March 23,

HOUSE OF ASSEMBLY PROCEEDINGS

Vol. XLII No. 5

The House met at 2:00 p.m.

SERGEANT-AT-ARMS: All rise.

MR. SPEAKER (Dicks): Order, please!

The hon. the Minister of Finance.

MR. BAKER: Mr. Speaker, I move that the House resolve

itself into a Committee of Ways and Means and that the Speaker do now leave the

Chair.

MR. SPEAKER: The motion is that the House resolve itself

into a Committee of Ways and Means and that I do now leave the Chair.

The hon. the Minister of Finance.

MR. BAKER: Mr. Speaker, it is my pleasure to present to

this hon. House today, a totally balanced Budget - a Budget that requires no

borrowing, either for current account or for capital account; and, a Budget that

requires no new taxes and no tax increases.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Our progress in deficit reduction over the

last four years has been the most consistent of any government in Canada. This

progress is a result of our comprehensive strategy to strengthen the foundation

on which the fiscal, economic and social future of Newfoundland and Labrador

will be built. It has been our objective to restore the fiscal flexibility of

this Province, and we remain on course.

For 1994-95 we have achieved a current account surplus. In

our 1994 Budget, we committed to eliminating our current account deficit in

1995-96. We have delivered on that commitment one full year ahead of schedule.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Last year, Premier Wells indicated that we

would strive to achieve a totally balanced Budget by 1996-97. With the aid of

some extraordinary revenues we will deliver on that objective one year ahead of

schedule.

But neither of these accomplishments can be one-time

achievements. We must ensure that government balances future budgets, and begins

to reduce the debt burden that is the legacy of past deficits. The benefits of a

deficit free government to our generation will be substantial. The benefits of

debt reduction to future generations will be immense.

Achieving our fiscal plan requires that we meet many

significant challenges: major reductions in transfer payments from the

economic renewal, particularly in light of the collapse of our groundfish

industry; and unfunded liabilities in our public sector pension plans. We must

overcome these significant challenges with a realistic plan and the

determination to make it work.

Mr. Speaker, the first element in our fiscal strategy is to

bring about change in the services we provide and the way these services are

delivered. The result must be more efficient, cost-effective and affordable

government.

The second element in our strategy is to strengthen our

revenue base by ensuring a growing, productive economy, and by attaining a more

Mr. Speaker, we must continue to implement less costly ways

of providing public services, while improving the effectiveness, quality and

delivery of core programs. In 1995-96, there will be additional restraints

imposed on the operating spending of all government departments and agencies.

Some measures will apply across all programs, others will be directed at

specific programs and services, and there will be some job losses.

We have made significant progress in rationalizing and

restructuring both the management and delivery of health programs through board

restructuring, and by changing the role of some facilities to fit a more

efficient regional service focus. These ongoing changes will enable quality

health care to be provided in all regions of the Province in a very

cost-effective manner. Funding in 1995-96 for this area, Mr. Speaker, will not

be reduced from last year's levels.

Commencing in 1995-96, responsibility for home care services,

formerly provided by the Department of Social Services, will be transferred to

the Department of Health. Services will be delivered through a single entry

system which will provide for co-ordination and effective delivery of programs

by regional community health care boards, ranging from home care all the way to

high level nursing care.

Cost efficiencies in the education system will be achieved,

partially through normal adjustments in response to declining enrolments.

Implementation of the recommendations of the Royal Commission on Education also

is contributing to a more efficient system. In addition, discussions have been

renewed with church groups to pursue educational reforms which, when

implemented, will create a more efficient system for the benefit of our

students.

In line with restraint measures imposed across government,

the grant to Memorial University of Newfoundland and other post-secondary

institutions, contributions will be reduced below 1994-95 levels. Government

anticipates that these educational institutions will implement efficiency

measures in order to avoid reductions in student access to education programs.

We also expect that these reductions will not cause financial hardships to

students or to the institutions themselves.

Mr. Speaker, the costs of social assistance, until now, have

been shared equally in a long-standing partnership between the Province and the

commitment to social assistance by freezing their contribution for 1995-96 at

the previous year's level. Unlike the situation in many provinces, the number of

families needing assistance in Newfoundland and Labrador continues to rise. The

federal restraint will create a shortfall of some $15 million in social

assistance funding in 1995-96. While basic assistance rates will remain

unchanged, some benefits will have to be reduced, and other savings will be

achieved through administrative efficiencies.

Achieving the reforms necessary to ensure sustainable

services and affordable government must be undertaken with the co-operation and

input of stakeholders. Mr. Speaker, this government is committed to a process of

open consultation.

Collective agreements providing for a continuation of

compensation restraint in 1995-96 already have been negotiated with most

bargaining units. The same restraints will apply to non-bargaining, management

and executive staff, and Members of the House of Assembly.

This year government will be consulting with employee

representatives to develop an equitable approach to addressing the unfunded

liability in public sector pension plans, which now has reached a level of $2.4

billion. We must act now to protect the Province's financial position over the

long term, and to secure the pensions of our public employees. A solution must

and will be found this year, and both Government and employees must contribute

to that solution.

Also, we will seek the input of the Newfoundland and Labrador

Federation of Municipalities before we determine future levels of funding and

services that we provide to municipalities. The Province traditionally has

provided considerable funding and services to municipalities to assist them to

provide basic services and to make capital improvements. This relationship must

be re-examined in light of prevailing fiscal realities.

The long-term viability of the Province's forest industry

requires responsible planned management, through the development of new

technologies and maintenance of silviculture efforts. The Federal Government

will no longer cost-share forestry programs with the Province and the pulp and

paper industry. Government has decided that in spite of the federal withdrawal,

these programs must be substantially maintained, and the Province will be

funding them in this Budget.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Mr. Speaker, as part of our deficit

elimination plan, our capital account spending program for 1995-1996 is lower

than it has been in recent years. Despite this reduction, expenditures related

to Hibernia and the national infrastructure program will help sustain a high

level of capital investment and construction activity in the Province.

As part of our privatization initiative, we are taking steps

to enhance the commercial viability of Newfoundland Farm Products Corporation.

We are reducing the annual operating subsidy, and will discuss with management

and employee representatives ways to achieve these reductions. Also, we will

start phasing out the subsidy to broiler producers.

As another efficiency measure, the Farm Development Loan

Board and the Fisheries Loan Board will be merged with Enterprise Newfoundland

and Labrador. This measure will enhance service quality by increasing access to

services for farmers and fishers through the regional office network.

We are continuing to consolidate the administration divisions

of departments. This year the administration divisions in the Departments of

Environment, Employment and Labour Relations, and Tourism, Culture and

Recreation will be merged into one unit.

Mr. Speaker, while these measures assist us in dealing with

the problem this year, we must also address foreseeable fiscal challenges

impacting upon subsequent years. In 1996-97, we will have about $160 million

less revenue, because of the restraint of federal transfers for social programs

and the elimination of some of the extraordinary revenue measures realized in

this coming year. Growth in other revenue sources will be insufficient to offset

this. We have begun the process of dealing with this challenge.

Government recognizes that it is difficult to effectively

plan for the efficient long-term delivery of programs and services, when they

are subject to funding uncertainties inherent in an environment of continued

restraint. Government will immediately implement a process to develop multi-year

operating plans for departments and agencies, as well as hospital and school

boards.

Each department and agency will prepare a multi-year human

resource strategy during 1995-96. This will allow for a gradual and orderly

reduction of compensation costs, which now account for two-thirds of program

spending. A planned approach will enable us to take maximum advantage of normal

attrition within the public service to lessen our compensation needs.

Mr. Speaker, expenditure measures are only one element of our

fiscal strategy. We must continue to strengthen our revenue base -both transfers

Reductions in transfer payments for social programs announced

in the 1994 and 1995 Federal Budgets will result in a revenue loss of an

estimated $110 million in 1996-97, escalating to about $160 million in 1997-98.

These reductions will cause hardship in this Province, particularly if our

social assistance caseloads continue to increase because of unemployment

insurance reforms and the phase-out of assistance to people displaced as a

result of the groundfish crisis.

Mr. Speaker, if transfers overall must be restrained as a

part of federal deficit reduction, then the only way to treat all Canadians

funds on the basis of demonstrated need. Funding must not be allocated on a per

capita, or an historical share basis.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: The Constitution commits to ensuring

reasonably comparable levels of service at reasonably comparable levels of

taxation. Mr. Speaker, that commitment must be honoured!

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: In addition to attaining a more equitable

fiscal transfer arrangement, we must pursue economic growth and job creation to

strengthen the tax base of this Province and lessen fiscal as well as economic

disparities.

Our Strategic Economic Plan continues to guide us towards

long-term economic renewal. Consistent with the objectives and vision of this

plan, government has undertaken many initiatives designed to increase the

attractiveness of the Province as a place to do business. These include the

establishment of economic zones, tax reform, regulatory reform, and the recently

enacted EDGE legislation. In keeping with this strategy, the Province will

implement a Scientific Research and Experimental Development tax credit in 1996,

after consultations with the business community.

There are a number of positive signs in the Newfoundland and

Labrador economy that give us cause for optimism. Our forest and mining sectors

are performing strongly. Hibernia is proceeding on schedule. The Terra Nova

oilfield is expected to be the next offshore development, and negotiations are

being actively pursued with members of the Terra Nova consortium. Oil

exploration is taking place on the west coast of the Province. There have been

several significant mineral discoveries with development potential in the

short-term, including Voisey Bay, potentially one of the largest nickel-cobalt

discoveries in Canada.

The rate of small business formation in this Province is

amongst the highest in Canada. Several Newfoundland companies are making inroads

in the growing high technology field. Newfoundland and Labrador has considerable

tourism potential, and the Cabot 500 celebrations should generate considerable

activity in 1997.

Mr. Speaker, during 1994, growth in the Newfoundland and

Canadian economies exceeded expectations, contributing to higher than expected

revenues from our own tax sources and from some equalization payments.

Expenditures were also somewhat higher than Budget, mainly because of increased

social assistance and employment programs, and the decision to reduce public

sector compensation restraints.

As a result, for 1994-95 we will achieve a surplus of $25.1

million on current account compared to the budgeted deficit of $24.6 million.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Our net capital account spending will also be

below Budget by about $10.7 million.

Mr. Speaker, our total budgetary requirement for 1994-95 will

be $136.3 million. This is over $60 million below the amount estimated in the

Budget, and is the lowest level of borrowing for budgetary purposes in fourteen

years. That, Mr. Speaker, is not projected. That is achieved.

Achieving the surplus on current account was made possible

enable the Province to assume responsibility for the south coast ferry service.

The balance of this $55 million agreement will be paid in 1995-96 and 1996-97.

Even without this payment, our budgetary requirement would have been almost $30

million below our Budget estimate. Mr. Speaker, we have significantly bettered

our target.

Mr. Speaker, in 1995, the Canadian economy is expected to

grow, although at a more moderate rate. The Newfoundland economy will also grow

in 1995, albeit at a pace slightly slower than the rest of the country. The

goods producing sector, with the exception of the fishery, will contribute most

to this growth.

Revenue growth from a stronger economy is not sufficient, by

itself, to achieve a totally balanced Budget in 1995-96. The expenditure

measures on both current and capital account contained in this Budget, when

combined with dividends from Newfoundland and Labrador Hydro and extraordinary

revenues, will allow us to eliminate our total budgetary requirement and achieve

a small surplus in 1995-96.

The extraordinary revenue gains for 1995-96 will reduce net

expenditures by about $90 million. They also will generate interest cost savings

of about $8 million annually, reducing the deficit problems we must deal with in

coming years. These extraordinary gains include: the second payment from the

revenues accumulated sinking fund surpluses; and, proceeds from privatization of

some government-owned corporations.

Mr. Speaker, Newfoundland and Labrador Hydro will pay the

people of the Province a return on their investment in the electrical industry.

Accordingly, government will receive an annual dividend, starting in 1995-96. In

the initial year, this dividend will be $19.6 million.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: The major portion of this dividend represents

profits earned by Hydro on its electrical sales throughout Newfoundland and

Labrador. The balance represents that part of the annual dividend which Hydro

receives from Churchill Falls (Labrador) Corporation which is in excess of

Hydro's cost of servicing the debt related to the purchase of shares in that

corporation.

Our total budgetary requirement for 1995-96 will be

eliminated in this way, and on current and capital account combined we will

achieve an overall surplus of $1.9 million.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: Mr. Speaker, even without the extraordinary

revenues, the resulting budgetary requirement of about $88 million for 1995-96

would have represented a considerable improvement over previous years. It also

would have represented a notable achievement in continuing the downward trend in

deficits established over the last five years.

Mr. Speaker, in 1995-96 the Province will achieve a balanced

budget on current and capital account combined for the first time since

Confederation.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: A consistent approach to prudent deficit

reduction undertaken over several budgets, combined with some fortuitous

factors, will allow us to realize that goal this year. Government is committed

to seeing this objective achieved, and to seeing that this achievement will be a

foundation on which future balanced budgets will be built.

SOME HON. MEMBERS: Hear, hear!

MR. BAKER: There are many significant fiscal challenges

ahead of us. No single budget can offer a solution to all of these challenges,

but each budget must be an incremental step that makes its contribution to the

restoration of fiscal flexibility to this Province. Each budget must build on

the foundation of those that precede it, and become part of the sound fiscal

foundation for those budgets that will follow in future.

This foundation is essential to the attainment of our

economic and social objectives. All Newfoundlanders and Labradorians, of present

and future generations, will share in the benefits. There is simply no

acceptable alternative. As a people, we will be able to enjoy the economic and

social well-being necessary for a full and rewarding life in this Province only

if a sustainable, sound fiscal foundation is built.

Mr. Speaker, this Budget is an integral component of that

foundation. It will set us to work, better prepared to surmount the fiscal

challenges which must be overcome to secure the future balanced budgets that

this Province must, and will, achieve.

Thank you.

SOME HON. MEMBERS: Hear, hear!

MR. SPEAKER: The hon. the Minister of Finance and

Treasury Board.

MR. BAKER: Mr. Speaker, I move that this debate be

adjourned until tomorrow, Monday, at 2:00 p.m.

On motion, debate adjourned until tomorrow, Monday, at 2:00

p.m.

MR. BAKER: Mr. Speaker, I wish to inform this House that

I have received a message from His Honour, the Lieutenant-Governor.

MR. SPEAKER: All rise.

The message is dated March 21, 1995 and directed to the hon.

the Minister of Finance and Treasury Board. It reads as follows:

"I, the Lieutenant-Governor of the Province of Newfoundland,

transmit estimates of sums required for the public service of the Province for

the year ending March 31, 1996, in the aggregate of $2,944,964,400, and in

accordance with the provisions of the Constitution Act, 1867, I recommend these

estimates to the House of Assembly."

Signed by His Honour: ________________________________

Lieutenant-Governor, Frederick W. Russell

We will take a few moments to distribute copies to the

members.

Order, please!

The hon. the Minister of Finance and Treasury Board.

MR. BAKER: Mr. Speaker, I move that the Message, together

with the Estimates, be referred to a Committee of Supply.

On motion, that the House resolve itself into a Committee of

Supply to consider the Message from His Honour the Lieutenant-Governor, together

with the Estimates, Mr. Speaker left the Chair.

Committee of the Whole

MR. CHAIRMAN (Snow): Order, please!

The hon. the Government House Leader.

MR. ROBERTS: Mr. Chairman, this, of course, is a

formality simply to put the Estimates into the committees. I move that the

Committee rise, report progress and ask leave to sit again.

On motion, that the Committee rise, report progress and ask

leave to sit again, Mr. Speaker returned to the Chair.

MR. SPEAKER: The hon. the Chairman of Committees.

MR. L. SNOW: Mr. Speaker, the Committee of the Whole on

Supply have considered the matters to them referred, have directed me to report

some progress, and ask leave to sit again.

On motion, report received and adopted, Committee ordered to

sit again on tomorrow.

Notices of Motion

MR. SPEAKER: The hon. the Government House Leader.

MR. ROBERTS: Mr. Speaker, there are no finance notices

because there are no tax increases in this Budget, but I wonder if I may have

the leave of the House to give notice of the motion to refer the Estimates to

the Standing Committees of the House? I trust I have leave, so I may proceed

then, Your Honour?

MR. SPEAKER: Yes.

MR. ROBERTS: Mr. Speaker, I give notice that I shall move

that the following heads of expenditure be referred to the Government Services

Committee: Departments of Finance; Works, Services and Transportation;

Employment and Labour Relations; Municipal and Provincial Affairs and those of

the Newfoundland and Labrador Housing Corporation and the Public Service

Commission.

I give notice further that I shall move that the following

heads of expenditure be referred to the Social Services Committee: Departments

of Social Services; Education and Training; Health; Environment and Justice; and

I give notice further that I shall move that the following heads of expenditure

be referred to the Resource Committee: Fisheries, Food and Agriculture; Natural

Resources; Tourism, Culture and Recreation and Industry, Trade and Technology.

Your Honour, with that notice given, I wonder if the House

will be prepared to allow the Premier to give Notice of Motion of a bill to be

introduced? It will require leave, it is a routine bill.

MR. SPEAKER: All in favour of giving the Premier leave to

introduce a motion?

All those in favour of departing from our rules to allow the

Premier to give notice, `aye'.

SOME HON. MEMBERS: Aye.

MR. SPEAKER: Contra-minded, `nay'

Motion, carried.

Notices of Motion

PREMIER WELLS: Mr. Speaker, I give notice that I will on

tomorrow, ask leave to introduce a bill entitled, "An Act Respecting The

Revision And Consolidation Of Subordinate Legislation."

MR. SPEAKER: The hon. the Government House Leader.

SOME HON. MEMBERS: Oh, oh!

MR. SPEAKER: Order, please!

The hon. the Government House Leader.

MR. ROBERTS: Mr. Speaker, the sourness of the response on

the other side is the indication of the sweetness of the Budget on this side.

Your Honour, I move that the remaining Orders of the Day do

stand deferred and the House at its rising adjourn until, Monday at two o'clock,

and I will remind members that, at that point we shall call Motion No. 1, The

Ways and Means Motion and we will no doubt be enlightened by the gentleman from

Mount Pearl, I believe he is to speak.

MR. SIMMS: (Inaudible) twenty minutes.

MR. ROBERTS: I have no doubt the hon. gentleman will be

longer than twenty minutes; he may not say any more but he will be longer than

twenty minutes.

SOME HON. MEMBERS: Hear, hear!

MR. ROBERTS: I move that the House stand adjourned, Mr.

Speaker.

On motion, the House at its rising adjourned until Monday at

2:00 p.m.