token, I guess it could move up, and it would be an even bigger surplus, but I don’t have clarity on that.
Did anybody look specifically at the cannabis estimates in light of the significant portion they are of the surplus?
MS. CASEY: First of all, we know and have stated that there will certainly be significant costs, in particular start-up costs. Those have not been identified. We’re working with municipalities and with law enforcement. There will be costs related to this. We and the NSLC are not looking for this to be anything but cost neutral, initially.
The costs are not in the budget because they were not identified, and the Auditor General would be aware of what we had as our revenues. We are very comfortable that the budget we have produced is balanced and will be able to continue to remain balanced, and that there is enough flexibility in that to allow us, if there are unforeseen costs, to be able to accommodate those.
MR. HOUSTON: There are specific revenue items in the budget for cannabis - $10.4 million plus another $10.4 million. That is clearly identifiable, but there are no clearly identifiable costs associated with the whole project, I guess.
The Premier has said there is enough fat in the budget to absorb the costs. That’s kind of how I’ve interpreted his responses to questions - there’s enough money in the budget to cover the costs. It’s difficult to accept that if we don’t have any understanding of what the cost will be.
Is it fair to say that, as we sit here today, we really don’t know what the cost will be, even on an order of magnitude?
MS. CASEY: I think it would be fair to say that if we knew the costs, and if they were clearly defined, they would have been in the budget. As I said, working with law enforcement, working with education, working with the NSLC, we recognize that there will be significant costs. Renovations alone will be a cost that the NSLC will be incurring. The NSLC has looked at their revenue and their expenses. They expect that that will break even. They are just now beginning to look at what those renovation costs will be, and as with any renovations, sometimes the initial projection is not the actuals at the end.
We do believe that we have the flexibility. We do believe that we will absolutely be able to maintain the balance and still cover the costs that may be incurred through the start-up. Some of those will be through law enforcement, some will be through the renovations, and some of those will be through education - public education and school education. If we had them, they would have been in the budget.
MR. HOUSTON: If the position is that it will be neutral to the province, and there are $20 million of revenue booked, clearly identifiable, then that suggests that there’s $20 million of costs somewhere in the budget. The most logical places that would come from would be Health and Wellness, Education, and Justice. Would it be the Department of Finance and Treasury Board’s position that there’s $20 million extra in the budget of Health and Wellness, Education, or Justice?
MS. CASEY: What we would be looking at is working with Justice. As you know, Justice have the lead on it, and they would be working with the municipalities and with law enforcement. They would be identifying what those costs are. If there are costs that have to be covered, and there will be - as I said, the NSLC is looking to be cost-neutral with the new renovations costs they have and the revenue they would generate.
We respect that position that they have shared. We know that as the other departments incur costs, they’ll be looking at their own departmental budget and whether those costs can be absorbed within their budget. But that would be an individual department responsibility, whether that’s Justice, whether that’s Education, whether that’s Health and Wellness, it would be from within their departments.
MR. HOUSTON: I wonder if they know that. I wonder if, in preparing their budget, they had a mandate to leave some fat for possible cannabis-related items.
MS. CASEY: I would say that those three departments have been meeting regularly as we work through the Cannabis Control Act, working closely with the minister and the Department of Justice. Education and Early Childhood Development, and Health and Wellness have been there, as well as the Department of Finance and Treasury Board. They would be well aware that there will be costs incurred during this budget year and that they would be looking at their own budget once they know what those costs are.
MR. HOUSTON: How many strains of THC levels will be available at the Liquor Corporation?
MS. CASEY: The NSLC, as you know, will be working with the vendors that are providing the product. We are out in the field now - NSLC is. Once they hear back from the vendors, that will determine what the vendors are able to provide, how many strains there would be. But the response back is within a couple of weeks. That would be more definitive then.
MR. HOUSTON: Minister, I regret to inform you I’m going to pass the rest of time to my colleague from Inverness. Thank you.
MR. CHAIRMAN: Thank you, Mr. Houston. I will now recognize Mr. MacMaster for the PC caucus. You have about 24 minutes.
MR. ALLAN MACMASTER: Minister and staff, it’s nice to see you here. I will carry on with some of the questions my colleague was asking. I have some questions prepared here.
I did have a question related to the URB. I don’t know if you have staff here with you tonight with respect to that. Minister, is it all right if I ask you a question about that? I can even keep it kind of broad if you like. I’ll let you let me know if it’s possible to ask you a question related to the URB.
MS. CASEY: It’s quite appropriate for you to ask a question about the URB.
MR. MACMASTER: Okay. This was a local issue, but I thought it shines a light on something that you may be interested in as minister. I know we look to the URB as the entity that protects Nova Scotians when there are decisions being made specifically around power rates and decisions Nova Scotia Power makes.
If you drive into the Strait area and come to the causeway, you’ll see these new towers that they have put up. I’ll give you a little background on this. I had heard that they were going to be putting up a new tower. For years the towers that were there had these flashing white strobe lights - very unsettling for people who live in the area - but nothing was done about it. It was always said that these are the Transport Canada regulations, and that, for the safety of air traffic, and there’s an airport very close by, they had to keep those flashing strobe lights.
Somebody had contacted me and said, why don’t they just bury the lines across the Strait? I thought, maybe now is a good time to ask. They’re burying a line between Newfoundland and Cape Breton Island. I thought, maybe they could use some of the expertise there to bury the line across the Strait. It would solve the annoyance of the flashing lights for local residents. It would make the entrance to Cape Breton Island much nicer. I think the towers are ugly.
I think it’s probably too late now, but Destination Cape Breton had written a letter of support to bury the lines. I had written letters to the government and called on the government publicly, when I wasn’t really getting any traction with it, to bury them. I thought it’s something that should at least be looked at. The responses I received from the Minister of Environment - it was Minister Samson and Minister Miller at the time - basically said no, there’s nothing we can do. Nova Scotia Power said, there’s nothing we can do. Go ask Transport Canada to change the rules for the flashing lights.
I guess in desperation I decided, why don’t I put out a press release? I did and I suggested burying the lines - at least look at it because there are all kinds of benefits to doing that. I contacted the URB. I said, have you considered? Anyway, the response that came back from Nova Scotia Power was that it would cost four times as much, and I thought well okay, I guess I have lost my case for that.
I probed further and I asked, what is that based on? They referenced a consultant’s report, and the URB referenced a consultant’s report. The question that I’m bringing here is, who is actually watching these consultant’s reports to see how accurate they are? Nova Scotia Power puts forth a consultant’s report on a couple of towers in the Strait much like they do with just about anything else, I expect, that they spend money on. The URB is monitoring that and saying, okay, they have their consultant’s report that says it’s going to cost four times as much to bury the lines as it is to put new towers up.
How do we know that that’s actually the case? Wasn’t it interesting that when I put out the press release somebody contacted me and said, I don’t think those numbers are right. It wasn’t really pursued because there’s all kinds of economic interests at play here, including people who might gain work from Nova Scotia Power in the future.
I thought, isn’t that something? How many other situations are there like this? This one was important to me because it’s close to the area where I live, and I know what the residents have been putting up with. Coming to the Canso Causeway every time I come home, I see those towers there. Every time I drive by, I think, it’s too bad that those towers are up because it probably would have been cheaper to bury the cables, and it would make the area look much more beautiful. It is a beautiful area.
My question is, is this a concern to you? Who is watching to make sure that the URB is watching utilities like Nova Scotia Power to make sure that when they put forward information, it’s actually vetted and it actually makes sense? In this case, I have uncovered evidence that it was not four times more expensive to bury the cable. In fact, it might have been cheaper to bury the cable, and we would have had all the benefits for tourism and for local residents.
MS. CASEY: I’m not sure if I can ask you a question or not. When you spoke about the consultant’s report, was it the same consultant report for Nova Scotia Power and for the URB, the same consultant?
MR. MACMASTER: The consultant’s report used by Nova Scotia Power to justify putting up the towers was acknowledged by the URB as the proof that was needed to justify putting up the towers.
MS. CASEY: I was just asking if the URB would have their own independent consultant’s report. I think what you are saying is that they accepted the consultant report that Nova Scotia Power had done. I don’t know the legitimacy of the consultant or the report at all. If the question is, “Should the URB have gone out and done their own consulting, got their own report and then compared the two?” - it would have been two independent consultant’s reports. One may have validated the other or may not have.
As an individual, the URB is there to protect. If there’s a belief that the report was not valid, I think there’s an opportunity to ask for the review.
MR. MACMASTER: If a review of that matter was asked for, would that be something the URB would be asked to do? Would it need to be asked for by the minister?
MS. CASEY: I think anyone can go and make an application to the URB. We would not be making that on behalf of anyone, but certainly the process is there for others to make that application.
MR. MACMASTER: I did bring the information to the URB. I pretty much handed them the information that apparently the consultants that are often used to look at infrastructure projects like this have experience with the bigger picture of a project and what the costs would be, but they may not have the knowledge that some of the companies that would be actually working on this infrastructure would have.
In this case, they didn’t contact any companies that would have experience in burying cable. They had very weak evidence for their basis of suggesting that it would cost four times more to bury the cable. That was uncovered because I opened up my big mouth. I put out a press release about it, and it attracted attention. To me, that says there’s a weakness within the system to ensure that, in this case, ratepayers, people purchasing power from Nova Scotia Power, are getting the best deal they can. If we’re depending on the URB to vet these consultant reports and to make sure that information is accurate and decisions are accurate - and we’re talking about millions of dollars in infrastructure here - then I think there’s a weakness in the system.
I bring it to you as minister, to highlight it. I would certainly do anything I can do to fix the situation. What I did do was bring the evidence to the URB, and they were responsive. They would answer my calls and write back. I have emails and records of that. But nothing was really done. It was just sort of accepted as a done deal. This was before the towers went up though, and we are where we are.
I raise the question today because this could be happening in other situations, and it could be having an impact on power rates and on the pocketbooks of Nova Scotians. Is there anything else you could add?
I certainly did try to raise the issue with the URB, but I don’t think it really had a lot of impact. Perhaps the minister would have more impact than I. I’ll let you comment.
MS. CASEY: My question would be, was there a decision that could have been appealed?
MR. MACMASTER: I’m sorry, can you repeat that?
MS. CASEY: Was there a decision of the URB that could have been appealed? There is an appeal process to their decisions. I’m just asking this for information.
MR. MACMASTER: Yes, I can appreciate that. A formal appeal, probably there is.
MS. CASEY: Was that something when you were communicating with them?
MR. MACMASTER: I don’t recall. This was some time ago now, but I don’t recall them suggesting a formal appeal. I suppose there would be a way to do that.
I would think if I brought them the information, they would investigate it and treat it as something they should look at. I’m an elected person. Think about the average Nova Scotian who might have an interest in something like this, how little regard they would be given if they brought something like this. Probably nobody would believe them or pay much attention to them. I just thought that bringing it to the minister responsible might make it a little more relevant to them.
MS. CASEY: I certainly appreciate you bringing this to my attention, and we will follow up.
MR. MACMASTER: Okay. I would be happy to provide you with the correspondence and other information on that.
I think we have about 10 minutes here. I’ll return to some of the questions that have been prepared, which my colleague was going to ask. I think he was asking a lot of questions here on cannabis and the NSLC and their distribution of that product.
The question I have here is, how did the NSLC come to decide that only nine stores in six municipalities were going to sell cannabis?
MS. CASEY: When we went to the NSLC to be the distributor of cannabis, we were looking at the July 1st federal deadline. We recognized that there would have to be some renovations in order to provide spaces within their existing stores. They determined that, based on the design and square footage of some of their stores, there were eight stores plus Clyde Street that could be easily and fairly cheaply and quickly renovated to accommodate an area for the sale of cannabis.
That is how the eight stores came to be identified, and then the stand-alone at Clyde Street was a facility that they were able to begin to work on. It was kind of driven by the time frame and also by the cost to be ready in time for July 1st. That is where the nine sites came from.
MR. MACMASTER: Is there a plan to quickly expand the number of sites in the months following legalization?
MS. CASEY: What we will be constantly doing is monitoring the usage. We know that cannabis will be available to every Nova Scotian online. That is an option supplemented by nine sites across the province. We know that we will monitor the activity, the usage, and the demand. The demand, I think, will determine what expansion, if any, there is. Then NSLC will be identifying where those expansions might be. Again, it was to get ready for the anticipated July 1st date. Then to anticipate what the volume of sales will be and the number of consumers that can be accommodated - that will certainly determine how quickly and where any expansion would be.
MR. MACMASTER: I guess an example of something to look at that might require a similar footprint in the existing store - there were the bottle-your-own-wine stations. What was the footprint of the bottle-your-own-wine stations, on average, in NSLC stores?
MS. CASEY: You have identified the spaces that are being converted. I’m being told that they’re between 800 square feet and 1,200 square feet, that space. It’s my understanding that that was a space that could easily be converted and not interfere with a lot of consumers and their use of that space. It’s between 800 square feet and 1,200 square feet.
MR. MACMASTER: Would I be correct, based on what you have said there, in saying that some of these bottle-your-own-wine stations are going to be converted for selling cannabis? Is that what you mean or no?
MS. CASEY: That space which was used for bottle-your-own wine will be gone. That activity will be gone, and that space will be converted to cannabis sale. That was a decision that the Liquor Corporation made based on their experience and their history with the usage of that space. That option will be gone from those sites.
MR. MACMASTER: Someone has highlighted that there are bottle-your-own-wine stations in Truro and Port Hawkesbury and that they are not going to be converted to sell cannabis. Did the NSLC give a reason for that?
MS. CASEY: It’s my understanding that there are three stores that are not on that list of eight that do have the bottle-your-own-wine spaces - Truro and Port Hawkesbury, and one in Bayers Lake. Initially, those two were not included in the group of nine. If that’s a space that lends itself to that renovation in those eight that are being renovated, and there is a decision of NSLC to convert spaces in those other two stores, that could certainly be part of another expansion.
MR. MACMASTER: Are they going to be separate rooms, these converted spaces? Are they going to be separate rooms from the sale of alcohol?
MS. CASEY: Absolutely. One of the things that we have said all along is that safety and security are of the utmost importance. NSLC has a proven track record. They are well respected by Nova Scotians as a place that can sell a product in a safe environment.
The spaces will be designed so when you go into the store, you go into a kind of walk-in area. You’re not visible, when you are in there, to other people in the store. The product in there is not visible to anybody else in the store. You would only be able to see the product when you are in behind a glass wall, basically. The transactions would take place in that space. The product that you purchased would be put in a bag in that space, the bag would be sealed, and you would walk out with your product.
MR. MACMASTER: I’m laughing just thinking of - there are good reasons for that, so I shouldn’t laugh. It reminds me of the old liquor stores where they used to have the wickets. It was almost like you were coming into a bank, and you weren’t going to be able to rob the bank. You weren’t going to be able to grab a bottle off a shelf because there was a wicket guarding your progress.
I will ask a serious question, and it relates to this. Why was it decided to co-locate alcohol and cannabis in the same store? I know there were concerns raised about mixing the use of the two. Why was it decided that co-location was necessary?
MS. CASEY: I would go back to the whole notion of safety and security and a space that Nova Scotians have recognized as being able to deliver alcoholic products in a safe environment.
MR. CHAIRMAN: Order, please. The time for the PC caucus has expired.
For the NDP caucus, Mr. Wilson.
HON. DAVID WILSON: Thank you to the minister and staff. I think I will continue on with cannabis, just because your staff for the NSLC is still there, so we might jump around a little bit.
I know in an earlier question, the dollar figure of $8.70 per gram was indicated. I just wanted to clarify. Is that after the tax, after the $1.00 that will be split between the federal government and the province. Or is that $8.70, and then it will be taxed after that - just for clarification?
MS. CASEY: There are two taxes here. The $8.70 would include the excise tax, but then the HST would be on top of that.
MR. DAVID WILSON: All right. Is that set in stone?
MS. CASEY: No.
MR. DAVID WILSON: That may fluctuate once the price is determined. I honestly don’t have a clue - I could probably find out for some friends of mine. Is that comparable to what a gram of cannabis is now? I really don’t know.
MS. CASEY: On the black market?
MR. DAVID WILSON: Yes, on the illegal market now. The challenge will be to try to convert those 172,000 or so to getting their cannabis legally. I know the concern was, if the province out-prices it, then there’s really no hope to convert those people, and it will be a bigger challenge.
I’m just wondering if there has been any research done on the average street cost of a gram of cannabis.
MS. CASEY: I will share what I have been told. It’s my understanding that the price on the black market has gone down. It was around $10. We are hearing now that it is down around $8. I think it’s no secret that there will be a challenge to break into that illicit, illegal market.
We have to focus on safety and quality of product. Consumers will continue to make their own decisions as to where they purchase and when and how and from whom. Our responsibility is to make sure that we provide a quality product in a safe environment and encourage people to keep those two things in mind - safety and quality.
MR. DAVID WILSON: The anticipation of uptake, I guess, will determine the next step for the government down the road, if it is an increased number of stores. Has there been any talk of allowing what is seen now currently in the system with alcohol, agency stores - to do the same with cannabis? Has there been instruction that no, this is going to be - I would say more controlled when it’s not an agency store, with the training and stuff. I don’t think you can control everyone who works at the agency stores. Has there been any discussion of agency stores being able to piggyback on the sale of cannabis?
MS. CASEY: We have not given any consideration to agency stores. Again, it goes back to the whole business, as you mentioned, of training of staff, security, and safety. There is no plan to consider agency stores.
MR. DAVID WILSON: When it comes to staff - when I was recently in the liquor store in Lower Sackville, I asked the staff, what’s going on? At first, they were hesitant to give me any detail, but then I explained to them that I was the MLA and just inquiring about how the store is going to look. I asked about the requirement of the current staff to work in the environment of cannabis sales. I was told that right now they just asked who would be interested in working in that area.
There could be reasons why people might not want to sell cannabis. Yes, they sell alcohol. Should there be any fear from staff who don’t want to sell cannabis of losing their jobs, losing hours, maybe being put down to part time because they don’t actually want to sell cannabis to residents? Is there any discussion? Has there been any policy, any statement from your department to NSLC on who’s going to sell it in the stores?
MS. CASEY: We have certainly had those conversations with NSLC. They are very clear that they want to work with their employees. If somebody is opposed to selling the product, that conversation will be had between the employer and the employee, and they will not be forced to do that.
There will be new hires as the sale begins and training. Absolutely all employees who are handling the cannabis will have to be trained. NSLC will be working with their staff to determine who those people will be who will go through that training. There’s no indication that there will be any loss of job because somebody is uncomfortable selling the product.
MR. DAVID WILSON: Excellent. I hope that that’s delivered well to the current employees. Has there been anticipation of the number of increased staff required in the upcoming year? I went through the business plan and that, but I don’t know if I saw it or not. That was some time ago. I’m wondering if there is an estimate of what the increase in staff might be to sell the cannabis.
MS. CASEY: NSLC have looked at that, again, in anticipation. They’re looking at over 60 - 66 I think is the number - of new full-time equivalents that they believe they will need in order to be functional in those nine sites when it becomes legal.
MR. DAVID WILSON: Does the budget reflect that? I’m trying to think where we would see an increase in their overall budget. I know I had a deck somewhere, but I’m not sure of the NSLC’s budget. Is that increased cost going to be - is there a requirement to NSLC to find that within the current budget, or has there been a request for an increase in their budget due to the potential 66 new positions?
MS. CASEY: Yes, in NSLC’s budget they have included $4.9 million to accommodate the 66 new hires.
MR. DAVID WILSON: I would assume that would be for benefits and salaries. Okay.
What about cross-border purchasing of cannabis? I know over the years there’s been - I believe there’s a New Brunswick gentleman who is going to court because of him buying alcohol in Quebec. I haven’t heard anything about whether Nova Scotia residents are allowed to go to New Brunswick or any other province, purchase cannabis, and bring it across the border. On the legal side of things, are there going to be any restrictions? If so, has there been a view of a challenge similar to what we see from the New Brunswick resident who is currently taking the New Brunswick Government to court over that?
MS. CASEY: As you know, this is federal legislation, and there are federal regulations that we have to respect. We have asked for some clarity on that particular issue of going to another province to purchase. It will affect all provinces in Canada, so we’re asking for clarification from the federal government. We have not yet received that.
MR. DAVID WILSON: Is it the same stipulation around 75 per cent and 25 per cent for other jurisdictions? Are you aware of that? Or are there separate arrangements with the provinces? I see the alcohol costs. Of course, there’s cheaper beer in Quebec, and New Brunswick reduced their price a little bit. I don’t know if you’re aware. Is it the same kind of makeup for the other provinces around the taxes that will be added to the cost?
MS. CASEY: It is. All Ministers of Finance were together with the federal minister back in December. That’s where we were working hard to make sure that the province got their fair share.
As you know, originally the federal government was looking at a 50/50 split between the provinces and the federal government. We recognized and helped them understand that most of the costs were going to be borne by the provinces. Through negotiations, we were able to get a 75/25 split and also get a cap so that after the federal government reached $100 million, they would have to distribute the rest beyond that cap back to the provinces. That’s a two-year agreement that all provinces have with the federal government, and it will be reviewed at the end of the two years.
MR. DAVID WILSON: Are there any strings attached to the 75 per cent that we will get in return - meaning the federal government saying, 50 per cent of that has to go to enforcement or policing or awareness or anything like that? Or is it that there are no strings attached to 75 cents per dollar?
MS. CASEY: When we had those conversations and we were talking about the costs and the costs being borne by the province, we recognized, as did the federal government, that some of those could be costs of a municipality, depending on how policing is done in a province or a territory. They indicated that out of that 75 per cent, some of that would have to be shared with the municipalities. There was never any percentage attached to that because costs in each province for that enforcement would vary. We recognize, and the municipalities recognize, that some of those costs will be theirs, and some of the revenue to help support those costs will come out of that 75 per cent.
MR. DAVID WILSON: Is that something that the municipalities are going to have to negotiate with the province, what they anticipate their costs may be? I know that the big concern is around enforcing driving while intoxicated. I know with cannabis, it’s not as cut and dry as with alcohol. You could have someone who is a regular user of cannabis for medical reasons who has a higher level in their body than someone who might just do it recreationally. They may not use cannabis for a couple days, but that’s still in their body. It’s a big challenge.
I still don’t know how accurate - the challenges that our police force are going to have. There have been challenges in other jurisdictions, I think down in the U.S., on police forces and just doing the visual inspection of impairment and charging motorists. I’m not one to go on the Internet and seek out those stories, but from the ones I have seen and that people have shared with me, it can ruin someone’s life if they haven’t been using it.
Is that something the municipalities are going to be negotiating with the provincial government over the next year or so, what increased costs there may be in different areas of the province? I would assume smaller jurisdictions and smaller forces will be more challenged to make sure that their officers are trained. Is that something that will happen?
MS. CASEY: The enforcement part is the responsibility of the Justice Department. They would be working with the municipalities on any kind of arrangement for that. I think it’s safe to say that there is an acknowledgement that there will be some cost sharing there.
MR. DAVID WILSON: Will the Chair of the Treasury Board be willing to entertain an increase in budget for Justice next year, or will we have to wait and see?
MS. CASEY: Will probably have to wait and see and talk to the Minister of Justice.
MR. DAVID WILSON: It depends on how well they sell it before you go into asking the Treasury Board. I know how it works. I have been there a few times. You try to know the answer before you go to the meeting - if you’re going to get it or not.
Just a little bit on NSLC - looking at their business plan, I’m a bit concerned. There seems to be a reduction in beer sales anticipated for next year. I know it’s not much, but I don’t think that’s a trend we have seen over the years. I know the wine industry has increased year after year, but there’s a bit of a dip for beer sales. I thought we might see an increase of that with some of the uptake on beer-making in the province and that - just for clarification that I’m reading this right.
MS. CASEY: One of the things that NSLC did and has been doing to prepare for this is to look at what’s happened in other jurisdictions, in particular the Colorado experience. What they were seeing there was a decrease in beer sales with the legalization of marijuana. It would be based on that research and that information that they had, that they would have changed their . . .
MR. DAVID WILSON: It’s almost $2 million. I’m surprised the media is not here. That could be a good story in the paper tomorrow - anticipate beer sales to go down because of cannabis use.
MS. CASEY: If it’s there, I’ll know where it came from.
MR. DAVID WILSON: Then there’s an increase in wine sales, about $6 million if I’m calculating that right. Is that correct?
MS. CASEY: It’s my understanding - I don’t know if there maybe is a trend here or not - that the consumption of wine is up. I think that’s good news for local wine producers in Nova Scotia. That is a trend that the Liquor Corporation would have noted and included in their estimates.
MR. DAVID WILSON: I know in the framework of the legislation, the Cannabis Control Act that was introduced, there are definitely two parts to it - responsibility of the Minister of Justice and the responsibility of the Nova Scotia Liquor Corporation. It talked about the legislation adding promotion of social objectives for responsible consumption of cannabis to the objectives of the Nova Scotia Liquor Corporation. Are those objectives all concrete now and given to NSLC, or is that a work in progress? I’m wondering, if it is down, if we could have a copy of that.
MS. CASEY: This would parallel the social responsibility for selling alcohol. The NSLC are committed to that. Currently, as they are working to develop that framework, they have established some pillars on which that would be built. It’s my understanding that that will be completed within the next couple of months. Once that is completed, that would be something that the NSLC would want to . . .
MR. DAVID WILSON: Is that something that will be released to the public? We’re going to be getting into the sale of cannabis. These are the pillars of socially responsible consumption of cannabis. Nova Scotians should probably know exactly where those pillars came from, or what they are so that they can use that in hopefully educating their kids and stuff. It’s interesting, as a father of teenagers and young people, how you change your outlook on some of that stuff and make sure that information is out and that kids are educated on the use of cannabis and drugs as a whole.
I’m just wondering if that will be made public as a document: here are pillars, and this is what’s pushing our responsibility as a government now that we are selling cannabis.
MS. CASEY: I know the NSLC has certainly made public their social responsibilities with respect to the sale of alcohol, and this would parallel that. It would be something that the public would want to see and that NSLC should be proud of because they have taken on that social responsibility.
MR. DAVID WILSON: I’m kind of out in left field. I knew this at one point - in the budget, where do we find the $1 million for harness racing? I know that there have been some changes there.
MS. CASEY: Agriculture.
MR. DAVID WILSON: Agriculture. Good.
Just quickly, I want to go to an area I mentioned to the minister, I think in Question Period - the gaming strategy. I know we have a Crown Corporation, and their business plan was provided. I’m just wondering about a couple of the questions.
Of course, I have talked to you about the gaming strategy and how it was introduced in early 2005 and then updated in 2011. You had indicated that you are to continue on with the essence of that strategy. There was an incident recently - and you had said it was a mistake - with advertising for the Take 5 initiative and then an ad for Casino Nova Scotia right after it. I appreciate the minister stating that it was a mistake, that it shouldn’t have happened.
Do you think that it may be time to look at updating the gaming strategy, especially in the context that we are about to venture into the sale of cannabis and the whole side of addictions? I would think that maybe getting the gaming strategy off your plate with an update would allow for you and the government to focus maybe on some addictions stuff. I’m just wondering if there has been any talk about updating the gaming strategy, or is that something that will be down the road a few years?
MS. CASEY: If I could, I’ll just go back to the incident that you asked about and that we discussed in Question Period. I think it’s an indication that sometimes mistakes happen. Obviously, the sequence was wrong, and it was unfortunate. We contacted the network, and I believe you may have as well. I’m not trying to lay blame, but somehow something happened at the network that was not anything by design. It is certainly contradictory to what we want to do. We know that any messages to help those who may have problems with gambling or who may actually be addicted to gambling that we do have programs that will help them deal with their addiction.
The whole question of the gaming strategy, again I spoke to that. I think it was in 2005 when the strategy was first introduced, and then in 2011 it was updated. It’s a guide for any government to follow. We do follow that, but it may well be time for a revisit to that, an update to that. There are some things that have changed in the industry. We certainly are committed to doing that. The reference to five years, I think I mentioned, wasn’t that at the end of five years there is no strategy. It is very much a guide for us, and we will certainly commit to doing that review.
MR. DAVID WILSON: I’m just looking at the estimates and forecast and the sales. It would be on Page 9 of the Crown submission or the Provincial Lotteries and Casino Corporation in the Crown book. I can’t even think of what I’m thinking of. It’s a late day. The Crown Corporation business plan, sorry - I should look at the front of it and I’ll know what it is.
We did see last year an increase from estimate to forecast in casino revenue. If I’m not mistaken, we’re looking about - is that in millions? It was $69.8 million, and it was $85.9 million. Am I correct with that?
MS. CASEY: It was $69.8 million.
MR. DAVID WILSON: Right, so that was the estimate for 2017-18, but actual forecast was $85 million. Is that just marketing? Were there bigger events? Why would see such an increase there? Are there more ads on TV? Cheaper prime rib - all you can eat?
MS. CASEY: The member would know that there has been lots of talk about the relocation of the casino in the Cogswell Interchange here. That didn’t happen, which allowed the casino to continue with their revenue stream. It was also as a result of a positive outcome of some marketing.
MR. DAVID WILSON: I would assume maybe tourism also. I know tourism is up.
MS. CASEY: Our tourism numbers, as you know, were high. I would be glad to repeat that. The tourism numbers in the Province of Nova Scotia this past tourist season were high, and that is a destination for some tourists.
MR. DAVID WILSON: I know lottery tickets are pretty constant. It looks there may be a little of bit of a forecasted increase this year on the estimates.
I know that the major driver especially for the lotto tickets are - every time that Lotto 649 or Lotto Max hits over $50 million, for whatever reason, more people buy in, thinking that $25 million isn’t enough. I know that drives interest and increase in lottery tickets.
VLTs have been a hot issue in this Legislature, definitely since I’ve been here since 2003. It seems to go from year to year, and it’s not so much out there now, but I do see anticipated forecasts of an increase in that. I thought the trend over the last number of years, if I remember, was downward revenue for VLTs. I know there was a spike when the removal of the responsible gaming My-Play system happened. I thought that trend was going down again. Could you maybe give us a little bit on the last few years on the trend of revenues for VLTs?
MS. CASEY: The increase you mentioned is about 1 per cent. It’s not a huge increase, but it is there. To go back to My-Play, the revenue dropped for a period with My-Play, but it has rebounded again. It’s about the same as pre-My-Play. Overall, I think we are pretty consistent if you pull out those few years with the My-Play.
MR. DAVID WILSON: I remember when the strategy was updated in 2011 that if a business that currently has VLTs closes, those VLTs are retired. Does that continue to be the case?
MS. CASEY: That is correct. That is continued. As they have been retired, the total to date, there’s 155 fewer machines in the system.
MR. DAVID WILSON: Since 2011?
MS. CASEY: The expectation is that about 20 per year will be retired for those reasons.
MR. DAVID WILSON: I’m glad to hear that. I read something on social media, so I’m going to try to get more information. There’s something opening up in downtown Dartmouth - I don’t know, a restaurant or a bar - that will include VLTs. I know if there was an existing place there, and they are just remodelling, they can keep them. There wouldn’t be the ability to open a restaurant, bar, or establishment and ask for VLTs currently.
MS. CASEY: To go back, if a business closes, the VLTs are retired. If a business is purchased, they could stay in the establishment. There are no new establishments that are applying for or getting any VLTs. If it’s a purchase of something that’s existing, that’s fine, but nothing new.
MR. DAVID WILSON: Once I contact that individual, I’ll make sure they know that.
MS. CASEY: If I could, I would be interested in knowing the name.
MR. DAVID WILSON: Definitely, yes. Like I say, it’s not - someone sent me a message. I don’t know the details yet, but I’ll definitely reach out to you. It’s a significant number, 155 machines over about seven years, so I’m glad that that continues. That’s it for gaming stuff. I’m good for gaming things.
I want to go to federal transfers. I’m just wondering if - I know my colleagues have been asking individual departments, if they remember, about federal transfers to the province. In the financials provided to us, are there indications of the exact amount of federal transfers? I know there is. I’m wondering if you could guide me to where I could find a breakdown of that. Is it specific for individual departments? If it’s a health transfer, for example, does that show up under your department, or does it show up under Health and Wellness? I should know that answer, but I can’t recall.
MS. CASEY: Do you have the budget book with you?
MR. DAVID WILSON: Maybe not. I have everything else. You could just give me the page number.
MS. CASEY: Page 23 of that lists all of the revenues there.
MR. DAVID WILSON: Is it just federal transfer? Is it broken down to Justice, Health and Wellness, and other areas?
MS. CASEY: It’s broken down by federal and provincial revenues. Under federal, it’s broken down into equalization payments, Canada Health Transfer, and Canada Social Transfer. That detail is there.
MR. DAVID WILSON: Is there a requirement by departments to include that in their Budget Estimates and Supplementary Detail, or it just shows up in the Finance and Treasury Board?
MS. CASEY: It shows up on the Finance and Treasury Board table.
MR. DAVID WILSON: That recent offshore agreement that we received, just for recollection and to make sure I have the right numbers, what was the amount received so far from the offshore settlement?
MS. CASEY: If you would recall, back in the December forecast, we had been notified of $120 million at that time and then in February an additional $130 million. The total of that was $250 million from the arbitrator award.
MR. DAVID WILSON: Is that the end of the ruling, or is there a possibility for an increase? Is there a possibility for more funds to come out of that settlement?
MS. CASEY: It’s my understanding that they’re nearing the end of that but have not concluded it, so there’s always a possibility.
MR. DAVID WILSON: The ruling itself, is that something that’s public, the language of the ruling? If it’s not, is it something that can be public? Are you able to share that with us?
MS. CASEY: No, it’s not public. Understand that it was a difference of interpretation of how the cost for moving a product was going to be calculated. The arbitration was part of the whole process of winding that down. It wasn’t like an arbitrator was called in, but that was part of the process when there was that difference of interpretation. We’re not able to share the details.
MR. DAVID WILSON: Are you not able to share it yet, or you’re not able to share the details at all? Once you know that this is it, there’s no more money, or there’s another $100 million, will Nova Scotians be able to see that settlement and the language within it on how the amount Nova Scotia received was calculated?
MS. CASEY: It’s my understanding that that’s proprietary information that we would not be at liberty to have or disclose.
MR. DAVID WILSON: I respect that. I don’t know to what degree I’ll cross any lines. My understanding is that there was a settlement initially offered but denied. Is that something we can engage in?
MS. CASEY: You probably know more than I do about it.
MR. DAVID WILSON: All right, I think I’ll leave that at that. Right now, it’s $250 million, and potentially, there could be more money coming down. Has there been any talk of what you would use any additional funds for? Is that something you’ll wait on and see if that increases?
MS. CASEY: As I said, there is a possibility that there could be more. We don’t know if, when, or how much, but we do know that it will have to be shown in the 2017-18 fiscal year. If there is anything in addition, it would have to show under that fiscal year.
MR. DAVID WILSON: Liability to the province - I know liability management is within the department and other departments. I’m trying to find out, when the province is liable for actions of the government, for example, or settlements and all that, is that booked in Finance and Treasury Board in some way? I wonder if you could just explain where that might be right now.
MS. CASEY: Normally that would be with the particular department, rather than Finance and Treasury Board.
MR. DAVID WILSON: In more recent years, there has been more talk, especially around contracts and negotiations, of litigation from unions in that respect. There’s one for Doctors Nova Scotia. Would the Health and Wellness Department or Justice be the ones that would look at how they engage in litigation on that front?
I’m just trying to find a breakdown of what it costs in the province. Or is it costing yet, these pending litigations or ones that are moving along the judicial system? Is that found under your department, or is it individual departments that take those initiatives up and maybe second someone from Justice over to the Department of Health and Wellness to deal with the Doctors Nova Scotia issue that is going on now? There’s one for other areas of bargaining especially.
Is there anybody in your department who will monitor that? Are there people in your department who monitor that on an ongoing basis?
MS. CASEY: It’s my understanding that it is departmental, and there would be legal counsel coming from the Department of Justice on that.
MR. DAVID WILSON: I think I have asked this question in the House, and I refer to your budget speech and how budgets are prepared, anticipated, and forecast. It is definitely a slim surplus this year.
MS. CASEY: It’s a balanced budget.
MR. DAVID WILSON: It’s balanced with a slim surplus, if I have it correct, and you would appreciate that - I think it’s $29 million. We kind of joke - and I think you would appreciate this humour - that in the Department of Health and Wellness, for example, you could hiccup going down the hall and spend $29 million, so it could eliminate that. I didn’t realize the current minister’s listening to this.
When you were preparing the budget, and I know you gave a four-year fiscal plan, how do the unsettled contracts, collective agreements, play in that? Did you just take what you anticipant or want in settlements and then forecast the cost over the coming years?
MS. CASEY: As the member would know, there are unsettled contracts, but in building our budget, we would use the current wage pattern and include that in the preparation of our budget.
MR. DAVID WILSON: Has there been any discussion, or have you taken into account - I believe one of the arbitrator’s settlements recently followed the wage pattern but added another year to their contract. That would throw a loop in any forecast three or four years down the road. Did you anticipate that in the four-year fiscal plan, that an arbitration decision could add a year to a contract and increase the wages that aren’t aligned with the pattern that the government wants?
MS. CASEY: I think you’re referring to the two additional years of contract settlement, and that additional amount was included in our fiscal plan. We have a wage pattern that has been established, but as with any negotiations, it could be for a longer period of time. That one turned out to be for a longer period of time rather than the 3 per cent over four years, but that was included in our fiscal plan to cover that amount.
MR. DAVID WILSON: Are there any unsettled collective agreements that would fall under that? I don’t know if they can go to arbitration or not. Are there any other units that might see a similar fate, where there would be added years to an arbitration agreement, or ordinance?
MS. CASEY: It’s my understanding that there are some health contracts that are not yet settled. The detail of that would be through the Minister of Justice.
MR. DAVID WILSON: Usually I start with these questions, but I’ll end with them because I know we’re coming to an end.
I wonder if your department could provide us with an organizational chart of the department that would indicate vacancies too. What we have gotten in the past from many departments is, here’s the organizational chart, and here are the vacancies. I wonder if you could provide that.
MS. CASEY: We certainly can provide that.
MR. DAVID WILSON: One of the areas I know we spent some time on last year, when we were reviewing the budget in different departments, was the cost of the use of temp agencies. I’m wondering if you have the figure for your department if you use temp agencies. Was there any kind of budget for that?
MS. CASEY: I’m hearing that, no, we don’t.
MR. DAVID WILSON: You should talk to the other departments. In the long run, I think it’s more beneficial to make sure that that’s not on there.
What about overtime? I know it’s more of an issue in some of the other departments. Is there any kind of pressure on overtime within your department?
MS. CASEY: Relatively little, if any.
MR. DAVID WILSON: You should talk to some of the other departments about that.
MS. CASEY: Good department.
MR. DAVID WILSON: How about the use of external consultants last year? Do you have a cost on the use of external consultants and the budget for that?
MS. CASEY: We do sometimes use external consultants. We can get you that information if you’re interested in that.
MR. DAVID WILSON: Yes, if we could get the number and the cost, and I don’t know to what degree you might be able to provide the vendor who it was.
I asked some questions in the budget lockup around this area. I wonder if the minister could maybe explain the significant change that we have seen in the estimates for the pension valuation adjustment. It was more than four times, I believe, the estimate from 2017 to the forecast. I’m wondering, could you give us a little bit of detail on why we have seen such an increase in the pension valuation adjustment in what was provided this year?
MS. CASEY: The one factor that contributed most to that was the provision for the payout of the Long Service Award, that payout of 2017-18.
MR. DAVID WILSON: Do you know the total cost for that? I know I think there was an option given for the payout - if you could give us the figure of what was paid out and then what is owed when those individuals decide to retire. I believe they get it when they retire, but it’s just frozen at what it is currently.
MS. CASEY: The total payout for 2017-18 was $229,325,800.
MR. DAVID WILSON: What is owed? Is that something that’s booked? Am I misunderstanding? I thought there was an option that they could hold it off. I would assume that that needs to be booked somewhere. Is there a figure on that?
MS. CASEY: When we were doing our estimates, we were basing it on about an 85 per cent uptake on it.
MR. DAVID WILSON: Right. That would be - if I did my math, I could take 15 per cent maybe of that $229 million. Is what’s remaining what might be owed in the future? I’m not an accountant like my colleague here before was. He’s no longer here.
MS. CASEY: I’m not either, but that’s close enough.
MR. DAVID WILSON: I should have looked at my notes prior to asking some questions, but I have my own notes and prepared notes.
The percentage of government revenue that comes from equalization has been declining. Equalization payments have gone from 18 per cent in 2014 to 16.8 per cent in this year’s upcoming budget.
I’m wondering if the minister is concerned with that trend. Is there anything specific dealing with that? I don’t know if the health agreement that has been agreed to with the federal government is playing a role in this. I wonder if the minister has any concern on that trend. I would assume over a longer period of fiscal planning, if that trend continues, then there would be more challenges facing whoever is in government down the road.
MS. CASEY: I think if you look at the dollar value, it is increasing, but as a percentage of the total, it is decreasing.
MR. DAVID WILSON: Do you have the figures? I know they’re in here somewhere.
MS. CASEY: Page 23. I can give them to you. Starting in 2014-15, the equalization payments were $1.75 billion; in 2015-16, $1.77 billion; 2016-17, $1.73 billion; 2017-18, $1.79 billion; and 2018-19, $1.82 billion. It’s fairly consistent, but it is trending up.
MR. DAVID WILSON: Do you calculate how much of that has stipulations attached to it, so for direct, specific funding? I think of last year’s federal budget and even this year’s and some of the money towards home care and mental health, for example. It’s $1.82 billion in 2018-19. Are you able to give us a percentage or a dollar figure of how much of that is directed to specific programming that the province has required that have strings on it from the federal government?
MS. CASEY: The $1.8 billion is not targeted.
MR. DAVID WILSON: To find the targeted health money with the health transfers, would I have to find that under Health and Wellness? I know I lost my opportunity to question the minister on that one, but is that where we would find it?
MS. CASEY: That’s right. Some of that would be targeted within the delivered health care.
MR. DAVID WILSON: The $1.82 billion is yours to spend, as Chair of the Treasury Board.
MS. CASEY: It’s for government to consider.
MR. DAVID WILSON: I think I’m pretty close. (Interruption) Four minutes, okay. We can keep going.
MS. CASEY: I could read those numbers again.
MR. DAVID WILSON: If the member is ready, I’ll pass it over.
MR. CHAIRMAN: I recognize Mr. MacMaster for the PC caucus.
MR. ALLAN MACMASTER: I’m back again. I will carry on with some questions around cannabis just because it has been an item with a lot of public interest. I know it’s slated to bring forth some increased revenue for the province in this year’s budget.
We were just talking about co-location, and you were speaking about the reason it was decided that NSLC stores would sell cannabis alongside alcohol. You were just about to start discussing that, and you started off by saying that the NSLC was a trusted retailer of alcohol. I wonder if you might continue from there with that response.
MS. CASEY: When the federal government made the decision that they would introduce a bill to legalize marijuana, and the provincial governments would have the responsibility for that, we recognized that two guiding principles we would have would be safety and protection of youth and children, and providing it in an environment that would support that safety.
The Nova Scotia Liquor Corporation has been the retailer for alcoholic beverages, has a well-respected reputation, and does a great job of the retail business with alcohol. It seemed like a safe place to have that sale of cannabis. NSLC has taken on that responsibility with great respect for the safety of our youth and our children. It helps build confidence in us, as a government, that where that product is going to be made available will be a controlled environment with respect to age and that within the facility a space is dedicated to the sale of cannabis and to the display of cannabis. Those were certainly deciding factors that caused us to do the co-location.
There certainly is research to support whatever model the sale is going to be, whether it is a corporation, whether it is private, or whether it is co-located. We feel very confident that this is a safe place for our province to have that sale. Those were really determining factors. The next thing we did was to work with the Nova Scotia Liquor Corp. to see where those spaces might be. Recognizing that we had a July 1st date ahead of us at that time, we wanted to be sure that we were ready, if that date was realized, to have it available. Using existing facilities that NSLC had certainly helped us there.
The other thing we have said is that we can’t anticipate what the consumption will be or how many people will turn to a safe environment for purchase. We are trying to control the costs to be ready for that. Some other provinces have spent millions of dollars in bricks and mortar to provide a space. That was not our choice. Our choice was to use some existing space, to be modest with our costs for renovations and setup, and to use that as our space. All those things came together, but it was predominantly driven by a safe, secure environment.
MR. MACMASTER: Keeping in line with this topic we’re talking about, how will they be packaging marijuana in the NSLC stores? I know it’s going to be kept out of sight unless you go into the room where you can buy it. How is it going to be packaged?
MS. CASEY: If we go back to the federal government, Health Canada will have very strict regulations that all provinces must follow. The packaging will be driven by the Health Canada regulations, so all provinces will have to respect that. As I said here earlier, once the purchase is made, the product will be put in a sealed bag and taken off the premises in that way. The actual packaging will be as per federal regulations, Health Canada regulations.
MR. MACMASTER: As a point of clarification on that, has Health Canada actually made those regulations yet?
MS. CASEY: Health Canada has issued those guidelines. The Nova Scotia Liquor Corp. would have received those because they are one of the vendors here. Those guidelines are available from Health Canada. We could get you a copy if you’re interested.
MR. MACMASTER: That would be nice if you could. That would be good. I would be interested in that.
What about employees of the NSLC? What kind of training are they going to be provided? Will that be something that’s happening soon?
MS. CASEY: It’s my understanding that all staff who work at NSLC will have to go through some basic training, but that doesn’t mean that all staff will be working with the product. As I said earlier to one of the other members, if there are employees of NSLC who, for whatever reason, do not wish to be part of the handling or the sale of the product, they will not have to do that.
There will be 66 new staff hired across the province through the NSLC sites that will be distributing the product, and there will be more intense training for those who will be dealing specifically with the product. There will have to be an education for all of them as to the product and the THC content, the effects of the product, and that kind of specific training for those who are actually handling the product. All employees of NSLC would have to go through a asic training, but not all would have to deal with the product.
MR. MACMASTER: I know the government has talked about doing marketing - I probably shouldn’t say marketing - public education about issues of safety around marijuana use. For instance, will there be some kind of public education in store to encourage people not to use both marijuana and alcohol at the same time?
MS. CASEY: First of all, the education component of it and all aspects other than taxation fall under Justice. The NSLC, under their social responsibility guidelines, will be making sure that the required age for purchase and use, the THC content - all of that information will be made available so that the general public are well informed, if they’re not already. They will be well informed before they make a decision to make a purchase.
Some of the hazards, some of the risks, some of those concerns will also be made available. A new user gets all of that information, and that’s part of the education component so that people are making informed decisions when they make that purchase.
MR. MACMASTER: Will the NSLC be changing its name to reflect this new product line?
MS. CASEY: The NSLC will not be changing its name.
MR. MACMASTER: It will not be?
MS. CASEY: It will not be changing its name.
MR. MACMASTER: Will there be some kind of new signage outside the stores to indicate that the store is selling marijuana?
MS. CASEY: If I could go inside first, as you know, when you go in an NSLC store now, you see a header that says wine, spirits, beer, whatever. Cannabis will be identified as one of those headers in the store. People who want to buy wine will know what aisle to go to. If you want to buy cannabis, you’ll know what area of the store to go to.
With respect to outside signage, the Clyde Street store, which is stand-alone, will have it. It’s my understanding that the other eight stores will have some signage outside to say that they are a distributor of cannabis.
MR. MACMASTER: What per cent of sales are expected to come from online sales through the NSLC? How will those sales take place? How will product be delivered?
MS. CASEY: The product will be delivered by Canada Post. An estimate on the percentage of online is 50-50.
MR. MACMASTER: So, 50 per cent will be online sales?
MS. CASEY: That’s the projection.
MR. MACMASTER: Okay.
MS. CASEY: That would be based on some of the research in Colorado and other places where they have experienced this going from illegal to legal.
MR. MACMASTER: Is there concern that other retailers may offer some kind of service where they would provide shipment to your door? Is that something that the government has considered?
MS. CASEY: At this point, we’re looking at Canada Post to be the delivery method.
MR. MACMASTER: What I’m thinking about is, could somebody else use Canada Post to deliver product? Are there protections in place for that?
MS. CASEY: At this point, there is no other authorized dealer or seller in Nova Scotia except NSLC. Retailer is probably a better word.
MR. MACMASTER: I respect that. Knowing that there is now going to be marijuana shipped through Canada Post, does this open the door for non-licensed or non-eligible sellers of black market product from shipping through Canada Post to their end user?
MS. CASEY: I’m not sure how you can stop somebody from sending something through Canada Post. It’s always a risk, and there are delivery firms across the province that already deliver things to your door. I guess the integrity of the delivery company would be something we would rely on.
MR. MACMASTER: It’s probably a better question for Canada Post. Today if somebody shipped marijuana, I guess it would be considered an illegal substance being shipped through Canada Post. Has Canada Post been asked about that?
I guess once it’s legalized, nothing changes, and somebody can still illegally ship marijuana through Canada Post. Knowing that 50 per cent of the sales in the province will be going through Canada Post, will Canada Post make any effort to stop illegal trade of illegal drugs, or in this case in the future, illegal trade of what will become a legal drug?
MS. CASEY: I can’t speak for what Canada Post does. If it is an illegal activity, then it would be something enforced through the law.
MR. MACMASTER: If people can buy marijuana online through the NSLC and get it shipped by Canada Post, if they can get a better deal on the black market and have it shipped by Canada Post, is there a fear that, once that becomes maybe a more normalized practice, shipments of illegal cannabis through Canada Post will cannibalize the market share the government is trying to maintain?
MS. CASEY: There’s always a risk of illegal activity. Right now, all cannabis sale in the province and in the country is illegal, and we know there is activity. I think we would be naive to believe that once this becomes legalized, all illegal activity will cease. We’re not that naive.
What we do want to do, though, is provide an opportunity for those who want to go the legal route, respect the law, and purchase a quality product. They will have that opportunity. No one is ever suggesting we will be able to curb the illegal market, but we hope we can eat into that a bit and, as I said, give Nova Scotians an opportunity to make that purchase of a quality product in a safe environment.
MR. MACMASTER: If it’s 50 per cent of revenues, which I suppose, based on the $20 million estimate in the budget, could be up to $10 million, it could be a significant risk. I guess the risk is there now. Has the government considered working with Canada Post to prevent illegal shipments of marijuana while encouraging safe passage for the legal shipments of marijuana that are going through Canada Post’s hands?
MS. CASEY: I think the important role we have - and again this would be through Justice - is public education so that Nova Scotians are aware of the product, aware of the harms and risks with the product, and aware of where they can purchase it legally and how it is transported legally. That whole education component is huge. Schools will play an important role here. Think back to the success that we have had with smoking cessation and keeping cigarettes out of the hands of children and young people and talking about the risks to their health. We have been successful in education.
I think we have that next challenge ahead of us. There will be many parts of that that will have to come together, but in the long run it’s an attempt - whether that includes more enforcement, more working with whoever is delivering the product, in this case Canada Post, all of that enforcement will be critical as we try to do this safely.
MR. MACMASTER: How will the NSLC determine if somebody is of legal age to purchase marijuana through an online sale and receive shipment?
MS. CASEY: When purchasers go online, there will be a pop-up for them to declare that they are over 19. That website will be the portal into an online order. Canada Post will have to verify the ID when they deliver the product. There will be a link between the website order and the ID that Canada Post will require when they deliver the product.
MR. MACMASTER: Will Canada Post be given training to do that? Secondly, what would be the consequences for a Canada Post employee if they make delivery to somebody who is not actually of age?
MS. CASEY: I would say the same level of confidence that we have in NSLC, we currently have with Canada Post. They are now currently delivering the medical marijuana, and certain guidelines and restrictions as to what they do on delivery would be the same. They have that practice now, delivering medical marijuana. Those same practices would apply with recreational marijuana.
MR. MACMASTER: Will all the cannabis be warehoused at one facility, say at the facility in Bayers Lake?
MS. CASEY: That is our plan.
MR. MACMASTER: Will there be any additional security requirements needed for that?
MS. CASEY: The storage of cannabis will be in a secure place. It will be separate from the storage of alcohol, but there will be security at the site.
MR. MACMASTER: Will there be any cost associated with that?
MS. CASEY: There will be. That will be one of the costs. Again, when we’re looking to balance revenue and expenses, there will be a lot of expenses. The security of that building will be an expense - additional fencing, cameras, and those kinds of security items. There will be a cost to that.
MR. MACMASTER: Where will those costs show up in the budget? I know there’s talk about $10 million in revenue, roughly, from an excise tax and another $10 million in HST. Are the costs showing up on a line item in the budget?
MS. CASEY: Those costs will show up in the NSLC’s business plan.
MR. MACMASTER: Would I be correct in saying that the $10 million that was referenced in this budget is net of costs? In other words, that $10 million will be coming into the government from the NSLC from these sales, and that is actual profit after those costs have been accounted for.
MS. CASEY: No, it would not be profit. We had to project some revenue. We used the numbers that the NSLC had for what they felt they would have to have as a quantity to be ready for July 1st. That would be revenue, that would not be profit. Again, we don’t show any expenses to charge against that revenue because those have not been clearly defined. We had to show it as a revenue. We would have shown the costs if we had a list of costs. NSLC are telling us that they believe those will net out to zero, but we won’t know that until we have a more complete list of those costs.
MR. MACMASTER: Just for clarification, we don’t know the costs at this point. Does that mean they haven’t been taken into account with respect to the revenues that are going to be brought in? We know there are going to be revenues brought in, and we know there are going to be costs. We hear in the budget there is going to be $10 million in excise tax and $10 million in HST. Presumably, there are going to be costs unless those costs are subtracted before we come up with the $10 million excise tax figure.
MS. CASEY: With respect to the NSLC, they expect their revenue and their expenses will net out. The revenues that you see in the budget are tax revenues that we expect to get based on that 12 million grams. Out of our revenues, we will have to bear the cost for some of the enforcement, some of the other education components, implementation, and so on.
MR. MACMASTER: I think I may understand now. There is no margin of profit going to be made on the marijuana. Only the excise tax will be the revenue.
MS. CASEY: That’s true of the numbers that you saw in our budget, the $10.4 million and the $10.4 million.
MR. MACMASTER: I should know this, but I guess that’s a little bit different than on the sale of alcohol. On alcohol, I know there are different margins, depending on whether you’re purchasing wine or craft beer or maybe one of the more traditional Nova Scotian brands of beer like Oland’s, for instance. There are different margins depending on the type of product you’re buying. Can you offer a comparison just so I can have a better understanding of how profit is generated on alcohol versus - as I understand it, the profit now on marijuana is really only going to be on the excise tax?
MS. CASEY: There is a significant difference in the margins for alcohol. We’re looking at about 54 per cent on the alcohol. There are expenses and profit that come out of that.
With cannabis, we are looking at about 14 per cent. NSLC are suggesting that that 14 per cent will allow them to cover the costs. If we want to be competitive with the illegal market, we can’t be looking at a large profit margin. If we want to take some of that illegal market into the legal market, we have to be competitive with our price. It’s a difference of about 40 per cent: 14 per cent for cannabis and 54 per cent for alcohol, the markup.
MR. MACMASTER: Back to the online sales, are the costs to ship the product by Canada Post solely borne by the purchaser?
MS. CASEY: Yes, it is.
MR. MACMASTER: What about edibles? I guess it’s not projected for this budget year, but has there been discussion around future revenues associated with edibles?
MS. CASEY: We have not even looked at that. We anticipate that that will happen, but we’re working hard to get the first phase of this ready for distribution.
MR. MACMASTER: I guess the price for cannabis purchased online or in-store is the same price?
MS. CASEY: Yes.
MR. MACMASTER: I think I’ll leave you alone on cannabis now. We have covered a lot of ground there.
Mr. Chairman, just to confirm, how much time is remaining?
MR. CHAIRMAN: You have until 20:50, which would be 8:50 p.m. It is now 8:22 p.m., so 28 minutes.
MR. MACMASTER: I know one of the other significant items in the budget was related to the harmonization of the securities commissions throughout the country. I believe it was going to bring a windfall of about $70 million. Minister, can you outline some detail of that revenue - what is coming, what is the source of that revenue, and when can it be expected?
MS. CASEY: Currently, as members of the Nova Scotia Securities Commission, we do get about $17 million annually. We know that back in the days of Minister Flaherty, there was an attempt and an interest in having all the provinces join the national regulator. A number of provinces have already joined, so they no longer get that $17 million a year. I think maybe that was back in 2004 that that started.
We have made the decision that we believe it’s time for Nova Scotia to join the other provinces. There certainly is an opportunity to harmonize standards and regulations across the country. We will be forgoing that $17 million annually and will be taking $77 million one time. From there on in, that $17 million annually is gone, but we believe it’s in the best interest of Nova Scotians to do that at this time. We know there will be a transition period.
One of the things that we looked at was employees of the commission during that transition. There will be no employees who lose their jobs because of that. They will just automatically transition over at the time when we join the regulator. All of that preliminary work has been done, and conversations have already started for that to happen during 2018.
MR. MACMASTER: To confirm, the $17 million would have been revenue the province would get every year. Would that be from licensing fees for investment advisers and from listing fees for Nova Scotia companies that would want to list on the stock exchange?
MS. CASEY: That’s right. That annual $17 million.
MR. MACMASTER: The $77 million is one-time compensation from the federal government as an incentive to join a national securities commission?
MS. CASEY: It would be, yes.
MR. MACMASTER: How did they determine the $77 million?
MS. CASEY: I think the way they calculated that in the agreement is, it would be for a period of five years that they would take an average. That translates into $77 million in the year in which we would join.
MR. MACMASTER: Is this going to happen for sure this year?
MS. CASEY: We have not signed an agreement, but we are certainly in conversation, negotiations, with them. There are a number of provinces that have already joined. I guess there would be a pattern that could be followed, and others have gone before us. We’re now in the queue for that, but it is our expectation, and that’s why we included that it would be during the 2018-19 budget year.
MR. MACMASTER: It’s considered a reasonable expectation that Nova Scotia could sign on and receive the compensation this year.
MS. CASEY: That is our plan.
MR. MACMASTER: In terms of value for this decision, is this going to result in lower fees for advisers who used to have to register in every province they had clients in?
MS. CASEY: The fees would be determined by the national regulator. The Capital Markets Regulatory Authority would be the board. We’re fortunate to have a Nova Scotian as chair of that board. Bill Black is chair of that board. We feel quite confident that this is in the best interest of Nova Scotians. The fees would be determined by the national regulator.
As I said, other provinces have joined and are pleased with their membership there. We’re anticipating that as well.
MR. MACMASTER: It’s interesting that, in Canada, we pay some of the highest mutual fund fees in the world. I would say that’s largely because we have given a lot of power to a few strong players in the market who I think will perhaps be trying to control things and may have an easier time of controlling things with one national regulator, as opposed to a bunch of provincial regulators.
I know this is something that many people have called for, this national regulator. I would flag that as something to keep an eye on. At the end of the day, the purpose of the regulator is to ensure that the advisers out there are operating in good faith and treating their clients properly and, of course, for companies that want to list on the exchange to do so and to be transparent about what they are doing.
There’s all kinds of tricks. The industry does attract people who like money and sometimes will do whatever it takes to get it. I would issue a caution that, even though we have a chair who is from Nova Scotia, that person did belong to one of the main players in the industry. I can think of at least one example, and that is defined contribution pension plans. That market in Canada is completely dominated by four insurance companies, one of which he worked for.
People want to control where the money goes. I would say the fact that we pay some of the highest mutual fund fees in the world is proof that sometimes these people are not acting in our best interest. They are driven, just like everybody else is, by money. I would issue that as a word of caution, for what it’s worth. I hope that this national regulator will end up serving the interests of the public because I’m sure that is the interest of this government, but they are going to have to be watched.
I will leave that item and move to another topic here, the provincial lottery corporation. There were reports in the last year that the province was in a dispute with the Canada Revenue Agency regarding the HST on First Nations gaming. Can you provide an update on this dispute and how it might impact the revenues of the province this year?
MS. CASEY: That matter is currently before the courts, so I would be unable to comment on it.
MR. MACMASTER: I respect that. Maybe this is not something you can say, but is there an estimate of the amount, the value, that’s at stake?
MS. CASEY: I can give you an approximate number here. It’s about five years or so, and we have been paying about $7 million per year, so $40 million or $50 million, over the five years. It works out to about $7 million a year since 2011-12.
MR. MACMASTER: Since 2011, okay. It could be up to seven years at about $7 million per year, roughly.
MS. CASEY: Yes, about $50 million or $55 million.
MR. MACMASTER: The Halifax Casino revenue is budgeted. I think last year it actually came in about $10 million more than expected. What was the source of that increase?
MS. CASEY: There were a couple of things. There was a projected decline in revenue with the anticipated move of the casino with the Cogswell Interchange plan. That didn’t materialize, so the projections were lower than the actuals. The other thing, too, is some good marketing and a bit of cosmetic work at the casino. All three of those really came together to be reflected in the revenue increase.
MR. MACMASTER: Were the projections actually made lower because of concern about the Cogswell Interchange project and when that might start?
MS. CASEY: I think there were concerns that if that project started, it could interfere with access to the casino - traffic and all those complications from construction.
MR. MACMASTER: What about this year? Do those concerns remain, or have you taken that into account?
MS. CASEY: The same uncertainty on when the city will move forward with that is causing us to be cautious with our projections each year with that uncertainty. They’re still talking about doing it. We have to be cautious with our revenue projections, in the event that it does happen and does interfere with the customers who come to play.
MR. MACMASTER: So, the concern remains. I guess nobody knows what’s going to happen with that development or who might be attracted there. Maybe it would be something that would encourage more traffic to the casino, but it might be the opposite. Are there any other thoughts on that? Are there any efforts being made by the province to ensure that the interests of the casino are protected?
MS. CASEY: As I said earlier, one of the factors that can have a negative impact on them is, if and when construction starts, it can certainly make for congestion in trying to access the casino. We have to be cautious of that. We are in conversation with the city about our concerns with that. Anything that the city can do to help mitigate that would certainly be something that we would encourage them to do and want to work with them on. Those conversations are ongoing, but until they make the decision that they’re going to actually start the construction, the planning is in place. We hope that any issues that can be resolved prior to that are, but in anticipation of potential interruption, we have downplayed the revenue.
MR. MACMASTER: Is there consideration being given to moving the casino?
MS. CASEY: Not at this time.
MR. MACMASTER: I’m going to move back to the NSLC. I’m sorry I didn’t ask these questions earlier. I believe there is still a trade dispute around local wine that the province is currently a part of. Is that something you can offer some comment on?
MS. CASEY: Is that the international challenge, the Australian one?
MR. MACMASTER: Yes.
MS. CASEY: We know that there is a concern that has been raised. We had a representative from our department actually attend the World Trade Organization in Geneva a couple of months ago to represent us there. Canada is certainly working on our behalf in those conversations, those discussions, but there has been no final decision or outcome of that at this point. We await and will respect whatever that decision is.
MR. MACMASTER: Okay. Projected sales for beverage alcohol, as I understand in this budget, are largely flat. Can you offer some background on why that is?
MS. CASEY: Sometimes when you have a very good year, the next year it’s pretty hard to match that. We are on the heels of a very good year. However, I have just learned that holidays and when they fall in the fiscal year can make a big difference. Depending on when Easter is, you might have two Easters in one fiscal year. Apparently, there are lots of purchases made during those holiday periods.
MR. MACMASTER: In this past year, were there two Easters? I guess it was just coming at the tail end. I’ll let the minister comment.
MS. CASEY: Okay. The Easter holiday, Good Friday was the 29th or 30th of March. People would have made their purchases during the past fiscal year in preparation for the Easter holiday, which was Friday, Saturday, Sunday, and Monday, taking us into the next fiscal year. Does that help?
MR. MACMASTER: Surely, they weren’t doing that over Easter weekend?
MS. CASEY: No comment.
MR. MACMASTER: I still have about five minutes. Then I’m going to turn it back over here, and I may come up with a couple more after that.
Since I have five minutes, I might as well continue what I was saying before about the national securities commission. I referenced the defined contribution pension plan. Across the country, it is dominated by four insurance companies. A number of years ago, I was looking at ways that those plans could be improved. A lot of people who have defined benefit plans don’t have to worry too much about their pensions, unless, of course, something happens to the company they are with or if, for some reason, the plan is underfunded and the company goes bankrupt. We have seen that in a few cases. I think of the NewPage pension plan in Port Hawkesbury, Point Tupper, as a prime example.
In the case of defined contribution plans, the owner of the plan - the person who is paying into it - has a lot more responsibility. You have four of the largest insurance companies in the country controlling that market. They like to offer a very low-cost option to those people, but they don’t want anybody else interfering with their business.
I know in the U.S., they allowed for investment advice, and they called it Safe Harbor. I know that Mr. Black was very much against that coming to Canada, and the pension regulator here agreed with him. I don’t think they saw the potential value in giving people advice. People who are saving in a defined contribution plan, a lot of the decisions around their saving actually make a big difference in their final outcomes.
They can’t depend on a defined benefit plan to make the returns they need to get a defined pension later in the future. I thought it was interesting that there was no support to allow Safe Harbor into Canada and to allow advice to be given to people who have defined contribution plans. It’s really an example of the way that the four largest insurance companies are controlling that market and keeping competition out of it.
At the time, I was working for a firm in the city here, and I thought, gee, wouldn’t that be a great market? You could help those people and give them advice. Instead of using the mutual funds that the insurance companies were offering with their rather large fees, you could offer them exchange-traded funds with much lower fees and then add on a fee for advice. Those people, I think, would have been much better served. It’s an example of how - and this is why I raised the national securities regulator as a potential concern. There are people who are trying to control this behind the scenes, and just because we have a Nova Scotian there, we shouldn’t feel that he is necessarily protecting Nova Scotians’ interests. He may be protecting the interests of the firm that he probably still has a lot of shares in. I’ll leave that with you.
Mr. Chairman, I think my time is just about up. I just wanted to further explain why I wanted to make that point. If it is of some benefit, may it be so.
MS. CASEY: Thank you.
MR. CHAIRMAN: Thank you, Mr. MacMaster. I will now recognize the NDP caucus. Mr. Wilson, you have 54 minutes, sir.
HON. DAVID WILSON: I won’t be using most of that time. I just have a few wrap-up questions, and then I will hand off to either my colleague or colleagues across the way.
Sorry for jumping around. I know you have staff in the back, but after going through some of the questions, I thought, oh, I forgot to ask this one or that one.
Again, on cannabis and NSLC, one question I forgot to ask when I was talking about personnel is, will there be an increase in security? Have you discussed the possibility of increasing security bringing on a new product that is illegal - or is illegal up to whenever it isn’t? Has there been any discussion on the requirement or possible need for security at the liquor stores?
MS. CASEY: I did mention when we were talking about where the product would be warehoused - I’m not sure if you were here then or not - that there will be additional costs there. It will not be housed with the alcohol. It will be housed separately with security, fencing, cameras, and those kinds of things at that site. Also within the stores themselves and within the area that will be separated off for the sale of cannabis, there will be additional security cameras required. If there’s a need for other security outside the building, or even on the floor of the commission, there will be costs related to that.
MR. DAVID WILSON: For deliveries, for example, is it going to be delivered in the same manner as the liquor itself? Will it be a separate service or company that will deliver the cannabis to the stores?
MS. CASEY: Delivering it from the stores?
MR. DAVID WILSON: From wherever we get it to the liquor stores, to stock the stores and stuff.
MS. CASEY: There are two deliveries here. One is getting it to the store, which I think is what you are asking about now. It will be delivered by a delivery company that will be delivering the product, and it will be in a sealed tote during the transfer.
MR. DAVID WILSON: That decision on who hasn’t been determined yet. Has a request for proposals gone out?
MS. CASEY: It’s not yet determined.
If I could add, though, the other conversation we had was the delivery from online to the home. That will be done the same as we do for medical marijuana. That will be through Canada Post.
MR. DAVID WILSON: I know there was a question earlier around the cost. It’s going to be the same cost per gram but an additional cost for delivery, am I correct?
MS. CASEY: It will be a standard cost for delivery.
MR. DAVID WILSON: Has that been determined yet? Will it depend on where you live and how much distance from wherever we are getting it?
MS. CASEY: It will be one standard rate, regardless of where you live.
MR. DAVID WILSON: Was that determined by the federal government? Did the federal government say Canada Post is going to be the service provider here?
MS. CASEY: There are federal regulations that we have to follow, but the decision about the transport and delivery of the product is a decision that we have made here in Nova Scotia. As I said, we have opted with Canada Post because they currently do the medical marijuana and would have the training to do that.
MR. DAVID WILSON: If I recall, currently we won’t be able to get the product here until the growers - I know a couple growers have been approved, but they’re not to the point where, if sales are where they’re projected, that we are buying some of that product from outside the province.
I know the NSLC has three focused areas with liquor, local producers, preferential markups, and direct monetary support to industry and stuff. Is that going to be a similar focus down the road for local growers of cannabis so that we may see maybe all of that product grown and purchased here from local producers?
MS. CASEY: If I could go back, before a producer is ready to sell a product, there are two different stages of approval that they have to get from Health Canada. We have some producers in the province that have gotten past the first stage of that. We don’t have any yet that have that second, and that is determined by the quality of the product. They have to have a crop in order to test the quality before they can get that last stage of approval. We do not, as you say, have any in Nova Scotia that have gotten that second stage of approval. Our initial purchase will have to be from outside the province. We don’t have any choice but to go outside the province right now.
MR. DAVID WILSON: I would hope that down the road, when the production increases, and if the approval is there, we would support local producers here in the province.
We’ll move to an area of banking, specifically credit unions. I know in the summer of last year, there was some heightened awareness around credit unions across Canada which have been, under the federal government, federal rules, limited or threatened around the use of specific terms of banking.
It’s interesting - my wife works for a credit union. When I say it’s a bank, she gets mad at me. It’s not a bank. They continue to say they’re not a bank, and I agree with that, but they do banking stuff.
There was some push back from the federal government. I know myself, meeting with the local area credit union personnel who wrote the federal minister in September of last year, asking if those rules would be loosened up. If I’m not mistaken, the federal government, in their budget, has relaxed some of those rules for the upcoming year.
I know provincially, we regulate credit unions. Is there any role provincially? Have you had any discussions with the credit unions of our province? They play an important role in our economy, especially in rural Nova Scotia, especially some of the provincial programs that are offered, through the business incentives and business loans that they offer. What role do you and your department have in ensuring that the credit unions can continue to function and not be threatened because they might have banking on a piece of material that they’re trying to engage their owners with - that that doesn’t happen?
MS. CASEY: It did seem a little strange when that ruling came out. We met with some of the members of the credit union, and it was just around the time that that decision had been made. They expressed that concern, and we shared that with the federal government on their behalf. I think there were probably others that expressed concern about that, too, and the federal government did relax that and allow things to continue as they had always been.
MR. DAVID WILSON: Are you confident that they addressed the concerns of the credit unions in Nova Scotia around the use of some of that terminology?
MS. CASEY: It’s my understanding and my belief that they have, but if you’re hearing something else from your wife, let me know.
MR. DAVID WILSON: No, I haven’t. I did get a response from the minister, but it was months later. I was glad to see that. As I said, in our province, credit unions play an important role in our economy and a special role in Nova Scotia, and also provide services and programs for small business owners.
MS. CASEY: If I could just add to that, in meeting with them, there’s a great sense of pride in what they do and their commitment to rural Nova Scotia. Many of their branches are pretty large, so they certainly have an important place in the financial world.
MR. DAVID WILSON: Oh, definitely. As they profess, they’re different than a bank. They need to make sure that they continue to reflect where they came from and that ownership component. Even though I wrote the letter, I do see the other side of it and that they have to make sure they remember how they were created, who owns them, and how that impacts communities.
Just a bit on the economic risk - I know during the budget lockup event, some of the key economic risks were identified. I think you mentioned a few of them earlier in some of the exchange that could potentially change projections and forecasts. One is definitely the trade arrangements that we have, CETA and NAFTA, maybe more NAFTA than CETA right now. Who knows where that’s going to go? We all stay tuned to our Twitter feed to see if it’s going well or not, interestingly enough. Hopefully cooler heads will prevail, and there will be an agreement that won’t have a negative impact on Nova Scotia.
Do you have a figure, or is it just that those key economic risks are identified? Is there a financial component to this? I know there’s certain aspects of NAFTA that would have greater impact on Nova Scotia, I would assume mostly on exports. I’m wondering if you could give me a little bit on that.
MS. CASEY: One of the risks that was identified when we met and spoke with the panel of economists was NAFTA - of course, they were speaking from a national level. Specific to Nova Scotia, their assessment was that the impact of NAFTA would not be felt as severely or as harshly on Nova Scotia. However, we’re pretty small compared to some of the other provinces, so a negative impact would certainly hurt us.
One of the things that we have done is try to diversify our markets a bit. The Asian market is one that is growing for us. The U.S. is our biggest trading partner. I think diversifying is not a bad thing to do with the uncertainty of what’s going to happen. We know the importance of the dairy industry, the poultry industry, softwood lumber, and the tire industry. All those things that are big drivers in the province here could be really negatively hurt by some changes in NAFTA.
We’re monitoring it. We’re watching it closely. We can’t put a price tag on it because it’s so uncertain, and as you say, it depends on the Twitter feed of the day. I think diversifying and getting other markets is to our advantage. It’s great to have two markets, but if you have all your eggs in one basket, sometimes you pay a price. We’re kind of trying to expand that trade to places other than the U.S.
MR. DAVID WILSON: I would agree that’s the approach we should take. We can’t dismiss the sheer fact of how large our trading is with the U.S. No matter how much you diversify, that’s still going to be a huge component to it.
The risks for the economy, especially around the dairy industry, is there not more of a risk with CETA than there would be with NAFTA with cheese production and imports maybe having an effect on current sales of local dairy products?
MS. CASEY: I believe there have been some decisions around CETA that take away some of that initial risk that we were feeling. We’re not feeling as threatened by that at this point.
MR. DAVID WILSON: I’ll pass on my time. I appreciate the answers and the information. I know there were a couple of things you were going to get for me, but we’ll get that at a later date. Thank you.
MS. CASEY: We’re going to get you a copy of that so you can go to Page 23.
MR. DAVID WILSON: I forgot to go get it again.
MR. CHAIRMAN: Mr. MacMaster.
MR. ALLAN MACMASTER: I have come up with a few more questions just off the top of my head here.
I noticed, when I was looking at the budget at a glance, that this year it is projected to be a balanced budget, but there was about $100 million added to the net debt for the province. Can the minister explain what’s going on there?
MS. CASEY: One of the things that adds to the debt is when you have a deficit, and we have avoided that. I think the deficit in 2013 was around $600 million, and we have been able to bring that back to a balance. We are not contributing to the debt through a deficit.
However, we do often have an opportunity to take advantage of infrastructure money through the federal government. Most of those programs require cost sharing, so you go to your debt to borrow money to match the infrastructure dollars so that those projects can be completed, whether it’s twinning a highway, or it’s a hospital, or it’s a school, or whatever. Those kinds of infrastructure require capital dollars.
That’s where you have to make the decision. Do you make those investments that Nova Scotians want in that infrastructure? If you do, you have to have the matching dollars to put with it. That kind of borrowing would have increased that debt.
MR. MACMASTER: That makes me think about highways. I know there was mention recently of using P3 to build a highway. The justification was that it could be done much more quickly. Is that because the company that that project would be contracted to would take on that debt as opposed to the province and the province could then keep it off its books?
MS. CASEY: No. This debt would still be on our books. The P3, as you know, is an option. I think all governments have used P3 for some kind of construction. It quite often gets a project completed more quickly. I think we have examples of where P3 projects have been an asset to the province, whether it’s the Cobequid Pass or a school or the convention centre. I think P3 is an option, but going P3 does not keep it off our books.
MR. MACMASTER: I think that way back when schools were constructed in the province, it was given as the justification at the time that they could keep that expenditure off the books to balance the budget. That’s going way back to the late 1990s but not so in this case, I guess.
MS. CASEY: My understanding is that those are recorded and on our books.
MR. MACMASTER: I guess I’m remembering things as I’m talking here. I think it was ruled at a later point that it had to be brought on the books because it was, in fact, considered long-term debt for the province.
Why does the government say that they can get those highway projects done more quickly? It’s on the province’s books, and there’s no problem with incurring those costs - we want to build those highways. Is it because the company could more quickly do the engineering work for that project than we could in house through Transportation? Maybe this is a question better earmarked for Transportation, but I am curious from a Finance perspective. Is there any reason why the province would say we can get these highways built more quickly if we go P3?
MS. CASEY: When we look at any major project, we want to get it done as efficiently, as effectively, and as quickly as possible. We know that in some cases, the expertise to deliver or design and deliver doesn’t always exist within a government department. A private partner that does that - it’s not the first time they have built a twinned highway, or it’s not the first time they have built a QEII replacement and those kinds of things. I think all of that has to be considered. It’s the quality of the work, the speed of the work, and the cost that all come together to determine which is best for Nova Scotians.
I think we recognize that most communities want their project as quickly as possible, so you have to work it within your long-range budget, and sometimes that takes longer to deliver. All those factors come together, but it is an option. I think it’s important that the government explore all those options and then make a final decision, based on all those factors, about which is the best model to follow and which will deliver the product that we want in a timely fashion at a reasonable cost.
MR. MACMASTER: I am reminded of discussions when there was consultation on highway twinning. It was put out there that it took so long to twin the recent highway twinning projects.
I think of the one around Antigonish. They talk about how it took so long to complete those. At the time, they were positioning maybe going the P3 route and doing a bunch of them all at once. There was going to be some time advantage to doing it that way. It’s not clear to me if there really was an advantage to go through a P3 process to save time versus going through a typical government design-build contract to somebody to build it. Anyway, I don’t think I’m going to ask any more questions about that because I think I have what I need here.
One of the things that came up years ago in a Public Accounts Committee meeting was looking at P3 school construction, if it made sense to do it. One of the questions I asked at the time was, how do we know it was better for the province? It was admitted at the time that the Department of Education had no analysis to determine if it was more feasible to go P3 or to do in-house financing and design of those projects.
Recently, two of those schools were coming up for renewal - I think you were Minister of Education at the time - two schools in Inverness. I did a little analysis myself and I’ll share that with you some time. I don’t know how accurate it was, but I came out with a conclusion that one of the schools had about a 6 per cent profit margin for the company, and the other had about 18 per cent. That was kind of surprising, but they were different-sized schools and roughly the same age and different rates for them. I don’t know how the rates were determined, but I will share that with you some time. It is something that we’ll be asking questions about if there’s a decision to go P3 to ensure that Nova Scotians are getting good value for those decisions to build the highways that way.
The next question I have is on interest rates. Has the department any thoughts about the coming year about interest rates? I’m sure they have, and I’m sure they have built that into the budget projections for the year. Can you comment on interest rates over the coming year and what the department’s position is on interest rates? Are they going to go up slowly? Are they going to remain the same? I’ll let the minister comment.
MS. CASEY: We know that the interest rate did go up not too many months ago, so in our projections and in our planning, we have written in anticipated increases in interest rates. If that does happen, it’s accommodated in our budget.
MR. MACMASTER: Has the department gotten so specific that it would suggest there is another rate increase within this year by the Bank of Canada, which would have an impact on the provincial finances?
MS. CASEY: We can’t predict what the federal government will do, what the Bank of Canada will do. When the Ministers of Finance were meeting in December, one would have expected that we may see another increase.
MR. MACMASTER: But you’re not going to put a fine point on what it . . .
MS. CASEY: I don’t know what it’s going to be or when it’s going to be, but I think we’re wise to anticipate that there might be, and we have written that into the budget.
MR. MACMASTER: I understand that. For the purpose of the budget, was there a determination that it might go up another quarter per cent? I would presume that to make budget projections, you would need to base it upon something specific.
MS. CASEY: We have to rely on economists, what they’re reading and what they’re seeing. Based on what they have been suggesting could happen, we have written in 0.25 per cent.
MR. MACMASTER: You have written in a 0.25 per cent increase. I was right. I guess it’s too short a term because we’re only looking at this coming year’s budget, but is there any concern - and there’s probably not because you’re only looking at this year’s budget - about further rate increases and the impact on the consumer economy and spending in the province? A lot of people don’t realize that if the interest rates go up 1 per cent, they’re either going to be spending much more on their monthly or bi-weekly payments, or they’re going to be reducing their mortgage by a lot.
Is there any discussion of that at the Department of Finance and Treasury Board, the future for the province if interest rates continue to go up, and their impact on the provincial economy and provincial budgets in the future?
MS. CASEY: If you go back to what we heard around the table with respect to our assumptions, one of the risks that was identified by all the bankers who were there was the uncertainty about interest rates and that it is a risk. I think they recognized that we had written in some anticipated increased interest rates, which contributed to them believing that we were on a pretty solid foundation. We at the department always have to be cognizant of that, not only for what it could mean to our consumers, but what it means for us as a government. It’s certainly a risk that we pay close attention to. The challenge with it is that it’s one you can’t control. You have to be prepared for that.
MR. MACMASTER: I know for the province, when you’re borrowing money, you borrow it over long terms, you get good rates, and there are amounts maturing every year. There’s less risk for the province. The province can undergo downturns in the economy, weather them, and carry on.
Just on the bonds, as I recall, they usually mature in amounts of half a billion dollars, or $1 billion each year. Are there bonds maturing this year? Is the government going to market with new bonds? If so, what would their interest rates be, and what terms would the province be looking for?
MS. CASEY: One of the things that government has done in the past is being able to get some long-term borrowing with some really good rates. But they do mature, and we do have a bond maturing this year. We will be going to the market.
I guess that’s why we’re paying close attention to the interest rates. As you would on your own, if you can lock something into a long-term at a good rate, you take advantage of that. We did have that advantage. We would hope to get a good interest rate the next time.
MR. MACMASTER: Is there a projection this year, roughly what the rate would be for the province if it does go to market?
MS. CASEY: I don’t have the number for that.
MR. MACMASTER: The department doesn’t have any projection around that?
MS. CASEY: The department may have a projection, but I don’t think they’re going to make that public, because that’s a part of the borrowing process.
MR. MACMASTER: But it will be public once it’s put out to market?
MS. CASEY: That’s right.
MR. MACMASTER: So, it’s a secret until then?
MS. CASEY: It’s not shared until then.
MR. MACMASTER: It has become fashionable, I think, amongst politicians - instead of talking about debt, they’re now talking about debt-to-GDP ratio. I think it’s often used as a way for people to justify debt. It’s certainly a relevant ratio, but I think it’s often used by people who don’t really care about debt. They probably don’t understand any other financial ratios, but they seem to understand that one. Can the minister comment - if our economy does sputter in the short term or in the medium term, is there any risk to that debt-to-GDP ratio? To what extent would that risk be?
MS. CASEY: I know that I spoke about net debt to GDP a couple of times because it is an indicator. It is something that determines the fiscal health of the province.
We have recognized, and we have accepted, the challenge that came out from One Nova Scotia which was the 30 per cent by 2024. I have mentioned that I think it was 38.5 per cent in 2015, and we’re now down to 35.4 per cent, perhaps. Our projections show that that trend will continue and that we will achieve that. You can look back at where you were yesterday, but you really need to look at where you were a number of years in the past and project where you’re going. That’s the trend that’s important. We do use that as a measure, and I think it does indicate that we are in a healthy position.
When you’re spending more than you’re making, when you’re adding your deficits going to the debt, and when you don’t have consumer spending that’s going to help you - all those factors work against you. We have tried hard to manage those so that we can contribute to that balance between the two. It’s a path. Every percentage point counts on that trend. We believe that the debt management, investing to grow the economy, more people spending more money, and those kinds of things, contribute to us being able to keep that ratio going in the right direction.
MR. MACMASTER: Thank you, and I was not referring to you, Minister, when I was commenting about the politicians who like to use that ratio. I just notice that it has become very popular in the last few years around the country.
I realized this wasn’t part of this budget, but it did impact the end of this past fiscal year, and that is the offshore royalties windfall. Minister, could you explain how that offshore royalties windfall came into place and maybe a little bit around why it wasn’t expected and projected for in last year’s budget?
MS. CASEY: Certainly. One of the things we disclosed when we did our forecast update in December was that we had been notified that there was a $120 million award that was coming to the province which was part of the award. There was a recalculation, as you know. There was a difference of interpretation, I guess, in how the cost for the transport of the product was calculated. The recalculation translated into the additional $120 million in December. We were notified in February of an additional $130 million, so that was a total of $250 million. The arbitration was part of the whole process of the winding down. It wasn’t like an arbitrator was called in, but part of the process included arbitration. When there was that difference of interpretation, that’s when the arbitration process took place.
We believe that the calculation will soon be completed. We have not heard for sure that it has been. That leads us to believe that there may be additional revenue, but we don’t have any way to determine what that might be. If there is an additional amount that’s awarded, it will still have to be booked in the 2017-18 year, as the $120 million and the $130 million had to be. If that happens, it will have to be in 2017-18. We don’t know that. We believe that it’s winding down, and I guess we would be hopeful there’s another part of that award, but we don’t have any indication if there will be or what it will be.
MR. MACMASTER: So, you think there might even be an additional award.
MS. CASEY: We don’t believe that the calculation has been finalized yet. If it is finalized, once we know that, that will determine if there is anything in addition or if that has been concluded.
MR. MACMASTER: I shouldn’t ask you this question because it’s too complicated to be trying to answer here, but can you give a brief description of this? I know this is tied into equalization payments and some of the agreements that were signed over the years, going back into the 1980s, and how they were changed in later years. Can you give a brief explanation as to exactly what this $250 million ties back into? Is this part of the offshore accord? I’ll let the minister comment.
MS. CASEY: It’s my understanding that it is not part of the accord. It is part of the recalculation of the royalties for the offshore, but not part of the accord.
MR. MACMASTER: Would these royalties have been royalties dating back to the 1980s, or would they be more recent years, or is that known?
MS. CASEY: More recent.
MR. MACMASTER: Probably during the 2000s, from 2000 onward.
MS. CASEY: That would be 18 years ago. Is that recent?
MR. MACMASTER: They were the years when there was more coming in. I guess that’s what I was thinking - around the mid-2000s, I guess.
MS. CASEY: I think we saw that reflected at that time.
MR. MACMASTER: The good old years.
Mr. Chairman, I know we’re coming near the end. I want to ensure that there’s time to read the resolutions because I know it’s a bit longer than some of the other departments. Perhaps one of my other colleagues may have a brief question. I will end my questions there, and I would like to thank the minister and her staff for answering.
MR. CHAIRMAN: Thank you, Mr. MacMaster.
We have 10 minutes left in the evening. Mr. Wilson, I understand you may have a question or two. I would think, with the amount of resolutions that you have about five minutes.
MR. GORDON WILSON: I’ll be brief. Listening intently, I have no questions on cannabis, although I must tell you, my father was the assistant manager at a liquor store when I was just a little baby. My, how things would have changed for his eyes if he was here today. Some of my earliest memories actually are of when he was the manager of that store - that was a wicket store - and him coming home on the weekends with bags of money that we would help him roll - again, just a little fella.
We did touch a little bit on the positive financial movement that we have seen, but I’m curious. I know that the credit rating agencies have given us some extremely positive moves. The confidence in the Province of Nova Scotia has exceeded even our expectations, I think. I know that every government wants that.
I must say, there’s one constant that we have, and that’s the staff. Before we close here, I want to really, truly thank them. I don’t think there’s a Minister of Finance and Treasury Board that has come through this province who could do what they did without the support of their staff.
To that point, I would like to know what effect the upward trend in our credit rating has on our debt. Is this something that directly correlates with the interest rates that we pay, that we can borrow on? Is there a number that you could tell me how it has positively impacted us? I have never heard that question asked or answered.
MS. CASEY: If I’m clear on your question, it’s how the improved position of the province and the bond ratings that have shown that we’re in a positive position are impacting us when we go to borrow money. Am I clear on the question?
MR. GORDON WILSON: Yes.
MS. CASEY: Whenever you look at being judged by credit rating agencies, if people are looking to invest here, or if we are looking to borrow, that bond rating is one of the factors that determines how fiscally healthy our province is. We have been able to attract investment to the province, and we will be going to the market as we have heard, to borrow money. The fact that we are the only province that was on a positive note - we don’t have the highest rating. I’m not going to say that we have AAA, but we have A, with positive. That is certainly acknowledged and considered when we are going to borrow.
When you work hard to manage your spending, you get recognized for that. Sometimes, it means difficult decisions, but at the end of the day, it puts us in a better position to be recognized and to borrow at a better rate.
MR. GORDON WILSON: Would a movement from an A to an A-plus result in 1 per cent? Is there a way that a number could be attached to that?
MS. CASEY: I wouldn’t say that there would be a specific number, to say that going from an A to an A-positive would mean a change of 1 per cent. I don’t think the science is that exact. I think when people are looking at our province, that’s one of the things that determines whether it’s high risk or not. I think we have negated that belief that we might be high risk. This is a place where decisions that are made are in the best interest financially and people can have confidence in the services that we can provide for Nova Scotians.
One of the things that we have been able to do, because we have been in a healthy fiscal position, was to invest in programs for all of our Nova Scotians, whether it’s health care, education, community services, or encouraging investors to come here and invest in our province. That provides employment for Nova Scotians. All those things - you can’t pull one thing out. They’re all part of a big success for our province.
MR. CHAIRMAN: I know the minister has a lengthy set of resolutions for her department. I would encourage her to maybe take one minute at the very most for her closing remarks, thank yous, or what have you.
MS. CASEY: I do want to repeat my thanks to all the staff at the department, the deputy and the staff behind me, who work hard every day to make sure that the finances of the province are well managed, well monitored, and open and transparent so that all Nova Scotians know exactly how their tax dollars are being spent.
MR. CHAIRMAN: Shall Resolution E8 stand?
Resolution E8 stands.
Resolution E9 - Resolved, that a sum not exceeding $893,573,000 be granted to the Lieutenant Governor to defray expenses in respect of Debt Servicing Costs, Department of Finance and Treasury Board, pursuant to the Estimate.
Resolution E22 - Resolved, that a sum not exceeding $8,341,000 be granted to the Lieutenant Governor to defray expenses in respect of Government Contributions to Benefit Plans, pursuant to the Estimate.
Resolution E28 - Resolved, that a sum not exceeding $2,647,000 be granted to the Lieutenant Governor to defray expenses in respect of the Nova Scotia Securities Commission, pursuant to the Estimate.
Resolution E29 - Resolved, that a sum not exceeding $2,006,000 be granted to the Lieutenant Governor to defray expenses in respect of the Nova Scotia Utility and Review Board, pursuant to the Estimate.
Resolution E40 - Resolved, that a sum not exceeding $190,241,000 be granted to the Lieutenant Governor to defray expenses in respect of Restructuring Costs, pursuant to the Estimate.
Resolution E41 - Resolved, that a sum not exceeding $146,883,000 be granted to the Lieutenant Governor to defray expenses in respect of the Refundable Tax Credits, pursuant to the Estimate.
Resolution E42 - Resolved, that a sum not exceeding $128,803,000 be granted to the Lieutenant Governor to defray expenses in respect of the Pension Valuation Adjustment, pursuant to the Estimate.
Resolution E43 - Resolved, that a sum not exceeding $487,910,000 be granted to the Lieutenant Governor to defray expenses in respect of Capital Purchase Requirements, pursuant to the Estimate.
Resolution E44 - Resolved, that a sum not exceeding $59,776,000 be granted to the Lieutenant Governor to defray expenses in respect of Sinking Fund Instalments and Serial Retirements, pursuant to the Estimate.
Resolution E46 - Resolved, that the business plan of the Halifax-Dartmouth Bridge Commission be approved.
Resolution E47 - Resolved, that the business plan of the Nova Scotia Provincial Lotteries and Casino Corporation be approved.
Resolution E48 - Resolved, that the business plan of the Nova Scotia Liquor Corporation be approved.
MR. CHAIRMAN: Shall the resolutions carry?
The resolutions are carried.
Time for debate on Supply has expired for this day. Thank you.
[The subcommittee adjourned at 9:43 p.m.]