Mr. Chairperson (Ben Sveinson): Will the Committee of Supply please come to order.

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This section of the Committee of Supply will be considering the Estimates of the Department of Employee Benefits and Other Payments. Does the Minister responsible for Employee Benefits and Other Payments have an opening statement?

Hon. Harold Gilleshammer (Minister of Labour): No, I do not, Mr. Chairman.

Mr. Chairperson: We thank the minister for those short comments. Does the official opposition critic--the honourable member for Wellington (Ms. Barrett) has gone--the honourable member for Transcona (Mr. Reid).

Mr. Daryl Reid (Transcona): No, Mr. Chairperson.

Mr. Chairperson: Okay, we thank the critic of the official opposition for the co-operation. We invite the minister's staff to join us at the table. We ask the minister to introduce his staff.

Mr. Gilleshammer: Mr. Chairman, it is the same staff as with the previous appropriation.

Mr. Chairperson: We thank the minister. We will now proceed to line 6.1 (a) Civil Service Superannuation Plan on page 43 of the main Estimates book. Shall the item pass?

Mr. Reid: This is my first opportunity to ask questions concerning Employee Benefits and Other Payments. I must confess I do not have a great deal of knowledge in this regard, so I am going to ask some questions to try and educate myself about the spreadsheet, the comparisons year over year that we have before us here.

There are a number of lines under resolution 6.1 talking about the Civil Service Plan, the Workers' Compensation Board, Canada Pension Plan, Employment Insurance, Dental Plan, et cetera. Can the minister give me some explanation of each of those categories and what that represents so that I might bring myself up to speed on this particular part of the department?

Mr. Gilleshammer: The Civil Service Superannuation Plan, this act provides a pension plan for all eligible civil servants, and the Civil Service Commission reimburses the Civil Service Superannuation Board, the employer's share, 50 percent of pensions paid to retired civil servants including the annual cost-of-living increase. With that thorough explanation, I think the critic is satisfied, and he is prepared to move on.

Mr. Reid: Mr. Chairperson, I am sorry, I did not realize that the explanations were provided on the other pages. I will move directly into an area dealing with the Civil Service Superannuation Plan. The explanation here shows that it is a cost-shared plan between the government of Manitoba and the government employees in the province. Is that saying that they are equal contributions, dollar for dollar, that are contributed?

Mr. Gilleshammer: Mr. Chairman, it consists of a number of separate employee groups, and I will maybe just reference some of them for you: the Province of Manitoba civil service, Manitoba Hydro, the Manitoba Public Insurance Corporation, the Civil Service Superannuation Board, the Manitoba Arts Council, the Manitoba Crop Insurance Corporation. I think that in all cases civil servants contribute approximately 7 percent, and there is also a provincial contribution, a matching contribution, so that the previous civil servants, previous employees are able to draw on that plan for their retirement income.

Mr. Reid: I thank the minister for the explanation. Is this plan fully funded?

Mr. Gilleshammer: No, it is not; it is matched on retirement.

Mr. Reid: Has this plan ever been fully funded?

Mr. Gilleshammer: I am told it was prior to the construction of Duff's Ditch around the city of Winnipeg. Prior to the Roblin era is the explanation I got, that it was fully funded.

Mr. Reid: So I take it that then the employees themselves would still be continuing to make contributions to the pension plan and that the government is not making contributions to the Civil Service Superannuation Plan currently, and that has been the case since approximately the early 1960s. I take it from the minister's comments that, when the greater Winnipeg floodway was constructed, that is when the contribution stopped?

Mr. Gilleshammer: I would not relate it to that. I was simply told that prior to the Roblin years, it was a fully funded pension plan. In all of the years since, it has been an unfunded liability through the '60s, '70s, '80s, and '90s.

Mr. Reid: I am trying to get an understanding here. I think I am correct in saying that the Auditor has referenced the fact that there should be some accounting for, if I recall correctly, the unfunded portion of the government employees' pension plans. So then the minister is indicating that this has been going on for quite a number of years. Can you provide me with some historical understanding of why the decision was made to stop the contributions into the plan back in the early '60s, I take it, because that is when the discussion was taking place with respect to the construction of the greater Winnipeg floodway?

Mr. Gilleshammer: I think over the decades there was a feeling that government was not going to go out of business, that they would simply fund it on a year-to-year basis. It was not like a normal company that had to put away resources every year.

In hindsight, and this is a dilemma that I think most provincial governments find themselves in, just about all provincial governments where, through the last three or four decades, they have not set aside funds for the pensions of retiring workers. So we have what is called an unfunded liability, and of course it is growing every year, but Manitoba has, I guess, treated this the same as other provinces. I think it is certainly an issue. I think, in retrospect, all governments would have liked to probably have done things differently over the years and put those funds aside, but it has not happened and, as a result, every year government has to make an allotment as part of its Estimates to provide for the pension of retired workers.

So what is happening in Manitoba is consistent with what has happened in other provincial jurisdictions, for the most part, and they have been, I guess, shown in a similar fashion in some of the other jurisdictions. I believe I sat in on part of the Estimates of the Minister of Finance, and this issue was discussed in those Estimates, just for the reference for my honourable friend, but it is going to be an increasing number as we have more and more people retiring.

In my opening remarks, I believe I said that we have an aging workforce and, in coming years, coming decades there is going to be a greater draw on the government to live up to its responsibility to fund those pensions.

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Mr. Reid: I do not doubt there is going to be an increasing draw on the fund. As employees, the baby boomer blip in the spectrum kind of moves through, there are going to be a number of people that are moving into retirement years, so there will be, I would imagine, a fairly large hit on the fund and, as government continues to downsize, that will also take some hit on the fund too, I would imagine, as people opt, through voluntary separation plans, to take advantage of this as well.

Can you give me an idea of what the total unfunded liability is to this point?

Mr. Gilleshammer: I do not have an exact number, but I think I can give some examples whereby we can give you a ballpark figure from this chart. In 1989, the unfunded liability was $607 million; in 1992, it was $720 million--and my staff indicate today it is probably over $800 million.

Mr. Reid: So the ballpark guess that you have got, I guess, for the year ending 1996-97 fiscal year would be over $800 million in unfunded liability to the Civil Service Superannuation Plan. Because I am asking this question to try and educate myself too, does this particular plan also include teachers? Are they part of this plan as well?

Mr. Gilleshammer: No, they are not. This was for the Province of Manitoba civil service.

Mr. Reid: I do not think I heard from the minister because I have--I do not know if the minister was, I do not think he was in the workforce back in the 1950s when the flood occurred, and then there was that consideration about constructing the greater Winnipeg floodway. Perhaps he was in the workforce in the early 1960s while I was still in school, and no offence meant by that, but I do not have a historical comparison that perhaps the minister may have, or his staff may have, to provide for me to give me an understanding why the decision was made to stop contributing to the fund.

Did the government of the day decide that they--did they have an agreement with their employees, the civil service of the province, to stop making those contributions? Did the employees still have to continue to make those contributions? Was there a reason that was given for moving in that direction, that the government had for wanting to stop making those contributions?

Mr. Gilleshammer: Well, I was not in the workforce at that time and probably still in the school system myself, but the staff tell me that their understanding of the situation is that the actuaries indicated that there is a decision to be made, a balance to be made, on whether you borrow money to do some of the things government wanted to do or, I suppose, increase taxes.

I know one of the things that happened throughout Manitoba in the 1960s was the building of schools. Many areas across the province had very unsatisfactory school buildings and a lot of little red school houses, one-room school houses of many grades, and there was particularly a move, I think, in the '60s to create school divisions, to build high schools across many parts of Manitoba to give young people the opportunities to get what was considered a decent education, prepare them for going to university or other training programs.

We also saw at that time the building of hospitals, particularly in rural areas, the construction of highways. So again there is a capital development of our resources in schools and hospitals and highways that called for a lot of money being spent.

Certainly I can recall the 1960s when many schools in rural Manitoba were built and opened. In fact, if you look at the construction, they are all very similar. The construction and the architecture have led to a lot of ongoing costs too. One of the things they built in every school was a flat roof, and there was not one of them that did not leak. We are still trying to fix them up, because basically the buildings are still in reasonably good shape.

So governments, I guess, could have addressed this at any time, and I know it has been described as a ticking time bomb in some jurisdictions, that you are going to have to devote more and more dollars every year to address these unfunded liabilities. It is very difficult in these times to governments of all political stripes trying to manage their expenditures, balance their budgets, pay down their debt, and at the same time be aware that there is an unfunded liability there that has to be addressed.

I think the issue that the member referenced earlier on is how do you display this. It is a debt that is recognized by governments. It sometimes is not included in the budget documents in a way that certain accountants would like to see it displayed, but in my understanding it is an issue that many, many governments in the western world have to address. It is not even uncommon with some governments to borrow from funds that have been established and use that money for other things, but certainly it is accounted for. It is acknowledged, and, you know, who knows how it is going to be addressed in the future.

Mr. Reid: So then I take it that there was an extensive capital works program that was undertaken when the government, through some negotiations with its employees--I would hope that would have been the case--worked out an arrangement whereby the contributions to the Civil Service Superannuation plan could cease to be shown as a paper number, and that the government then use those funds to do capital works construction programs which would include, no doubt, schools, hospitals, highways, and perhaps even the greater Winnipeg floodway, because it would have been around that time, and I know the minister referenced that in his initial comments in this regard.

So I understand that there was a decision that was made at that time then, judging from the minister's comments here. Does the department then have a plan to commence paying down the unfunded liability portion in an orderly fashion, or is that a decision that is going to be made by the Minister of Finance or the cabinet as a whole and not just to be made by this department itself?

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Mr. Gilleshammer: For sure. It is not an issue with our department. We simply represent the employee benefits and other payments here. How that is dealt with is a government decision. I would hasten to say some of the background I was providing for my honourable friend predates all of us being in government. In fact, I am told that it probably predates collective bargaining, which started in 1965.

I am just trying to give a commonly accepted explanation for this without, certainly, appearing to be an expert on it. This has been known by governments through the '60s, '70s, '80s and '90s that the pension requirements was an unfunded liability, that governments were not putting aside resources, knowing every year that their commitment and their exposure is growing. It has always been part of the budget that you had to set aside so many dollars for those people who have retired or are retiring in that particular year. It is not part of the decision making within the Civil Service Commission or this group to determine what the ultimate solutions are going to be. That will be done by central government.

Mr. Reid: So there is a bigger decision that has to be made with respect to the unfunded liability and will not be made by the minister or by his staff here today, which I can appreciate, considering the magnitude of the problem that is facing all of us, I guess, collectively, because it was successive governments that were involved.

When the minister referenced the fact too that the decision to commence or to stop making payments into the civil service plan which predates collective bargaining, I did not know that. I was not aware of the historical aspect of that, so I appreciate that information as well. I guess it was a decision that was made several decades and a generation ago that is now coming home to affect us which we are going to have to deal with. So I thank the minister and his staff for that background and that information.

When you talk about the information that is in here for the Workers Compensation Board line, there are a variety of figures in there that we are talking I think it is $3,430,000 for this current year, and then there is a number in brackets shown below. Is that the money that is collected back from the government that is remitted to the Workers Compensation Board? Is that what those figures are for?

Mr. Gilleshammer: I am told that that is a charge back to the departments.

Mr. Reid: A charge back for premiums, Workers Compensation premiums, or actual injured employee costs that are recovered from those departments that are then remitted to the Workers Compensation Board?

Mr. Gilleshammer: Yes, as explained on page 12 of the expenditure Estimates, as required by The Workers Compensation Act, the Civil Service Commission remits to the Workers Compensation Board assessments applicable to government employees injured at work and then recovers amounts from other departments in respect of their employees. So we are assessed $3.4 million by the Workers Compensation Board, and we recover that from the various departments of government. We assess the various departments to achieve that recovery.

Mr. Reid: I am trying to get an understanding here, and having a little bit of background about the Workers Compensation system, when you talk about assessments, there are assessments for excessive accidents where you have higher risks or you have penalties that are involved, but you also have the premiums that are involved as well. I am just trying to get an understanding here or to clear up whether or not this is an additional assessment or this is the actual premiums assessment that would be spread out amongst the other departments that are affected, based on the number of employees that would be injured in those jurisdictions.

Mr. Gilleshammer: I am told that we are not a premium plan. It is self-insured so that this is the actual payout, and then we assess the departments to recover that.

Mr. Reid: On the Canada Pension Plan line, that is money that you would collect based on the number of employees in the different departments as well, and that money would then be remitted to the federal government, to the Canada Pension Plan based on the number of civil servants. The second part of the question is, because the Canada Pension Plan has seen some increases in the assessments for this year, does that number reflect that change as well?

Mr. Gilleshammer: As the explanation indicates, as required by the Canada Pension Plan Act, the Civil Service Commission pays the employer's matching contribution to the Canada Pension Plan for all eligible civil servants. The number of $14.4 million reflects the current rates.

Mr. Reid: Because there are other areas here including the Group Life Insurance, the Dental Plan, Long Term Disability, Ambulance and Hospital Semi-Private, these areas are affected by the negotiations with the various government employee representative groups, the union groups.

I know the minister said in his opening comments that he could not talk about the negotiations, and I can appreciate that. That is something that is internal to your operations as managers of that particular portion of the negotiations. But what do these numbers reflect? Do these numbers reflect current costs, and should there be any changes in the negotiation process? Will there be an adjustment in these areas? How does that process work? How is that determination made?

Mr. Gilleshammer: Yes, essentially the member is correct. These represent the current costs and, as he can appreciate, until agreements are finalized, it is impossible to project a totally accurate number, but they would have to be adjusted if need be.

Mr. Reid: I am just trying to get a handle here, an understanding of how the process works here, because budgets are usually set. Then once they are passed through the various committees, it was my understanding that they become pretty well entrenched and unalterable. How does the process work if you are showing an estimate based on current costs? When you do your negotiations on behalf of government, do you always try and reflect the changes that you would negotiate, should there be any, at some point beyond this budget that is set here, or is there some way that these numbers are altered to reflect the changes that would be negotiated?

Mr. Gilleshammer: We would naturally have to find the resources necessary to accommodate any negotiated changes, and if need be, at the end of the year be part of the special warrant to access the necessary funds.

Mr. Reid: Okay, so that would be essentially either a cabinet or Treasury Board decision for the additional funding should there be any as a result of the negotiations, and then these numbers would be adjusted to reflect in next year's Estimate document what the cost to the government would be under the Employee Benefits. Is that accurate?

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Mr. Gilleshammer: Well, that is correct. I mean, the numbers are put there with the understanding that this is being negotiated. Obviously, whatever is negotiated has to be accommodated, and if need be, at the end of the year, we would have to address that under a special warrant and find the resources, because there is no other choice.

Mr. Reid: On your bottom line, you have got a rider clause there that talks about the Ambulance and Hospital Semi-Private Plan premium payments. I take it that was a negotiated change that is now taking effect in September of 1997 to the Ambulance and Hospital Semi-Private plan. Is that accurate?

Mr. Gilleshammer: That is correct.

Mr. Reid: Recoveries from other appropriations seems to be a catch-all. Can you give me some explanation on what one would expect? Is it too broad to even describe? I am looking for some kind of an understanding on what you would recover from Other Appropriations that represents $59 million.

Mr. Gilleshammer: Mr. Chairman, I think the explanation at the bottom page 13 covers it. I will just read it into the record. Recoveries From Other Appropriations. Commencing with the 1994-95 fiscal year, the cost of the various employee benefit plans and related overhead charges, with the exception of the Civil Service Superannuation Plan and a portion of Workers Compensation Board charges, will be recovered from client departments and agencies. So in essence, it makes departments fully aware of what the costs are related to these employee benefits.

Mr. Reid: All right, then, the other costs, including Workers Compensation, Canada Pension Plan, Employee Insurance Plan, Dental Plan, Long Term Disability,

Ambulance and Hospital Semi-Private, the Levy for Health and Post-Secondary Education, Group Service Life Insurance, that is all of the recoverables under Other Appropriations. Is that what the minister is referencing here, that it would be recovered from other departments?

Mr. Gilleshammer: That is correct.

Mr. Reid: No further questions.

Mr. Chairperson: Item 6.1. Employee Benefits and Other Payments (a) Civil Service Superannuation Plan $39,750,700--pass.

6.1.(b) Workers' Compensation Board (1) Assessments re: Accidents to Government Employees$3,430,600--pass; (2) Less: Recoverable from other appropriations ($3,415,600)--pass.

6.1.(c) Canada Pension Plan $14,432,400--pass.

6.1.(d) Employee Insurance Plan $21,733,200--pass.

6.l.(e) Civil Service Group Life Insurance $1,764,700--pass.

6.1.(f) Dental Plan $4,850,300--pass.

6.1.(g) Long Term Disability Plan $2,612,600--pass.

6.1.(h) Ambulance and Hospital Semi-Private Plan $133,000--pass.

6.1.(j) Levy for Health and Post-Secondary Education $13,659,700--pass.

6.1.(k) Less: Recoverable from other appropriations ($59,185,900)--pass.

Resolution 6.1: RESOLVED that there be granted to Her Majesty a sum not exceeding $39,765,700 for Employee Benefits and Other Payments for the fiscal year ending the 31st day of March, 1998.

This completes the Estimates of Employee Benefits and Other Payments.

The next Estimates that will be considered by this section of the Committee of Supply are the Estimates of the Department of Government Services. At this point, we will take a 10-minute break.

The committee recessed at 5:25 p.m.

The committee resumed at 5:30 p.m.