HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Keith Colwell (Chairman)

Hon. Ronald Chisholm

Mr. Keith Bain

Mr. Chuck Porter

Mr. Clarrie MacKinnon

Ms. Vicki Conrad

Mr. Leonard Preyra

Ms. Diana Whalen

Mr. Harold Theriault

[Hon. Ronald Chisholm was replaced by Hon. Cecil Clarke.]

[Ms. Vicki Conrad was replaced by Mr. Graham Steele.]

In Attendance:

Ms. Jana Hodgson

Legislative Committee Clerk

Mr. Gordon Hebb

Legislative Counsel

Also in Attendance:

Hon. Christopher d'Entremont

Minister of Community Services

Mr. John Traves

Department of Justice

WITNESS

Department of Finance

Ms. Vicki Harnish

Deputy Minister

HALIFAX, TUESDAY, MARCH 24, 2009

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Keith Colwell

MR. CHAIRMAN: Good morning everyone, we'll start the meeting off. We'll go around the table and introduce ourselves.

[The committee members introduced themselves.]

MR. CHAIRMAN: I'd ask our guests to introduce themselves and any of the staff that you might have with you.

MS. VICKI HARNISH: I'm Vicki Harnish, Deputy Minister, Department of Finance. I have with me John Traves, who is senior financial counsel for government.

MR. CHAIRMAN: Thank you. With that, if you have a presentation, we'd like to see it and we'll proceed with questions after that.

MS. HARNISH: No, I have a very short opening statement which I've circulated. Good morning, Mr. Chairman, committee members. I appear before the committee today in response to your request for the Department of Finance to report on economic conditions in the province.

As Deputy Minister of Finance, I am only one of many public servants who works to promote the best economic results for the Province of Nova Scotia. The Department of Economic and Rural Development, Nova Scotia Business Inc., Labour and Workforce Development, and many other provincial agencies and departments have significant responsibilities in this area as well. In addition, we all work closely with municipal and federal counterparts who deliver programs and services that contribute to Nova Scotia's economic performance.

Your request for me to visit the committee did not include any specifics about the information you were looking for, so I have brought with me some of the latest statistics on our key economic indicators and I believe copies have already been distributed to committee members.

I think it's important to note that some of the economic analysis that you may be seeking is not yet available, of course. The Executive Council sets the fiscal and economic agenda for the Province of Nova Scotia and government will announce its plans for 2009-10 in the Spring budget. As usual, a formal economic forecast will be included in the budget, in accordance with the law, and preparation of the forecast is now underway. We will be in a position to answer questions about the 2009-10 forecast when it is released. However, I recognize the committee's interest and concern about the province's economic circumstances, so I would like to give members a brief overview of economic trends, as illustrated by some of the statistics I have provided.

There's no doubt that economic conditions are a major concern for almost every government around the world in 2009. I meet regularly with my counterparts in other provinces and no one has ever seen anything like the last six months. These are clearly unprecedented economic times. We are fortunate that Nova Scotia has a relatively stable economic situation, compared to many other jurisdictions. We don't have the large economic ups or downs of large provinces like Alberta and Ontario. Compared to the resource-based economy that dominated the province two decades ago, we now have a largely service-based economy that tends to be a bit more resilient. This means that Nova Scotia has not seen the major job losses that have been experienced in provinces like Ontario, with its large manufacturing industry.

However, this is not to say that Nova Scotia has not been affected by recessions in the U.S. and other countries. Consumer confidence is always an issue. Nova Scotians, like all Canadians, may be less likely to spend money, given the declining value of their personal investments and tighter credit conditions.

A slowing economy is also having an impact on Nova Scotia businesses. We have seen job losses in certain industries, although employment levels have so far remained steady. Export markets have started to soften in recent months, due to reduced demand in the United States, and this has been a challenge for businesses shipping products south, such as lobster producers. However, the Canadian federation of small business tells us that so far small businesses are holding their own.

Economists have been clear about the importance of stimulus measures to bolster the economy. Nova Scotia's economy will also benefit from the Building for Growth plan released just recently. In addition, we intend to take full advantage of the fiscal stimulus measures announced in the Government of Canada's budget of January 27^th. Thank you, and I will take questions.

MR. CHAIRMAN: Thank you very much for your presentation. The first round will be for 15 minutes - we'll start with Mr. Steele.

MR. GRAHAM STEELE: Thank you very much. The difficulty that the members of the Legislature face is that there's a lack of solid, factual information about the state of the province's finances. The last forecast update was on December 19^th; that's now more than a full quarter ago. The government has given us no date for the introduction of a budget, nor even a date to recall the Legislature, and the next formal update is going to be on whatever day the budget is introduced. That could be April, May, June - we have no way of knowing.

The Premier and the Minister of Finance have refused to appear before the Public Accounts Committee, knowing that we do not have the authority to force them to without the support of the House of Assembly, and you appeared here today only because you were subpoenaed. The difficulty, of course, is that much has happened since the last forecast update. For example, in February the Quebec Finance Minister is quoted as saying that the drop in government revenue in January was "brutal".

I want to read three sentences from a report and the original report is in French and I do want to read them in French, but then I'll translate them for you because I want to give you a sense of the words that the Quebec Finance Minister used. She said, in Le Devoir, March 7, 2009:

"Les chiffres compilés au 31 décembre ne comportent évidemment pas 'l'épouvantable' mois de janvier 2009 que la ministre Jérôme-Forget avait déploré, le 11 février, lorsqu'elle fut contrainte d'admettre que le Québec serait en déficit en 2009-10.

Il a été impossible hier d'avoir des chiffres précis sur ce mois, mais la ministre n'avait pas caché sa frayeur. 'Il y a eu une détérioration brutale [des revenus de l'État] en janvier', avait déclaré la ministre lors de son point de presse. 'Je peux vous dire que le ministère des Finances a été extrêmement ébranlé par ce qui se passait en janvier'. . .".

Let me translate that for you. I wanted to read it in French so nobody would accuse me of mis-translating this - the words are out there for those in the room who understand French. It says:

The figures compiled as of December 31^st evidently didn't include the frightening month of January 2009 that Minister Jérôme-Forget talked about on February 11^th when she had to admit that Quebec would be in deficit in 2009-10. It was impossible yesterday to have precise figures for that month but the minister did not hide her fear. There was a brutal deterioration of government revenue in January, the minister declared during her press

conference. I can tell you that the Department of Finance has been extremely shaken by what happened in January.

That's what the Quebec Minister of Finance said about the revenue in January. Now let me give you another example. A week ago, an official from the Ontario Ministry of Finance reported that corporate tax revenue in that province had dropped $3 billion just since December. The original target was $11.5 billion but over three months, beginning last December, the revenues fell about $3 billion, leaving the provincial treasury well short of that target.

So this is all by way of saying, a lot has changed since we got our last forecast update. I know you're not here to talk about government policy. What I'm looking for from you today are simply the facts. Can you confirm that the Nova Scotia Department of Finance has more up-to-date figures about the state of the province's finances than the figures that were released on December 19^th?

MS. HARNISH: Well, first of all, Nova Scotia is not Ontario and Quebec, and circumstances there are not necessarily reflective of Nova Scotia's circumstances. I did reference the fact that our economy is much more stable than economies of other provinces in Canada.

Forecasts made by any province are that, forecasts. It would be months before we receive firm data. In fact, it is often years later when we're in a position to know the absolute numbers for any given year. So given that it would be just that, a forecast, and that the forecast is made by the minister - with the advice of the department, for sure, but it is the minister's forecast - I'm not in a position to comment on what that forecast would be until the Minister of Finance releases it, per the legislation with the upcoming estimates.

MR. STEELE: Can you confirm that the Department of Finance has financial information that is more current than the information contained in the update on December 19^th?

MS. HARNISH: We have statistics that come in every month, as you would know. In fact, I've tabled many of those statistics with you. Those are the statistics that drive the models by which we would run forecasts to advise the minister.

MR. STEELE: Of course, I fully expected this. You're not answering my question, you know you're not answering my question, I know you're not answering my question.

MS. HARNISH: You know I'm not in a position to answer your question.

MR. STEELE: I don't know that at all because I'm asking for the facts and, frankly, facts are not advice - not advice to the minister, not advice to the Executive Council or advice to anyone else. Facts are facts.

If the Quebec Finance Minister can talk about the state of revenue in her province, every month - they issue a monthly report in Quebec - and if an Ontario Finance official can talk about corporate tax revenue knowledgeably, within a few days of the close of the period that he's talking about, now surely Nova Scotia can do the same. What are the facts about the current state of Nova Scotia's finances?

MS. HARNISH: Mr. Steele, we would on a monthly basis update the projections from the models, advise the minister of that. But the minister produces the forecast, not the department - it is his forecast. I am not in a position to release that information.

MR. STEELE: That's pure nonsense and you know it. You know that the minister receives the facts. What the minister does with the facts is up to him. It's pure nonsense to suggest that the minister is the one who is actually doing the forecast and do you know what? I'm not asking you what you tell the minister, I don't want to know that and I'm not asking you that. It has nothing to do with the minister or the Cabinet. I'm asking you what facts and figures you have. For example, what is the current factual information about personal income tax revenue for this fiscal year?

[9:15 a.m.]

MS. HARNISH: The last information which the minister made public is in the December 2008 update . . .

MR. STEELE: Ms. Harnish, I didn't ask you . . .

MS. HARNISH: And that's what I am in a position to give you.

MR. STEELE: I did not ask you what information the minister last made public. I asked you what is the latest factual information about the state of the province's finances. Either you know and you're refusing to tell us - and you are here under subpoena - or you don't know. Which one is it, do you know or don't you know?

MS. HARNISH: I do not know what's in the minister's head with respect to the forecast that he will be making.

MR. STEELE: If you continue to answer like this, I'm going to propose to the committee that you be found in contempt of this committee. I am not asking you what is in the minister's head. I expect you to tell me, and through me the people of Nova Scotia, the facts that are within your knowledge. What is the state . . .

MR. JOHN TRAVES: Mr. Chairman . . .

MR. STEELE: I'm sorry, he's not a witness.

MR. CHAIRMAN: Order, please. (Interruptions) Just one second, order. You have no right to speak here . . .

HON. CECIL CLARKE: On a point of order, Mr. Chairman.

MR. CHAIRMAN: The deputy minister . . .

MR. CLARKE: On a point of order, Mr. Chairman.

MR. CHAIRMAN: One second, wait until I finish. I'll take your point of order in a second. The deputy minister is the one who will be speaking here today - no one else except the committee members.

MR. TRAVES: I'm sorry, Mr. Chairman, just a second. For the record, I'm counsel . . .

MR. CHAIRMAN: No, for the record . . .

MR. CLARKE: I'll speak to that point of order.

MR. CHAIRMAN: Yes.

MR. CLARKE: Mr. Chairman, on a point of order. The deputy minister is here at the request of this committee in respect of it. Now, there's another point of order that shall be raised with regard to the procedure, and regardless of that I don't deny the ability of a committee to undertake a subpoena. The process upon which you've embarked upon this is subject to a matter that will be brought up to the House when it's next convened, to be brought before the Speaker for consideration.

With regard to the Deputy Minister of Finance being here, as per your request and on a couple of points, the deputy minister is here to respond within the capacity and level of authority that she has to respond to this. She has counsel and a right to counsel to be present with her. It is not, Mr. Chairman, for you to deny that person the ability to provide technical or legal advice that clarifies the position of the deputy minister.

Further on a point of order, it is not for a member of this committee to badger someone and to suggest what they can or cannot say. She has offered an opinion on that. She has provided within the authority that she has and if he wants to raise that with the minister, I suggest that he raise that with the minister, who is the authority, the Legislative authority

with the governance structure of the Province of Nova Scotia. So if he wants to continue to badger anyone that comes before this committee, if there's legitimate information of what the last fiscal update was for the Province of Nova Scotia, the deputy can speak to those details. The deputy can talk about those things, but we are not going to have someone come before this committee, if you deem it to be such, and badger them and indicate what they are rightfully or wrongfully doing within the authority they have.

Again, I would say, Mr. Chairman, it is inappropriate for the level of conduct and the level of questioning that Mr. Steele and the agenda he has here today.

MR. STEELE: Can I speak to that?

MR. CHAIRMAN: One second, I'll rule on one part of your point of order. You are out of order on the fact that the solicitor can speak here. The solicitor cannot speak here, he is here strictly to give advice to the deputy minister and that will stand. If the solicitor has some comment to make to the deputy minister, she can forward that comment to the committee. But the solicitor is not to speak to this committee, he is not a witness here today. Mr. Steele.

MR. STEELE: Thank you, that was the point I was going to make. I make no apology for being hard on witnesses who don't answer legitimate questions. I'm asking legitimate questions and I expect answers.

MR. CHAIRMAN: I would agree with Mr. Steele. He has asked direct questions, information that should be available, and I would instruct the deputy minister to answer the questions.

MR. CLARKE: On a point of order, Mr. Chairman. The deputy minister has indicated what she has the authority to respond to this committee on. If the member doesn't like that response, I can appreciate he may not like the response, but as far as the authority provided to her by the minister, that is something she has responded to and I don't think she has done that inappropriately. If you want to continue to suggest that she is not answering the question - she has answered the question. If you do not like the answer, that is not her fault.

MR. CHAIRMAN: It's not for me to decide whether I like the answer or not. My decision here is whether she should answer the question or not. I feel . . .

MR. CLARKE: She has answered the question, Mr. Chairman.

MR. CHAIRMAN: I feel that she has not answered the question directly and I would instruct her to answer the question directly. Mr. Steele.

MR. STEELE: Thank you. I'll repeat the question, which is, what is the most recent factual financial information the Department of Finance has concerning the revenue for personal income tax for the current fiscal year?

MS. HARNISH: The most recent information and forecast is as set forward in December 2008 by the Minister of Finance, and that number is $1,784,420,000.

MR. STEELE: Are you telling me that the department has no information, since December 19^th, that would allow the department to update that figure? Is that your testimony here today?

MS. HARNISH: It's not up to the department to change the forecast. It's up to the Minister of Finance to revise the forecast, not the department.

MR. STEELE: You are just dancing around the question. Please answer the question I am asking.

MS. HARNISH: Mr. Steele, I am answering within my authority.

MR. STEELE: Let me ask you the question this way. I don't agree with you that you're answering within your authority, that's perhaps for another forum. If the committee went in camera, would you answer it then?

MS. HARNISH: I would answer exactly the same way.

MR. STEELE: So this has nothing to do with confidentiality or publicity. You understand your instructions to be, or your authority, that regardless of what facts are known to you, you will not present those facts to this committee in answer to a direct question?

MS. HARNISH: There are no other facts. The Minister of Finance is the person who develops and makes public the forecast. It is his forecast, it is not the department's forecast.

MR. STEELE: Does the minister sit at his computer and try to surf the net to try to find out what the figures are, or do you present them to him?

MS. HARNISH: Of course, we provide advice to the minister, as we provide advice on many things . . .

MR. STEELE: I'm not asking you what you're presenting to the minister or what's in the minister's head. I'm asking you, what information do you know about the level of personal income tax for the current fiscal year?

MS. HARNISH: The personal income tax is a projection, it is projected by a number of variables. You have the most recent inputs into the models that we would be using.

MR. STEELE: And you have made no other projections after December 19^th, is that correct?

MS. HARNISH: The minister has not made projections since that point in time.

MR. STEELE: But that's not what I'm asking. I didn't ask you what the minister has done or what the minister thinks or what's on the minister's desk. I'm asking you what you know, what's on your desk?

MS. HARNISH: I haven't made a projection, no.

MR. STEELE: And you have seen no factual information that would allow you to know what the current state of personal income revenue is for this fiscal year, is that right?

MS. HARNISH: We have lots of data, we make lots of projections, but the minister has not made a revenue update since December.

MR. STEELE: But I didn't ask you whether the minister had made a revenue update, I'm asking you what you know factually to be true.

MS. HARNISH: I can't speculate on what the minister's forecast will be.

MR. STEELE: Did I ask you to speculate on what the minister's forecast will be? Did I ask you that? So why are you pretending to answer questions that I've never asked? Why can't you just tell the people of Nova Scotia what you know - the facts?

MS. HARNISH: These are not facts, these are all speculation. These are forecasts, I've told you that.

MR. STEELE: Okay, so when you go back to the Department of Finance - we're one week away from the end of a fiscal year and you don't know what the state of the province's finances are? Other provinces can do it, almost every other province has delivered their budget. I've quoted things from Quebec Finance, Ontario Finance, they all know. What is it that they know that we don't know?

MS. HARNISH: They would be forecasting. Our data comes in often 18 months after the actual year end, so anything that's released by any province would be a forecast by the minister at the time. It would certainly not be based on factual information and absolute numbers.

MR. STEELE: Yes, I know. Look, I've been around for awhile and I understand you don't get the final figures for like six months, 12 months, 18 months, but I'm not asking you for that. I quoted you something from the Ontario Ministry of Finance, saying what their revenue was after December 31^st and saying it had already dropped by $3 billion. Are you saying you have no idea where corporate income revenue is right now in Nova Scotia? You have no idea?

MS. HARNISH: I'm telling you that the last forecast - and all of these numbers are forecast - was made and released by the minister in December 2008.

MR. STEELE: That's not what I asked you. What I asked you was whether you have more up-to-date information than what was in the forecast.

MS. HARNISH: We would have another month or so of data to feed into a model that would be used to produce forecast, but . . .

MR. STEELE: Excellent. Give me that data, then. You have the information, give it to me.

MS. HARNISH: Well, you have the statistics, they're here.

MR. STEELE: No, it's not there. You know it's not there.

MS. HARNISH: These are the statistics we would feed into our modelling.

MR. STEELE: You just said you have another month or two of data, which I . . .

MS. HARNISH: And these are our last months of data.

MR. STEELE: No, the data's not there, I've looked through it. You know it's not there. What is the most recent . . .

MS. HARNISH: Personal income tax is a calculation. It is not an annual amount or even a monthly updated data.

MR. STEELE: If an Ontario Finance official can say what their corporate income tax revenue was approximately, why can't you?

MS. HARNISH: I can't speak to what the Ontario Government was doing or what the Ontario Finance people were doing.

MR. CHAIRMAN: Order, please. Mr. Steele's time has expired. I have added two minutes to Mr. Steele's time because of the points of order. Ms. Whalen.

MS. DIANA WHALEN: Thank you very much. We're glad to have you here today, I think it's going to be a long three hours from the start we've just had. I think you can appreciate, Ms. Harnish, why it's so important to Nova Scotians to know where we're at in terms of all of the uncertainty that's surrounding not only our province, but the country and the global economic situation. There are a lot of indicators that we're getting from other provinces and from other countries that are saying that other jurisdictions are taking action and facing the problems head-on, laying out a plan on what's going to happen. Here in Nova Scotia, we're hearing that we can wait, it's not really a big problem yet.

In October when we asked, we were told that six to eight months is when we'll have a better view of it. Here we are six to eight months later and we still know it's going to be a little while yet before we see what the government might have in mind or how we might be responding. There's a lot of frustration, I believe, a lot of anxiety, and certainly we would like to get a better sense now of where we're going. At this point, as was mentioned, we don't even know when the House will go in or when we will see our budget - it seems to be certainly later than recent years.

So what I'm wondering is, particularly, I wanted to start with the budget because clearly we already have the December update, it's in front of me, and I think those are the figures you're prepared to give us today. That's what I'm hearing you say and it is disappointing, I will say that, because clearly you have a large department with very professional people and they are monitoring this, I'm sure, on a daily basis. You have economists, you have accountants, you have people who are expert in projecting, in making assumptions and taking their best view. We're not hearing any of that today and that's unfortunate because they are servants of the province, as well, and we need to know that this province has a vision, has some control and knows where it's going. That's our concern.

In terms of the budget for this year, I'd like to just ask you if you have all of the information you need at hand for a budget. If the minister decided that we were to have a budget next week, are you prepared, have you got everything ready? It's a pretty simple question, I don't know why you look quixotic about that.

MS. HARNISH: The budget is a work in progress always, until it is tabled in the House of Assembly.

MS. WHALEN: Have you had any indication from the minister when a budget will be presented?

MS. HARNISH: That isn't something that I can comment on, that's certainly up to the minister.

MS. WHALEN: If you've had discussions, could you tell us?

MS. HARNISH: No, I have had no discussions. I have had no instruction from the minister yet on his budget date. When he tables his 30 days, I'll have an idea.

MS. WHALEN: And how is he to know that you're ready with a budget, that you have it prepared, that there aren't going to be great delays?

MS. HARNISH: We work constantly with the elected officials in the development of a budget.

MS. WHALEN: So it is developed, it's underway?

MS. HARNISH: A budget is a work in progress until it's tabled.

MS. WHALEN: Do you have all of the information from the departments other than anything they might just update because of months of delay?

MS. HARNISH: The departments update us every month on a number of factors and we are receiving these updates on a regular basis. The budget will be based on the best available information at the time the minister signals he's prepared to complete his exercise.

MS. WHALEN: Are you waiting because you want more information from the federal government or from municipalities? You mentioned several other things in your opening comments.

MS. HARNISH: We receive information on a monthly basis, as well, from statistics, from a wide variety of sources, and we use the best available information we have and close off the forecasts, when the minister makes a determination he's prepared to close off the information that he's waiting for.

MS. WHALEN: Ms. Harnish, everything in this province seems just fine to roll along, business as usual, no particular worries about anything. What the public sees is a withholding of information, tremendous delays, an opportunity I guess for the government to close ranks and simply not be forthcoming.

[9:30 a.m.]

In 2007, when the federal government put in their budget in March, four days later we had our budget ready. We were ready to go and a budget was presented here. It's kind of inconceivable that you're not ready today, if you were called on today. That's what I want to know - are you ready today?

MS. HARNISH: At any given time we have a most recent set of data that we would use to develop the budget. We will have 30 days, we will close the information that we're prepared to build a budget on, once we receive an indication of the filing date.

MS. WHALEN: In preparation to come here today, Ms. Harnish, did you have any discussions with the Premier's Office about questions that you should or should not answer?

MS. HARNISH: No.

MS. WHALEN: None whatsoever?

MS. HARNISH: No.

MS. WHALEN: Did you have any questions at all with your minister? Any discussions about, again, what would be appropriate? I know you didn't want to come today and you've had to come, are you able to tell me if you had any discussions with the minister about what you should or should not answer?

MS. HARNISH: I'm certainly not at liberty to discuss the conversations between me and the minister.

MS. WHALEN: Has the Premier's Office or your minister given you any indication of when a budget will be presented?

MS. HARNISH: That would be - we will not get an indication until probably the date the House is called, at which point we know we have roughly 30 days, give or take a couple, to finalize the budget.

MS. WHALEN: So I guess you're as in the dark as the rest of us, that's interesting. Clearly if it's a work in progress, you haven't sent it yet to the printer.

MS. HARNISH: We send it to the printer the night before, generally. That truly is a work in progress, until budget day, usually.

MS. WHALEN: I would be willing to speculate that 95 per cent of it is ready to go and you may make a few changes, based on a one-month update or whatever, but you have a clear indication, you know the figures that are going to be impacting this coming year and you know whether or not Nova Scotians should be worried or should be comforted by the situation that is before us.

Nobody here has that same confidence, we don't have exact details and I imagine we will, with three hours at hand we probably will go through each item and see what we can find out. We've touched on personal income tax, we've talked about corporate income tax.

We need to know what those forecasts are and what the indications are, the early indications of this, the job losses and the cuts that are going to be coming in industry and going to affect us directly.

Are there no figures that you can indicate to us that would say that for perhaps, for example, let's take the offshore royalties and just take that as one item, have you got figures you could give us on the price decreases and perhaps the impact on the royalties that we'll expect this year?

MS. HARNISH: No, I have nothing to provide other than the December 2008 forecast update numbers.

MS. WHALEN: And yet would you be able to tell us the price today?

MS. HARNISH: Not offhand.

MS. WHALEN: Has it decreased by one-third? By one-half?

MS. HARNISH: I can't tell you what the price is. It was running $44.50 per mcf the last time I looked but that might have been a couple of weeks ago.

MS. WHALEN: So we'll have a look at where the budget was predicated on in December.

Again, every other province, practically, has either given a date for their budget or given updates or, as it was mentioned, Quebec is giving monthly updates to their people and to the Legislature, and yet we're left with just this business as usual, steady as she goes, you can wait until the next scheduled update or until the pleasure of the government. The frustration level is certainly rising about that.

I'm going to go back to the information that you might be requiring. Have you got all of the information that you need right now to present a budget? As you say, it's a work in process but have you got the information you need now, if it were required now?

MS. HARNISH: At any given time we would produce a budget, based on the instruction of the government and the best information available at that particular cut-off date.

MS. WHALEN: Ms. Harnish, how long are you allowed to go into the new year without a budget?

MS. HARNISH: I don't remember anything in the Provincial Finance Act that actually specifies the date. We would be governed more, I believe, by the spending limitations that are imposed in the Provincial Finance Act.

MS. WHALEN: And based on our spending, how long would that take you into the new year?

MS. HARNISH: Well, I believe the Provincial Finance Act talks about the ability to spend up to 50 per cent of the previous year's allocation.

MS. WHALEN: So we could carry on like this for quite some time, if it was the choice or the will of the government.

MS. HARNISH: It seems to me it was - and the Legislature has provided for that. I believe it was in 1999 that we had a budget in October because the government had changed at the time. So clearly, under the legislation, our constraint is on the amount that departments can spend and if that's exceeded, it is possible to request a special warrant for additional spending.

MS. WHALEN: So this could really carry on, if it was the will of the government and the minister.

If you have all of your information that's ready to go, what is standing in your way right now? Is it the Premier's Office?

MS. HARNISH: It's up to the Minister of Finance to decide when he's going to table his budget. I can't tell you what's in the minister's head right now.

MS. WHALEN: Have they provided you with the details surrounding any initiatives or spending priorities for the budget?

MS. HARNISH: We work constantly with the government to respond to their requests. The priorities will be set by the minister and the Executive Council and we'll be provided instructions when they're ready.

MS. WHALEN: So really you're saying you're not at liberty to tell us, would that be correct?

MS. HARNISH: Well, it's up to the government and, as I say, the budget is a work in progress until we print it the night before.

MS. WHALEN: I think what's important, though, is to know that there are spending priorities, that in the face of the crisis that's before us, that we have a plan, that there will be

a plan to get out of this, to chart a course through this. We have no indication that's the case so I'm wondering if there's any way you can tell us that there are strategic initiatives, that there are spending priorities that are going to be directly a result of the situation we're in today, the financial . . .

MS. HARNISH: The government always looks at a wide variety of options put forward by every minister and makes decisions according to the priorities, as they determine them.

MS. WHALEN: Ms. Harnish, would your department also provide advice to the minister?

MS. HARNISH: On?

MS. WHALEN: On how to chart a course through the coming uncertainty, through the economic upheaval, through the job losses and decreases in revenue?

MS. HARNISH: Many departments would provide input to the budget process. Certainly it's not the Department of Finance that sits and determines and devises programs. Each department is involved, from their own mandate, in looking at the needs of the client base and providing suggestions and recommendations to their respective ministers, who bring it forward during budget discussions.

MS. WHALEN: I'd just like to go to the last fiscal update, do I have a couple of minutes left, Mr. Chairman?

MR. CHAIRMAN: Yes.

MS. WHALEN: The last fiscal update in December, it was estimated that the government was going to cut $43.5 million in departmental expenses.

MS. HARNISH: It was.

MS. WHALEN: I would like to know, have you done that since then? Have you been able to cut that amount out of the spending of the departments?

MS. HARNISH: Departments have been largely living within their new budget targets, yes.

MS. WHALEN: Can you say that the $45 million reduction was achieved?

MS. HARNISH: Well, I don't have the most recent estimates, of course. Certainly deputies were asked to live within the new, reduced allocations, as were ministers.

MS. WHALEN: Could you say who initiated the $45 million reduction? Who set that target?

MS. HARNISH: I believe the target at the time was based on what was really calculated to be possible, given the time of year that departments were being asked to reduce their spending. Departments and ministers of departments would have reviewed the budget, as yet unallocated, and come forward with suggestions for review by the Treasury and Policy Board.

MS. WHALEN: So on whose instructions were the departments then told to decrease? Was that a minister's instruction?

MS. HARNISH: That would have been on the instruction of the Executive Council.

MS. WHALEN: So Cabinet, a Cabinet directive, okay. At what time did it begin? When was the direction given to cut?

MS. HARNISH: I believe departments were asked to start reviewing what would be in the art of the possible - maybe, I don't know, October.

MS. WHALEN: In October - the same October when the Premier was saying that we wouldn't know for awhile how our revenues were going to be and that there was no particular concern for six or eight months?

MS. HARNISH: I think that it was being prudent at the time, not knowing what was going to be coming, to take a hard look to see if there were ways that departments could also curb their spending without impacting the services they were responsible to provide.

MS. WHALEN: You mentioned that it was the Cabinet that made the decision to sign off on this reduction in all of the departmental spending. Can you say for sure that it was October or was it earlier, were results already coming in October?

MS. HARNISH: I don't think departments were asked to take a look until probably October.

MS. WHALEN: Would it be possible for you to provide us with relevant documents that pertain to those cuts? Do you have documents that would have outlined what was expected? I know you won't have them today, but would you be able to provide them? Of course, this is pre-December, so we should be able to get that, I would imagine.

MS. HARNISH: I'm not even sure what documents there are right now, whether or not there was a written instruction to departments to come forward with suggestions or not, but I can take a look.

MS. WHALEN: I'd like to look at what programs were cut, for what reasons, by how much, any drafts that were leading up to the final decision on program cuts, that sort of thing. As you said, it was within the art of the possible, each department must have examined their spending.

MS. HARNISH: I wouldn't have all of those specifics in my department, those would be inside each relevant department.

MS. WHALEN: Would you have briefing notes on that topic at all from each department, from each deputy minister?

MS. HARNISH: I don't think so.

MS. WHALEN: Were there any reports or recommendations that were put before Cabinet that you could provide?

MS. HARNISH: They would be with the Treasury and Policy Board.

MS. WHALEN: Can we request them from you or would we have to request them from someone else?

MS. HARNISH: You would have to request them from the Treasury and Policy Board office.

MS. WHALEN: Well, I would just like to request anything you have on that subject, if we could, please, anything that relates to that. I'll just move on. How's my time doing?

MR. CHAIRMAN: Your time is going to expire in a few seconds so I think I'll stop you there. Just one thing I'd like to clarify, Mr. Clarke is going to be next but, Mr. Steele, you quoted from a document from Quebec. I would ask you to table that with the members.

MR. STEELE: Sure, no problem.

MR. CHAIRMAN: Mr. Clarke.

MR. CLARKE: Thank you, Mr. Chairman. I, too, would like to thank the deputy minister for coming and showing her willingness to undertake in a dialogue. If I recall, in the preamble to this, people were looking at the concerns about the overall economic conditions of which we all are - it's part of a global reality of which, I think it's fair to say, deputy, that Nova Scotia has not been immune to. At the same time I think it's also fair to talk about what's relevant for Nova Scotia, again, what's relevant within the authority of the deputy minister to do.

Deputy, there has been some reference to Quebec as well as Ontario, in broad comparisons of what ministers would have said or ministries authorized to say, but specifically here in this province I think it's also safe to say, we're not Quebec or Ontario, our realities are not Quebec or Ontario and the relevancy of what we talk about has to be on those Nova Scotia numbers. Just again for clarity for us, the numbers in the package you presented, can you provide just some broad strokes of where we were as of the December update, upon which the Minister of Finance actually spoke to and addressed and accepted those on behalf of government?

MS. HARNISH: Well, at the time in December, we were forecasting a budget surplus of $212.9 million, which was about $23 million more than the estimate that the minister had prepared at budget time. The revenues in December were forecast at that point to be slightly more than at budget time. A large part of that was due to the Crown Share Adjustment Payment, which had not been estimated at budget time. As you remember at that point, the work of the expert panel on Crown share was ongoing, but the expert panel report had not yet been released. So that $95 million contributed quite a bit to the additional revenue that we were anticipating in December with the forecast there.

The expenses, as well, were forecast to be $8.3 billion, just slightly lower than budget. Although we were forecasting a decrease by departments of about $43 million due to budget efficiency measures, there were increases in the pension valuation adjustment, for example, and government had announced an expanded Heating Assistance Rebate Program, as well as bumped the energy efficiency programs with an additional allocation to those.

Debt service costs were relatively the same at that point in time, that's probably the high points.

MR. CLARKE: Thank you very much. I would assume, as well, I mean there are other matters now associated with where we are provincially, the new Minister of Finance, you're in that process of providing him with updates and advice as associated with the ongoing process of the budget. Can you tell me how many years now that you've been Deputy Minister of Finance?

[9:45 a.m.]

MS. HARNISH: Since January 2004.

MR. CLARKE: So you've been involved obviously with the budget process since 2004?

MS. HARNISH: And prior to that with Treasury and Policy Board.

MR. CLARKE: How many years with Treasury and Policy Board before that?

MS. HARNISH: I've probably been involved in budgets since 2001.

MR. CLARKE: So since 2001 you've had some direct involvement with the budget process and in that time period, since 2001, how often would you have gone forward and disclosed information with regard to the budget or spoke on behalf of a minister or government publicly or before committee?

MS. HARNISH: Well, I've never spoken about a budget that had not yet been prepared and released by a minister.

MR. CLARKE: I suspect not and that's part of the point being raised with regard to the authority and precedence and the procedures here in Nova Scotia. I think you've upheld those processes within that and it is important. I would like to come back to Quebec and Ontario, in terms of some of the differences. One of the things that was raised by Mr. Steele previously was regarding revenue streams and the direct differences. Is it fair to say that the Quebec and Ontario economy revenue streams would be dramatically different than those of Nova Scotia?

MS. HARNISH: It is. Quebec and Ontario are much more volatile economies and much more dependent on manufacturing for a large proportion of their economic base than is Nova Scotia. With the downturn internationally as well as in the U.S., which is the major trading partner of Canada, you would see that that economy would be impacted much quicker and possibly more harshly than would Nova Scotia.

Our economy is largely a service-based economy and the service-based economy really isn't hit by the export market to the same extent as would be other provinces in Central Canada, so we are more stable. Our ups are not as great; on the downside our annual economic growth doesn't have the highs that some other provinces do. On the plus side we aren't also impacted as harshly by the vagaries of the international economic climate as are those provinces.

MR. CLARKE: Would you say, deputy, that since you've been directly involved since 2001 in the budget process and, of course, the revenue streams, that Nova Scotia's revenue mix has shifted and changed in terms of its composition and how, as budgets have proceeded, where the main streams would have come from, that it's not the same as, say, Ontario or Quebec, as has been referenced?

MS. HARNISH: Part of our revenue, at least one-third, is based on federal sources. Much of that revenue is fixed at the beginning of the year. Equalization, for example, is a large portion of our annual revenue base, it's likely around 20 per cent, that's fixed a year in advance and that's fixed according to formula - CHT, CST, those numbers are also largely

fixed, so we are not subject to changes throughout the year at all hardly in that particular source of our revenue. Other variables, provincial-owned source revenues, many of those revenues are also unaffected by the economy.

MR. CLARKE: Can you tell me, when you deal with your other colleagues within government and the respective departments, when you receive direction and information, is it on the authority of the department, or deputies, or the authority of the minister that that information is provided to you on behalf of the Minister of Finance?

MS. HARNISH: Oh, it's provided on the authority of the minister of that department. Deputies on their own certainly don't have the ability to make decisions regarding their spending, they do that at the instruction of the minister of the department.

MR. CLARKE: And you make recommendations and advice, as options for them to look at and consider, and they may go back and look for other types of information and/or projections?

MS. HARNISH: In our capacity as support to the government and making budget decisions, the Department of Finance provides advice, we don't make decisions. We only can work to fulfill the instructions of the Minister of Finance and his colleagues.

MR. CLARKE: There has been discussion about budget dates and when they're set and decisions made on a budget, so it's clear that you don't make a decision on what the final budget is or what it will be. Have you ever selected a budget date yourself?

MS. HARNISH: No, I haven't, and I didn't anticipate I would . . .

MR. CLARKE: I think that's consistent but, however, some of the questioning that I've heard here, Mr. Chairman, would suggest that the deputy minister, or deputies make those choices. I think it's fair to say, and more importantly, the role that you would have in this process and the types of things that we'd want to look at, and I think there are a lot of relevant matters that are key to the economic development interests, and I'm sort of wondering and left to wonder if this is the Public Accounts Committee or if it's the Economic Development Committee because, quite frankly, I'm left wondering if what you're trying to talk about is the economy or, indeed, is it trying to get into a wider process because you're not satisfied with what you think should or shouldn't be, even though the normal processes continue.

I must say, as well, that in the time I have I will apologize because I think in some cases, as I've indicated in my points of order - you don't have to add on time, I won't do another point of order but I might reiterate, I think badgering people to expect information that really should be flowing from a minister who is responsible for a portfolio is something that bears probably the consideration, and thoughtful consideration, of members of this

committee. However, it is the prerogative of those members to act as they see fit and they're reflected in the same light, in terms of their conduct, Mr. Chairman.

Also, I'd like to, with the deputy minister, just look at where we are. One of the things that has come up, deputy, is our discussions in Nova Scotia about how we are structured fiscally. There have been transformations with regard to accounting procedures for this province that differ - can you just explain, as well, to me, are all provinces under the same accounting and reporting procedures and budgetary processes, or are there variances in that process?

MS. HARNISH: In terms of the accounting, pretty well all provinces in Canada have adopted GAAP - Generally Accepted Accounting Principles - to some extent. The extent varies according to the individual province, so their degree of implementation, for example, of consolidation varies according to the individual province; in other words, how many of their external organizations they actually account for within their financial statements, whether they budget on a consolidated basis. So in our case, we are very well along the road to adopting GAAP. We consolidate, bring into our financial statements, all of the third-party entities over which we would have ownership and control. So that would be school boards, district health authorities, small options homes. We have very long and large schedules of the entities that we do consolidate in this province.

We moved to full accrual accounting several years ago. We have been improving and progressing in our adoption of GAAP standards since 2000, I believe, was the year that we shifted to that kind of accounting. All provinces are not at the same level and don't always employ the same degree.

Also, within GAAP there are some areas that are discretionary, in terms of treatment of various kinds of accounting principles and not all provinces have adopted the same response, where there is a choice of acceptable options, but Nova Scotia is among one of the leaders, in terms of the extent of its adoption of Generally Accepted Accounting Principles.

MR. CLARKE: Deputy, with regard to Nova Scotia processes, in terms of the budget process itself, is it fair to say that Nova Scotia's process for doing a budget would differ from other provinces and they, too, would differ from ourselves or other counterparts?

MS. HARNISH: Various provinces have various legislations, for example, under which they prepare their budget. We have the Provincial Finance Act which sets the standards for the preparation of budgets in this province, others have similar legislation. The House Rules would vary according to different provinces. Even the traditional means used to actually produce a budget would vary across the provinces.

In some areas we're very similar, in some areas we differ from other provinces. For example, in Nova Scotia we have responsibilities for determining the budget split between

the Department of Finance and the Treasury and Policy Board. In our province the Department of Finance is responsible for the development of the overall fiscal plan that the minister would be using, so that would be a Finance Minister's prerogative. The Treasury and Policy Board Minister is responsible for the development of the expenditure estimates for each department. The Finance Minister is responsible for the forecasts of revenues. It is a split and shared process, not all provinces use that shared process. In some the Finance Minister is responsible for the entire preparation of the budget.

MR. CLARKE: So I guess it's safe to say, if we're going to sit here and talk about other jurisdictions, likely those comparisons are not in the full context of what is relevant to Nova Scotia versus where we are, that since we've come in, I guess really Nova Scotia's process is not the same as Quebec or Ontario in its completeness, is it?

MS. HARNISH: Every province has their own specific ways of approaching a budget.

MR. CLARKE: Since you've been involved with the budgetary process, have you found a consistency of approach, within a Nova Scotia context, of how that budget evolution - recognizing there have been accounting changes, as you've referenced before?

MS. HARNISH: Actually the budget development process differs slightly almost every year and that is the call of the minister of the day.

MR. CLARKE: Right, and over that period you've dealt with different ministers who have had that authority.

MS. HARNISH: I have. This is the third minister that I've dealt with, while Deputy Minister of Finance and prior to that, of course, there would have been another minister while I was at Treasury and Policy Board. So each minister has his own tone and approach. In this case we have a minister who is very newly minted now, and I would expect that this minister is going to also want to add and lend to the budget process his own particular thoughts and approaches to doing things.

MR. CHAIRMAN: Order, the time has expired. Mr. Steele, please.

MR. STEELE: Thank you very much. At the end of February the Acting Minister of Finance promised that updated financial information would be released sometime within the next few weeks. Now, I was there in the media room when he said it, I heard it with my own ears. Is that going to happen? Do you have instructions to prepare a fiscal update in advance of the budget?

MS. HARNISH: I wasn't in the room to hear it. I did read the paper where it said he was going to do that. That was certainly his prerogative to do it at the time, if he so chose.

MR. STEELE: I asked you if you have any instructions to prepare a financial update in advance of the budget.

MS. HARNISH: That was another minister. This new minister has been in place for less than two weeks.

MR. STEELE: Listen to my question and answer my question, do you or do you not have instructions to prepare a financial update in advance of the budget?

MS. HARNISH: Not at this point.

MR. STEELE: Okay, and if the minister promised an update, that was, as you say, his prerogative and not something that you have any instructions to follow through on, correct?

MS. HARNISH: That minister is no longer the minister, of course.

MR. STEELE: I'm aware of that. You have no instructions, at any rate.

All right, let's talk about growth forecasts. I do want to thank you for providing that in the package, this is genuinely new information. Now, it's not private information but it is difficult for us to gather this ourselves because it has to come from a number of sources. I'd like to refer committee members to a document. The pages aren't numbered so it's hard to say - it's about halfway through the package and it's headed Table 1A, Forecasts of Macroeconomic Performance, and . . .

MS. HARNISH: From private-sector forecasters.

MR. STEELE: Pardon?

MS. HARNISH: Yes, this would be a collection of the most recent forecasts from the private sector.

MR. STEELE: Right, this is a Department of Finance collection of private-sector growth forecasts. I haven't seen most of these before, I've only seen a couple of them and I want to thank you for bringing that today. I notice that this document is updated on March 23^rd, so this is the information as of yesterday. This is all really I'm looking for, I'm looking for factual information about the state of the province's finances. You've clearly refused to give any information generated by or within the department. This is not information generated by the department, nevertheless it's useful.

[10:00 a.m.]

When we look at the forecast GDP growth for 2009, of all these private-sector forecasters, we notice that the average forecast is a drop in GDP for 2009 of 0.6 per cent. Why does this matter? It matters because GDP growth is a fundamental input into the preparation of a budget, and more particularly it was a fundamental input into the financial analysis that accompanied the infrastructure plan that was released on March 11^th. The plan calls for an increase in Nova Scotia's debt to $13.5 billion, for a percentage increase of 11.6 per cent, but the plan also says that the debt-to-GDP ratio will not change. But simple math will tell us that if the debt is going up, if the ratio is not to change, then the economy must grow by the same amount, otherwise you end up with a different ratio. What is the rationale for a growth forecast between now and 2011-12, totalling 11.6 per cent?

MS. HARNISH: The rationale?

MR. STEELE: It's implicit in the infrastructure plan, I'm now making it explicit.

MS. HARNISH: I'm just wondering what you mean by "rationale".

MR. STEELE: Given the private-sector forecast that we have here, which shows the economy going backward not forward at least for the next fiscal year, what is the information or the basis on which the Department of Finance has forecast growth over the next three years totalling 11.6 per cent?

MS. HARNISH: The forecast would be to 2011-12, as you know. What we have here is a private-sector forecast to 2010, so there's another year of growth that would still be implicit. Based on best information at the time, it was determined that that growth forecast would be the appropriate forecast to use for planning purposes for the infrastructure plan. The first year, for example, you'll note that the average is a minus-0.6. That's not necessarily the forecast that the Minister of Finance will use for 2009, that is just a rough average and it's quite variable, as you can see, according to the forecaster.

Many of these forecasts were also made in the absence of the stimulus package and you'll notice from the text of the infrastructure plan that it does include a specific increase in GDP related to stimulus efforts alone of a plus-3.7 per cent over the three-year period.

MR. STEELE: So that's a 3.7 per cent growth over three years due to the infrastructure plans?

MS. HARNISH: Due to just the stimulus.

MR. STEELE: And what is the factual basis on which the department projects the other 8 per cent growth, which, as you know, is far above any private-sector forecast? It's based on something - what's it based on?

MS. HARNISH: It would be based on the best information that the minister would have at the time with respect to a number of factors. GDP is based on consumption, plus investment, plus government expenditures, plus exports, minus imports - that's the economic formula for gross domestic product. Those various parameters, the estimates of forecasts of each one of those, is based on historical growth rates, as well as predictions with respect to a number of factors that are made and input into the economic models that we have.

MR. STEELE: Of course, one of the selling points of the infrastructure plan is precisely that at the end of the day it won't have any adverse impact on the debt-to-GDP ratio, but that depends on assumption about growth. It just seems - it's hard to see what it's based on.

Let's take the average growth over the next two years, if you average it out it is a total growth over two years of 1.1 per cent. Let's be generous and assume that the infrastructure plan has the impact that you forecast of 3.7 per cent, that's still leaves a gap for one year of 7 per cent growth. Does that not seem unrealistic to you?

MS. HARNISH: The forecast itself is based on the time period 2007-08 through to 2011-12.

MR. STEELE: Right. In fact, you kind of put your finger on a little sleight of hand that has gone on in the infrastructure plan, because the debt-to-GDP ratio that's being referred to isn't the debt-to-GDP ratio today. It's the debt-to-GDP ratio a year ago, isn't it?

MS. HARNISH: Tabled in the last financial statements for year ended March 2008.

MR. STEELE: Okay, so that's 365 days minus a week. Although that news release kind of tells a little stretcher by saying that it refers to the debt-to-GDP ratio today when really it didn't mean today, it says last year. In fact, today, the debt-to-GDP ratio is better, isn't it, than that 36.7 per cent? So if we're talking about today it would be a different figure, wouldn't it?

MS. HARNISH: I'm not sure what it was, as a matter of fact. I don't think I have the calculation of that right now for as of December.

MR. STEELE: But you'll agree with me that if it was 36.7 per cent a year ago, that it's less than that today, isn't it?

MS. HARNISH: It was predicted at budget time to be declining, but in my head I don't really have the number.

MR. STEELE: Isn't that a little bit of a stretcher then to talk about debt-to-GDP ratio today when really what was meant was a year ago?

MS. HARNISH: I believe that the document is very specific in identifying 2007-08 as the base here.

MR. STEELE: Now, based on the private-sector forecasts - and typically what the Department of Finance does in a budget is it comes in roughly around the average. It tries not to be above the private-sector forecast, it tries not to be below, it often takes something fairly close to an average. The average is a decline of 0.6 per cent for 2009.

Here's what I'm looking for. There must have been a financial analysis behind the figures given in the infrastructure plan and the news release that went out with it, somebody must have done a financial analysis to justify those figures. Can you release that analysis to this committee?

MS. HARNISH: It would be an economic growth analysis that the minister would have used, adopted and accepted in order to predict the amount of infrastructure spending available.

MR. STEELE: So presumably you wouldn't have any difficulty releasing that to this committee?

MS. HARNISH: Well, I will certainly discuss it with the minister to see if he would be prepared to.

MR. STEELE: There's an analysis prepared by the department to justify a program that has already been announced. Can you think of a single good reason why that shouldn't be released without even thinking about it, why you have to discuss it with anybody?

MS. HARNISH: It's a forecast that was provided to the Executive Council as advice.

MR. STEELE: I know, but it's a program that has already been announced. Do you understand how freedom of information laws work? Once something is announced, it is no longer protected, it has to be released - and it's in a news release. I'm just saying, I want to see the analysis that backs up the figures - apparently very rosy figures - behind the analysis announced by the government. I'm prepared to accept that maybe there's a reason to think that the Nova Scotia economy will grow by 11.6 per cent, but I want to see the analysis and you're saying, well, you'll think about it. Why can't I see that analysis, why can't this committee see that analysis?

MS. HARNISH: I will certainly go back to the department and determine whether or not it is something that the minister is prepared to release right now.

I will indicate though, as I've said, many of these private-sector forecasts didn't anticipate the infrastructure plan. They were prepared somewhat in advance of the infrastructure stimulus plan itself being released. I mean you look at it and it is all over the map; the Royal Bank, for example, is quite aggressive in its forecast. So every economist, every forecaster, every institution has a different opinion about what's going to happen in the economy.

MR. STEELE: But you know what the problem is? Even if you take what you call an aggressive forecast, which is the Royal Bank, it adds up to 2.9 per cent over two years, which means that you still have, gosh, almost 9 per cent to make up in the third year. If I, or you, or anybody predicted that the Nova Scotia economy was going to go up by 9 per cent three years from now, people would laugh us out of the room, you know they would. Anyway, even if you take the most aggressive ones, I still don't see how you get from here to there.

Let me ask you about something else. There's something called critical path briefings, which are presented to deputy ministers. I happen to have one of them here, it is dated August 19^th, and by the miracle of typographical errors it appears to me that I have another one dated January 21, 2009, although it seems to be an error, as they didn't mean to release that one to me but they did. These critical path briefings to a committee of deputy ministers include forecast updates. When was the last critical path briefing?

MS. HARNISH: Those are not made to deputy ministers. Those briefings are provided to the Executive Council or the Treasury and Policy Board, the collective of ministers sitting as the Treasury and Policy Board.

MR. CHAIRMAN: Order, please. Mr. Steele's time has expired. I would ask Mr. Steele to make copies of that available to the committee, please.

MR. STEELE: Happily.

MR. CHAIRMAN: Ms. Whalen.

MS. WHALEN: Yes, thank you very much. I'd like to ask you a little bit about the position again of the province at this time. My first question will be, could you tell us today if the government is in a deficit position at this time for this year's budget, the current situation?

MS. HARNISH: The December forecast provided a very large surplus forecast of $212 million.

MS. WHALEN: That sounded pretty rosy but, in fact, it was $1.2 million wasn't it, that's actually discretionary?

MS. HARNISH: The actual accounting surplus is $212 million.

MS. WHALEN: That's right, but . . .

MS. HARNISH: The discretionary amount would be based on the government's debt plan, which is a policy document which indicates that the government is not prepared to add to the net direct debt. The Premier did talk about amending that debt plan certainly on a go-forward basis, through the infrastructure plan.

MS. WHALEN: Yes, that's true, but is there not an obligation - under the offshore agreement and perhaps under the Crown as well - that you put that certain amount, that $105 million, onto the debt?

MS. HARNISH: The Provincial Finance Act calls for the commitment of the offshore offset amount to be put into surplus and therefore towards the debt.

MS. WHALEN: So at least $105 million of that has to go onto the debt.

MS. HARNISH: A budget can't be tabled - the Provincial Finance Act says we cannot table a deficit budget and a deficit is described as including that amount of surplus.

MS. WHALEN: So really that just flows directly through - that money is never available to be used. It comes onto the books and comes straight onto the debt?

MS. HARNISH: That's right.

MS. WHALEN: That's right. For the second portion of that, the other $105 million, it does show under your - the last time under, it shows as debt retirement.

MS. HARNISH: That's right. That's the policy commitment under the existing debt plan that indicates the government will not add to the debt of the province.

MS. WHALEN: So you're saying, based on what the Premier said when he announced his sketch of an infrastructure plan, when he made that announcement of the spending stimulus, he would change the debt plan and, therefore, there would be flexibility to remove that $105 million.

MS. HARNISH: I'm saying he says on a go-forward basis, the stimulus numbers for the next three years will require a - I don't know over what period of time. For the three years specified, he has indicated that the debt plan will be amended.

MS. WHALEN: Well, that's going forward. Do you think there's a commitment right now that we have to adhere to that, that there would be $210 million going towards the debt retirement here, as shown in December? Are we obliged to stick to that?

MS. HARNISH: I haven't heard the Premier make any comment at all on the end year debt plan.

MS. WHALEN: So you have no idea what would happen to this year's books in terms of - at that time, in December - the $212 million that was projected as a surplus? I go back to the fact that only $1.2 million, which is beyond a rounding error in the kind of numbers we're talking about, was really available above and beyond those two commitments.

MS. HARNISH: Under the debt plan, that's right.

MS. WHALEN: And you cannot comment on what will happen with this year's budget?

MS. HARNISH: I can't. That would be something that will be contained in the upcoming budget forecast.

MS. WHALEN: And with your knowledge of the current growth and the various revenue streams that obviously are fluctuating and changing as the year goes on, can you tell us whether or not the government is facing a deficit now?

MS. HARNISH: I wouldn't be prepared to comment on what the minister is going to be tabling next month.

[10:15 a.m.]

MS. WHALEN: So you don't know whether we're in a deficit position at this point in time or you can't say?

MS. HARNISH: I'm not prepared to make a comment on what the minister will be tabling next month.

MS. WHALEN: Okay. With your updated numbers, do you see declines in revenue?

MS. HARNISH: In the future?

MS. WHALEN: This year. It's been happening for the last six to eight months.

MS. HARNISH: In December we forecast a fairly steady revenue. You should remember, as I mentioned to Minister Clarke earlier on, many of Nova Scotia's revenues are

much more stable than would be revenues of some of the larger provinces, for example. Our economy is much more stable. Clearly one can look at some of the elements and know they're tied to commodity prices, like offshore royalties. At the same time, others don't vary nearly as quickly as they would in the larger provinces. Our retail sales are stable, for example.

If you look at the various drivers behind the revenue sources for this province, you'll note that we haven't been experiencing the same kind of fluctuations and major immediate impact that other provinces have in those same drivers. That's what the statistics that I've tabled would show, we're holding our course in a number of areas.

MS. WHALEN: In terms of exports, we know that exports have gone down significantly over a number of years, not just this year . . .

MS. HARNISH: Well, we have moved to a service sector, that's right.

MS. WHALEN: Yes, and service sectors are not as lucrative as some of our resource sectors. The lobster industry is tremendously important to this province and the exports of that one fishery alone and we know that it's gone way down and has significant decreases, particularly in exports. So can you comment even on that one sector, the lobster sector? You referenced it in your opening remarks.

MS. HARNISH: Everyone knows the prices of lobsters this Fall were at an all-time low. Prices now, just coincidentally, appear to be very high again but at the peak sou'west Nova Scotia season, the lobster fishermen were negatively impacted, for sure. I happen to know that.

MS. WHALEN: I'd like the deputy minister to know that a good third of the fleet is really looking at bankruptcy. They are tied up, they are in severe financial strife.

MS. HARNISH: My husband has a lobster licence, I'm very aware of the lobster fishery.

MS. WHALEN: Well, I didn't know that, but then that means you can feel it directly. I think that we have to look at the overall economics.

I know my colleague across the way asked questions about why we would be interested in economic indicators. Well, clearly this is the Economic Development Committee and economic indicators are entirely the basis of your assumptions and the drivers for your budget. So I think it's pretty clear why the committee and why the members of the Legislature are interested in the economic indicators and each and every one of these industries, we talk about fisheries and lobster but also forestry. Forestry is very much impacted and there have been closures or temporary closures of some of the pulp and paper

plants and a real possibility that some of them may be lost and that's very important to the communities where they are. Those are lucrative jobs, those are jobs that pay well.

Service-sector jobs often do not pay well, they will not put the same kind of money into our provincial coffers. So even if we show good employment rates, they may not be the kinds of jobs that are going to sustain the income of this province. Would you agree with that?

MS. HARNISH: Oh, I agree. On our Web site you will see a budget presentation, a pre-budget consultation presentation, that the department makes available to a wide variety of stakeholders. One of the things we've indicated is that our revenues will soften over the coming year and that's why there are hard decisions at play across all departments that the minister has discussed with respect to spending decisions, among other things.

MS. WHALEN: Well, we are getting mixed signals. You're saying that yes, the numbers will soften but nobody is prepared to really say to what extent and whether or not it is precipitous, like in other provinces, or whether, in fact, it is just a more marginal thing. If, in fact, it's not a dire crisis, then I think we should hear that now, so that people can relax and consumer confidence and business confidence can be shored up. I think that's an important thing and that's something that could be done today rather than delaying. Are you prepared to say whether or not it is precipitous or whether it is less than that?

MS. HARNISH: That would be a question for the Minister of Finance.

MS. WHALEN: So he's the keeper of all financial knowledge?

MS. HARNISH: He is.

MS. WHALEN: That's what we're hearing. You mentioned earlier that we're not able to table a deficit budget. Could you tell me what the Act says about that?

MS. HARNISH: It's Section 75, I believe, of the Provincial Finance Act. What that Act requires is that a deficit budget not be tabled. The definition of deficit then goes on to go beyond the traditional accounting definition of deficit to indicate that basically, unless the accounting budget puts at least the amount of the offshore offset to surplus, it is considered to be a deficit budget. These lawyers designed that, so it's a rather convoluted description, but that is basically what the Act says.

MS. WHALEN: Would you agree then that the legislation prohibits the government from even introducing the budget, it can't even be introduced in a deficit position?

MS. HARNISH: It indicates that the Minister of Finance cannot table, I believe is the terminology. I don't have it in front of me.

MS. WHALEN: Because of world economic situations, because of the impact here in Nova Scotia, if it was necessary to have a deficit budget would the minister then have to make some changes to the legislation?

MS. HARNISH: The legislation would have to be amended, yes.

MS. WHALEN: So right now the government's hands are tied otherwise in the absence of that?

MS. HARNISH: Yes.

MS. WHALEN: How much time would I have left, Mr. Chairman?

MR. CHAIRMAN: You have about four and a half minutes.

MS. WHALEN: I'd like to go over again the infrastructure sketch, as I like to call it. We now have a figure, a $1.9 million figure over three years, we have a relative idea that more than 50 per cent is going to roads and so on, but I think that the line of questioning that Mr. Steele had around the really rosy projection of being able to maintain the debt-to-GDP ratio is something that we should explore again.

I do, again, appreciate seeing these various economists' forecasts for the Province of Nova Scotia. Even taking the rosiest one, when you talked about the Royal Bank being aggressive, their rosiest projection is 0.4 for next year, actually there's a 0.8 from APEC, as well as the TD, but none of them are over 1 per cent for next year, not one. What I am wondering is exactly whether or not the projection to maintain that debt-to-GDP ratio, which is an important indicator for financial lenders, for people who look at the stability of this province, if we're going to maintain that and increase our debt by $1.4 billion, up to $13.5 billion, we would need an increase in our GDP of 11.6 per cent over the three-year period, is that correct?

MS. HARNISH: I think we calculated an average annual increase over the four-year period of 2.7 per cent, when we were asked to perform that calculation one day.

MS. WHALEN: The interesting thing you say there is over a four-year period.

MS. HARNISH: Yes.

MS. WHALEN: Which wasn't clear from the Premier's announcement because he's talking about a three-year stimulus plan.

MS. HARNISH: I believe the document does indicate it's based on the starting point, the 36.7 per cent in 2007-08.

MS. WHALEN: So you had the benefit of this year's growth which even then, for 2008, which was our last year, shows 1.2 per cent, so it's still a very modest . . .

MS. HARNISH: It varies, yes. Certainly 2008 numbers aren't complete yet, so the estimate is anywhere from 1.2 per cent - the Bank of Canada most recently talked about 1.6 per cent for 2008 and, of course, 2009 and 2010 numbers have no acknowledgment of the infrastructure stimulus package built in.

MS. WHALEN: No, and again, you said the stimulus impact would be 3.7 per cent, is that what you thought, over the three years?

MS. HARNISH: That's right, over the three-year period.

MS. WHALEN: So divided by three?

MS. HARNISH: It would be at the end of the three-year period.

MS. WHALEN: So cumulatively it would be 3.7 per cent?

MS. HARNISH: That's right. It would add to an otherwise forecast in the absence of a stimulus package, 3.7 per cent to the final GDP.

MS. WHALEN: Can you explain why it would be 3.7 per cent when the majority of the spending is already budgeted spending? What we were told was $1 billion of that - no, in fact, even more - $1.1 billion is our standard spending, it would be business as usual in Nova Scotia and yet you still believe it would add that much additional to our growth?

MS. HARNISH: I'm going to have to go back and reference the document for a minute. That is the cumulative impact, I'm taking a look at this now.

MS. WHALEN: But I am right in saying then that $1.1 billion is our steady-as-she-goes, business-as-usual expenditure for three years?

MS. HARNISH: Yes, it would be. We normally spend anywhere from $300 million to $350 million a year on capital.

MS. WHALEN: Which would take us into that realm?

MS. HARNISH: That's right. The stimulus portion itself, yes - the breakout is here - would add 1.7 per cent over and above the normal spending. The normal spending itself is expected to add about 2 per cent to the GDP, so that's a very small proportion of the number of elements that impact GDP, of course, that would be the investment portion.

MS. WHALEN: But you're saying that . . .

MR. CHAIRMAN: Order, please. Time has expired. I'm going to propose a 10-minute break, to 10:35 a.m., and I'm going to add the 10 minutes to the proceedings for the day with the concurrence of the committee. Any objections?

Okay, we'll recess until 10:35 a.m.

[10:26 a.m. The committee recessed.]

[10:37 a.m. The committee reconvened.]

MR. CHAIRMAN: I'll bring the committee back to order. Order, please. Mr. Bain.

MR. KEITH BAIN: Thanks, Mr. Chairman. Just to follow up on a couple of points. Deputy, you mentioned that the Treasury and Policy Board is responsible for the expenditures, Finance is looking after the revenues and it is a combination of both that are involved in the budget process.

I realize that over the past while there's been a change in ministers - our former colleague and then we had an acting minister for awhile and now a new minister who, as you said earlier, wants to have his own input into the budget process. I am sure that through all this, the process has been going forward, that at the end of the day, when the time comes, there will be a budget ready to be presented?

MS. HARNISH: Certainly the preparation of the budget is an ongoing process, generally from the Fall of each and every year, as government starts to take a look at its priorities for the coming year.

MR. BAIN: I think, first of all, that we should also apologize for having you here today because I think many of the questions that are coming forward are more pertinent to the Public Accounts Committee than they certainly are to the Economic Development Committee, but we're continuing through the process.

Would it be fair to assume that service sectors are much more stable than many other sectors of our economy, and indeed, the economy throughout the country, and that's why we're in a better position at this point?

MS. HARNISH: Well, we tend to be somewhat more stable, without the highs or the lows of the manufacturing or goods-producing-based economy. Certainly at one point we were heavily resource-based. That has diminished over time.

Some of the statistics that I've tabled actually show the reduction in manufacturing output over the last number of years. We are very service-oriented these days. Also, our population tends to be more moderate in its response to things. If you notice, yes, our retail sales have declined, but possibly in many cases not as much as declines in other provinces, like Ontario, where the entire state of the economy and the auto sector are having quite an impact on the decisions of consumers in those provinces. So our retail sales have dipped but they're also more moderate than you would see in other locations. Generally we're slightly more optimistic than other locations in Canada, as Atlantic Canadians. So, for a number of reasons, we don't peak like others do and have high growth rates from time to time but we also don't tend to see the large negative swings that others do see.

MR. BAIN: Would it be fair to assume that in the service industry there's more predictability? Would that be a fair assumption?

MS. HARNISH: Yes, our service industry. A lot of it is things like the financial industry, the kinds of sectors, professionals, lawyers. We have a heavy public sector in this province, as well; 25 per cent of our labour force is, in one way or another, attached to the public sector, whether that's provincial, the extended provincial mandate of hospitals and school boards, and we have a heavy influence of federal public servants as well as municipal. So when 25 per cent of your labour force is public sector, it also adds some stability to the spending patterns, the income patterns and so on, of the labour force.

MR. BAIN: Mr. Chairman, I'm going to share my time with the rest of the members of the committee but I probably will be asking questions later on, if that's permissible.

MR. CHAIRMAN: Okay, that's great. Mr. Preyra.

MR. LEONARD PREYRA: Mr. Chairman, I'm going to give a few minutes of my time to Mr. Steele and then he'll give them back to me again, I believe that's his plan.

MR. CHAIRMAN: Okay, whatever you wish. Mr. Steele.

MR. STEELE: I promised my colleague I had only a few questions left. I wanted to pick up where I left off. I was referring to the Forecast Update by the Committee of Chairs. Now, I may have misunderstood that, is that a Committee of Chairs of Cabinet committees?

MS. HARNISH: Could I have a copy of that?

MR. STEELE: Sure.

MS. HARNISH: It's a little difficult for me to respond to something that I've not seen.

MR. STEELE: Okay, so this, the Forecast Update, Committee of Chairs, what does the Committee of Chairs refer to?

MS. HARNISH: That's a subcommittee of the Executive Council.

MR. STEELE: Okay. This one is dated August 19, 2008, we have another one dated in October. How often is a forecast update provided to the Committee of Chairs?

MS. HARNISH: When they request it - sometimes monthly, sometimes quarterly.

MR. STEELE: And when was the last one?

MS. HARNISH: I don't remember, to tell you the truth. The minister would bring something like a forecast update, when requested by his colleagues. In this case it would probably be done not as a Committee of Chairs, but made available to the entire Treasury and Policy Board as we're working through the preparation of the budget.

MR. STEELE: What I'm asking you, though, is when was the last forecast update done?

MS. HARNISH: I don't know.

MR. STEELE: Don't you prepare it?

MS. HARNISH: It's prepared by a number of people and I'm just not sure when that specific something called a Forecast Update would have been provided to the Treasury and Policy Board. I mean it's part of the budget process and we meet with that group weekly.

MR. STEELE: I'm sorry, it's not part of the budget process. These are dated back in August, October, it's not part of the budget process.

MS. HARNISH: But we bring this in at this time of year to the entire Treasury and Policy Board, as part of the budget process.

MR. STEELE: Okay, and presumably when you give those forecast updates, you don't tell them that it's really up to the minister as to what to tell them? You come to them with the best figures that you have, right?

MS. HARNISH: These figures would be the figures that are approved by the minister, to be tabled with his colleagues.

MR. STEELE: And has there been one since December 19^th?

MS. HARNISH: We've been working with the Treasury and Policy Board Committee since early January, in the development of the budget process, so we would be providing updated data to them on a regular basis.

MR. STEELE: In the freedom of information request that this came along with, it said something which I found interesting because I didn't know this before, it says, "It is the practice when briefing the Premier on overall budgetary matters pertaining to the Province of Nova Scotia, to do so verbally." This was all by way of explaining why there wasn't very much paper along the lines of what we had requested.

We have another letter that says the same thing about briefings to the minister. Can you explain to the committee why it is that briefings to the Minister of Finance and the Premier are, according to Bob Fowler, almost always done verbally?

MS. HARNISH: Do you have a copy of the letter that you're referencing?

MR. STEELE: Sure, but the relevant sentence is the one that I just read to you. I'll give it to the clerk and we'll pass it around but that's the relevant sentence.

[10:45 a.m.]

MS. HARNISH: So your question?

MR. STEELE: Why is it that briefings to the Minister of Finance and the Premier are almost always given verbally?

MS. HARNISH: Well, is that Mr. Fowler's letter?

MR. CHAIRMAN: Mr. Steele, if you could provide that to the deputy minister, it would be very helpful.

MR. STEELE: Okay, why don't I give it to the clerk, she can circulate it and then come back to it when she gets it copied.

So my last question to you is simply, when is the last time that the Premier was briefed verbally on the state of the province's finances?

MS. HARNISH: My briefing to the Premier, and I can't speak to anybody else's briefing to the Premier, is done in concert with the minister through the Treasury and Policy Board Committee meetings.

MR. STEELE: I didn't ask you how it was done, I asked you when it was done.

MS. HARNISH: Well, I can't tell you when Mr. Fowler last briefed the Premier.

MR. STEELE: You never personally brief the Premier?

MS. HARNISH: Our briefings to the Premier are done in concert with the Finance Minister.

MR. STEELE: You're dancing around the question. I'm asking a very simple question, when was the last one that you know of?

MS. HARNISH: At the last Treasury and Policy Board meeting.

MR. STEELE: Which was when?

MS. HARNISH: The Treasury and Policy Board meets weekly, but I can't tell you what I told them or what the minister made available to them at any given meeting, as you know.

MR. CHAIRMAN: Mr. Preyra.

MR. PREYRA: Thank you, Mr. Chairman. I'd like to thank the deputy for coming here today. I know you're here under protest and that this is a difficult time for the department, both because of the economic turbulence that you have to deal with and the death of a minister and I'm sure that's caused a great deal of anxiety in the department so I appreciate your being here.

I did want to just make a quick comment on the hardline position that you've taken today about the question of privilege. It's a very dangerous principle for us, if we're allowed to go unchallenged, to say that a deputy minister will not offer information to a committee of the House because she does or does not have instructions. This committee supersedes the minister. Public officials and deputies who come to committees of the House have to answer questions that are posed to public officials. It's just not a principle that we can accept and it's dangerous to other committees, as well, if we can't get the information we need, because we do represent the people of Nova Scotia.

I did want to ask just a quick question about your comment that as a deputy, you work with elected officials in the preparation of the budget. Deputies are the linchpin between the bureaucracy and the political arm of government, the Cabinet.

You say that you work on developing this budget and overall fiscal plan. Is there anything in the fiscal plan connected to the round of announcements that have been made recently to the $1.9 billion that's been spent, to the announcements of additional monies

being put in the Industrial Expansion Fund? Is there a connection between this overall fiscal plan that has gone forward and the spending announcements that have been made?

MS. HARNISH: Inside the fiscal plan would be an assumption of a certain amount of tangible capital assets spending and the operating statement would contain estimates of the amount of amortization and debt service associated with borrowing of the money for a certain level of tangible capital assets. That would be your direct connection to the fiscal plan.

MR. PREYRA: There is a sense, at least amongst the general public and others, that there really isn't a fiscal plan, that there isn't really a plan, that these are a series of just opportunistic and expedient announcements that are made that are not connected to the plan. I'm wondering, what is the connection between the fiscal plan that was presented, or the statement that was presented in December or in March, and what we're seeing now in the rollout of various announcements? Is there a general strategy or are there specific things being made up as the government goes along?

MS. HARNISH: The strategy is a go-forward strategy, starting in the next fiscal year. By that I'm talking about the infrastructure plan as provided by the Premier a couple of weeks ago. That will be picked up in our fiscal plan and included in our statement of expenses, of course, when we table the budget.

MR. PREYRA: My question, though - I understand that it's a go-forward strategy, but is it a go-forward strategy based on a plan that has been set out or is it something that's based more on a political plan?

MS. HARNISH: The budget itself is by its very nature a strategy and it's generally partly political and partly many other things and this would be part of the budget for the coming year.

MR. PREYRA: I'm not asking about the coming budget, I'm asking about the rollout of various announcements that have been made. Are they connected to an overall plan or is there some other plan that drives them?

MS. HARNISH: I'm not sure what you're expecting me to say here or to . . .

MR. PREYRA: Let me ask it a different way then. To what extent or what measures are in place in the Department of Finance - it's a lead agency, it is the agency really for everything that happens in government - to what extent is the Department of Finance insulated from political pressures? What measures are in place to protect the deputy from having to respond to a political plan rather than a fiscal plan?

MS. HARNISH: A budget is by its very nature partially a political plan, partly an economic plan, it's difficult to extricate the two. The fiscal plan that's presented in the House is a picture of government's plan for the future. Now, in terms of looking at the validity of the plan, the auditor takes a look every year at the revenue estimates contained in the budget document and that's right inside the Auditor General Act, not because he second-guesses, he would look at the results to take a look at its reasonableness and, in fact, you'll see a statement from the Auditor General in the front page of the budget document every year saying that the revenues themselves have been reviewed as to the reasonableness of the assumptions underlying them. Again, that provides a degree of comfort, it speaks to the fact that these are very reasonable estimates made by the government.

MR. PREYRA: Can I ask you a question about your projections and modelling? Again, I'm not asking you for the advice you're giving to the minister, although I think the committee has the right to ask those questions and you have a duty to respond to them, I'm not asking that. On your projections and modelling have you looked at specific measures that have been proposed in the course of this rollout relating to tax cuts, relating to infrastructure spending? Do you actually look at these announcements that have been made in terms of the extent to which they will, in fact, provide a fiscal stimulus or an economic stimulus and do you have those documents and are they available?

MS. HARNISH: They're not documents as much as model runs that would be prepared as a result of the actual stimulus package that was presented by the Premier two weeks ago. We have shocked our models and I think that's the term that staff use . . .

MR. PREYRA: You've more than shocked the models, I think.

MS. HARNISH: Well, that's an opinion. We have shocked the models to input an extra amount of infrastructure spending to determine, based on that modelling, the amount of employment that would be generated, direct, indirect and induced - they're input-output models that we use for this - associated with the extra capital spending in the plan itself. Those results, in fact, were presented in the document, that's where the additional employment and impact on GDP came from.

MR. PREYRA: Are the same tests applied to the spending in the Industrial Expansion Fund?

MS. HARNISH: The spending in the Industrial Expansion Fund hits the operating statement through the amount of interest or expected bad debts that would result from it. What we do look at in forecasting GDP and what all economists look at - and we would provide the minister with a number of scenarios each year - is the amount of overall investment expected in the economy. One of the elements of GDP is overall investment, so government investment would be only a small proportion of total investment actually anticipated when preparing a GDP forecast; for example, Deep Panuke is going to be a

significant contributor to the overall investment in the economy in the coming year. So the overall level of investment is used as one input and it's a forecast level of investment, to any models that would be run to predict GDP.

MR. PREYRA: So has the department then, in looking at this infrastructure spending, conducted the shock modelling of the various initiatives that have been put forward prior to their release and prior to their announcement by the government?

MS. HARNISH: It is and that would be the basis of the numbers contained in the infrastructure plan.

MR. PREYRA: And it would be the advice of the department then that this is the best - certainly in terms of measuring the costs and benefits of various initiatives - way of stimulating the economy?

MS. HARNISH: The folks who would make decisions on this would be provided with information on the anticipated impact of various types of expenditures and that would be one factor that they would consider when making decisions regarding how they're going to spend the money.

MR. PREYRA: I want to ask something about the end-of-year spending spree that we see each year. What does it say about the Department of Finance's ability to project government spending when each year we have several hundred million dollars that's spent in a spending spree, largely to escape the provisions of the Act which require money to go to the debt? How do you explain that, does that fit the GAAP requirement that you referred to earlier?

MS. HARNISH: GAAP in an accounting mechanism and it is reflected in the way we present our financial statements and actually do our calculations. So GAAP would have nothing to do with decisions by government on how or if they're going to spend available monies anytime during the year. GAAP is the test that we use or the guideline that we use when we actually do the accounting at the end of the year and present the results.

MR. PREYRA: One last question, I think I'm running out of time. I see in the document that was referred to earlier by Mr. Steele - which was Table 1A, the no-page references - that the private sector is projecting an unemployment rate of almost 10 per cent within the next two years. What provisions is the department making to address that pretty extraordinarily high rate of unemployment that we expect?

MS. HARNISH: I think I need to clarify the role of the department in any of this.

MR. PREYRA: What projections I mean, not provisions?

MS. HARNISH: Well, those projections will be part and parcel of the forecast and the minister's budget when he tables it within the next coming while.

MR. PREYRA: Thank you, Ms. Harnish.

MR. CHAIRMAN: Order, please. Mr. Preyra's time has expired. Ms. Whalen.

MS. WHALEN: Thanks very much. I'd like to go back to the questioning I was at when we were interrupted the last time and that would be back to the projections of growth for our province. A lot of the support that comes from the business community for the infrastructure plan is based on maintaining debt at a level that is manageable, so that we have the same capacity to repay it, as I understood from the chamber's response to the announcement. I think it was an important factor to build into the announcement because it gave that assurance that all is well. I think all of us, the business community and all of us need to know what that's based on and whether it is reliable information.

I want to go back again to the suggested growth rates. What I find difficult to understand right now is that from our earlier discussion you said that 2 per cent of the 3.7 per cent that's related to the stimulus package is, in fact, the usual level of spending, the $300 million to $350 million a year that we spend anyway on capital projects, schools, bridges, roads, we're doing that regardless. So that should have been included in these figures that were given from the economists far and wide, Table 1A that you gave us today. They would have been basing their projections on our pattern of spending up to this point in time. Yes, so you agree with me there that this estimate we have in front of us for 2008-09, and even 2010, is based on our regular level of spending and capital spending?

MS. HARNISH: I would expect that when the various forecasters are making those forecasts the infrastructure plan had not yet been released for most of them, I think for all of them. I would anticipate that they would have assumed some overall level of investment consistent with historical patterns.

MS. WHALEN: I wonder if you could explain to me where your estimate that an additional 2 per cent over the three years is going to come from regular spending because their estimate of annual growth is based on our regular spending that we have anyway. How is it that continuing to spend as we always have will add 2 per cent over the three-year period - above and beyond?

[11:00 a.m.]

MS. HARNISH: I believe what they're saying is that 2 per cent of the normal growth is based on normal government spending but over a three-year period the additional 1.7 - if you look at the table on Page 9 of Building for Growth, you'll see . . .

MS. WHALEN: I don't have that in right front of me unless you gave it to us.

MS. HARNISH: No, but I think it was put in this overall binder originally. Yes it is, it's under your Tab 2 and it's on Page 9.

MS. WHALEN: Yes, I don't have that binder. That's okay, you can just tell us.

MS. HARNISH: You can have it if you want.

MS. WHALEN: No, I've read the report.

MS. HARNISH: It does indicate that the addition to GDP by the end of the three-year period from the $800 million stimulus is 1.7 per cent.

MS. WHALEN: So it's clear that it is 1.7 per cent?

MS. HARNISH: It is, it does break it out.

MS. WHALEN: Then we still come back to the fact that in your earlier answers you did agree that we are looking at 11.6 per cent over the, as you said, four-year period (Interruption) It's really going back a year. It's still, compared to the figures in front of us and the fact that only $800 million is additional spending, very difficult to see where you've gotten those figures from, where the bump is going to be, where we're going to experience at least one year that's going have to be significantly better than the three that are in front of us here in this projection and I'm going back to Table 1A in terms of that. Can you walk us through the plan in terms of how we can maintain our ability to repay debt?

The debt-to-GDP ratio is really just a measure of how we can, as a province, repay the debt that we're taking on, how we have the capacity to repay. Rather than getting concerned about the details of that ratio, we need to know what it means and it means that we're going to increase our economy to the point where we can maintain extra debt. So if you could explain to me where that comes from when right in front of us we see debt projections for 2009, the average is a decrease, it's a 0.6 decrease and for the two other years shown it's only 1.2 per cent and 1.7 per cent at this point in time. It comes nowhere near an 11.6 per cent increase.

MS. HARNISH: Those are the forecasts of private-sector economists, those would not be the forecasts that I'm expecting would be built into the minister's forecast at budget time. That doesn't include the year 2011, which would still be added to that particular set of numbers here.

MS. WHALEN: And what would you say would have to be in 2011, based on these kinds of projections in front of us, in order to reach your target?

MS. HARNISH: It would be dependent on whether our own forecasts would be consistent with those and you see that they vary all over the place here. Certainly under the forecasts that the minister had at the time this plan was produced, and this would be under the forecasts that he would have been prepared to accept and use, the debt-to-GDP ratio supports the $1.9 billion total amount of investment.

MS. WHALEN: And it supports a growth rate of 11.6 percent?

MS. HARNISH: Over a four-year period.

MS. WHALEN: Over a four-year period. The three years here in front of us cumulatively is 2.3 per cent.

MS. HARNISH: Well, like I said, that depends on which forecast you look at and whose forecast you accept.

MS. WHALEN: Ms. Harnish, did I hear you say that these are private-sector economists and you're not expecting that the government will use private-sector economists' figures?

MS. HARNISH: The Department of Finance would be advising the minister based on its own models.

MS. WHALEN: Are your models superior to the banks and economic organizations across the country?

MS. HARNISH: We look at all sorts of forecasters each and every year. Our track record isn't too bad, I don't think.

MS. WHALEN: Can you tell me if there was a directive from the Premier's Office to find a model that would substantiate the claim that they could reach 11.6 per cent of growth over four years?

MS. HARNISH: No.

MS. WHALEN: Absolutely not?

MS. HARNISH: No.

MS. WHALEN: Would you not agree that your figure, that if you even take this as a basis or an indicator that all of these economists are averaging out at 2.3 per cent growth in three years, and that includes 2008, the fourth year in this plan would require a 9 per cent growth rate? Even if there's some rounding, even if there are some cumulative factors, it's

still an enormous difference between 2.3 per cent that we would garner over three years of growth.

MS. HARNISH: Well, that's if you accept - it depends on which forecast you accept here as being the appropriate forecast. As you can see, economists vary all over the place in any kind of forecast that they use.

MS. WHALEN: The variance is really quite small in any one of these and, in fact, including the federal government, there are 10 different economists and 10 different projections here and they don't differ dramatically from year to year, they differ within a percentage point. So it still doesn't account for where we would come to the point of recouping that growth, in one year getting enough growth to bring us to the same level of financial stability that we're at, or we were at, a year ago when that debt-to-GDP ratio was chosen.

I would like you to say again, where you would find other economists or other models that would support a fourth year of tremendous growth.

MS. HARNISH: Well, that would be assuming that the first three years' growth that will be the basis of the minister's forecast are at the low end of the private sector. I would suggest that the Minister of Finance will be comfortable with the forecast that he'll be tabling at budget time.

MS. WHALEN: And again, how will the minister come up with those forecasts? Where will he seek other information beyond what the banks and economists are estimating?

MS. HARNISH: He'll seek it from the Department of Finance, of course; he'll seek it from other private-sector forecasters. He looks at a variety of factors whenever the forecast is made and comes up with a determination.

MS. WHALEN: I think earlier I heard you use a term like shopping the model, or shopping . . .

MS. HARNISH: Shocking.

MS. WHALEN: Shocking. Okay, well I think this time it sounds like you're shopping around for the best model. That's how it really sounds, like we're looking out there, trying to see everywhere what all of the different models are and let's shop for one that will serve our purposes in this instance.

The fact that 10 other economists would come up with very different figures makes it look really unreliable that the Department of Finance would have figures that are significantly better.

MS. HARNISH: I would suggest that the department and the minister are comfortable with the results of its analysis.

MS. WHALEN: I would definitely have to suggest that the people of Nova Scotia cannot be too reassured by that kind of analysis when, in fact, it's so deviant from what everybody else is saying; it deviates greatly, it's not following what the wisdom is of a lot of other economic organizations.

Is there anything you can give us in terms of what the formula would be that you would follow to come up with the growth? Is there a great project that's going to come on stream in the fourth year? Is there something major that you would see in the near future - that's only two or three years away - that's going to make this difference?

I'd like to hear it. I think everybody would hope that there is something positive in the near future that's going to make a huge, shocking difference.

MS. HARNISH: I believe that the assumptions underlying the Department of Finance models and the advice that would be provided to the minister and the minister's determination are consistent with the kinds of inputs that we would have used in previous years, when forecasting. We use these same models every year, we use the same data sources every year. The assumptions and the inputs differ but I believe our success rate hasn't been too bad and certainly is at least as good as any of these other private-sector forecasters.

MS. WHALEN: When you say that you use the same inputs every year, would you not be using these forecasters as part of your inputs?

MS. HARNISH: We would be running models as well as looking at what others think. It is fair to say that the fourth year, 2011, should be a turnaround year, for example. The CPI is expected to grow over time. As you know, that bumps the amount of GDP, as well, because it's the difference between real domestic product and GDP. So, for a number of reasons, the anticipation is that by the end of 2011 the growth rate underlying the infrastructure plan is defensible.

MS. WHALEN: Can you provide any project or any particular initiative that's going to create a turnaround in 2011?

MS. HARNISH: I would have to go back and take a look at the various inputs. I'm certainly not a model-runner myself.

MS. WHALEN: One of the things you've told us earlier is that Nova Scotia is famous for its stability because we've got a lot of public-sector employees and activity, federal government activity, military and so on. We don't have tremendously - we don't have spikes,

we don't have highs and lows is what you told us, that we're a province that has a lot more stability than some of the other ones that we might have looked at today.

So in light of that, again, Ms. Harnish, why would we expect that in the fourth year we're going to see almost double-digit growth?

MS. HARNISH: I didn't say it would be double-digit, according to the forecasts, I didn't . . .

MS. WHALEN: Almost double.

MS. HARNISH: If you take a look - I'm trying to find it here - one of the tables I tabled with you actually shows historical GDP, among other things, for Nova Scotia over the last number of years. It's rather interesting as well to take a look at the history of the gross domestic product in this province.

MS. WHALEN: And have we had years where it would go to 8 per cent or 9 per cent growth?

MS. HARNISH: It's been good, steady growth over a number of years.

MS. WHALEN: Again, I go back to the fact that it has been steady, that it has not had highs and lows.

MS. HARNISH: Well, nominal GDP; there's a nice little table about three charts in from the end that shows Nominal GDP, % Change, Year to Year, for Nova Scotia: 5.1 per cent in 2001, 4.5 per cent in 2002, 6.5 per cent in 2003, 4.8 per cent in 2005. So when I say we're relatively stable, we don't have the 12 per cent and 13 per cent that Alberta might have had in the last couple of years.

MR. CHAIRMAN: Order, please. Ms. Whalen's time has expired. Mr. d'Entremont.

HON. CHRISTOPHER D'ENTREMONT: Thank you very much, Mr. Chairman, and I apologize for being a little late. The roads, even though we took a little bit of snow, there's only a little bit of snow on Highway No. 103, so I don't know how Highway No. 101 was for my friend from Digby-Annapolis but I do apologize.

I want to thank the deputy minister for being here today. I know that probably there's no harder-working deputy right now in the process of budget. I know that during her presentation she did talk about working on that budget and that budget to be tabled at a later date, so a lot of the information, I think, that this committee was looking for will be held within that budget at a later date.

I'm interested in a little bit of the reasoning of having the deputy minister here, to begin with. I know that this is the Economic Development Committee and I know that there are inputs and information that come from the department from time to time that would be important to modelling, to the information of the members of this committee yet, at the same time during this crucial period of budget process, I think the deputy minister's time is better spent working on the budget, with the staff and with the government officials.

Mr. Chairman, I'm not going to spend any real time on questioning the deputy minister because I do respect her time on working and I'm just going to leave it at that. So thank you very much for allowing me to speak for a couple of moments.

MR. CHAIRMAN: Is Mr. Bain going to share your time? Mr. MacKinnon.

MR. CLARRIE MACKINNON: Thank you very much, Mr. Chairman. It is great to have the deputy with us today. You mentioned, just in passing, what the minister will be presenting next month. Was that a faux pas or was that a Freudian slip or was that based on knowledge? Next month is April.

MS. HARNISH: Well, next month could be April or May, given that we're almost at the end of the month and in my world time just gets very confused right now.

MR. MACKINNON: Next month to me is April. However, we didn't get too many other answers so far today. You mentioned about the GAAP system, the auditing system that you've moved to and you talked about third-party consolidation. I'm concerned with - and there are a lot of concerns out there - the Nova Scotia School Boards Association, the health authorities and all of the third-party entities that are out there not knowing where they're going or what they're doing in the next fiscal year. We can say to them that things happen quicker and harsher elsewhere, but that's no comfort to them, it's not a bit of comfort to them. What kind of interactions are you having with the Nova Scotia School Boards Association, the health authorities and so on? Are there interactions with your department with these entities, these third-party entities?

[11:15 a.m.]

MS. HARNISH: Spending proposals are brought forward by the line department responsible for the organization. My department does not directly discuss spending requests or spending items with the departments. We depend on the department itself and the minister of that department to bring forward the concerns and issues to the other elected officials during the budget decision-making process.

MR. MACKINNON: Have those concerns been passed along to the Department of Finance? I think that it would be very appropriate that you would have them by now.

MS. HARNISH: Certainly, the minister would be privy to whatever conversation goes on inside both the Cabinet as well as the Treasury and Policy Board meetings.

MR. MACKINNON: You said that you were meeting regularly with your counterparts from other provinces. Could you perhaps, in capsule form, just highlight where some of these provinces are in presenting the economic conditions that exist within those provinces?

MS. HARNISH: Our interrelationships and our dealings with them are predominantly through Finance Ministers' meetings that have occurred frequently over the last number of months. Anecdotally, from reading the paper and from actually browsing Web sites, I see this week that the budgets have been tabled by New Brunswick, Saskatchewan and Quebec in the last week. B.C.'s was about a month ago. I am aware that the schedule calls for several other provinces to present their budgets within the next short while as well.

MR. MACKINNON: And all other provinces would have come up with some kind of economic update since last December?

MS. HARNISH: Well, they would be part of their budget tabling, as is ours. Our legislation is very specific, that the update is to be tabled with the tabling of the budget each year. So we have legislation under which updates are tabled, it's inside the Provincial Finance Act. It says:

"The Minister shall submit to the House of Assembly financial reports on the state of the public finances for a fiscal year in accordance with the following schedule: (a) on or before September 30^th of the fiscal year . . . (b) on or before December 31^st of the fiscal year . . .", and then as part of the estimates tabled in the House of Assembly for the following fiscal year; in other words, when we table the budget. Then, of course, "(d) as part of the Public Accounts prepared respecting the fiscal year.", which means when we actually provide the audited financial statements for the preceding year, generally in August or September.

MR. MACKINNON: To quote you, you said no one has ever seen anything like the last six months. Can you elaborate on that a little bit because you talk about . . .

MS. HARNISH: Well, we're certainly talking about the global economic and financial markets. Anybody who holds any equities can tell you that nobody has ever seen anything like the past six months, it has been unprecedented, certainly. So not only the magnitude of the swings, but also the fact that it is international, it doesn't matter which economy you're talking about, it has run through all of the developed economies as well as moving right through into some of the developing economies, it has been almost instantaneous, as you know.

When I returned from vacation in September I was shocked because conditions had changed so much from when I left in August and many others are shocked as well. Just the rapidity of the changes that have happened with international recessions, as well as the freezing of credit markets and that's perhaps the biggest concern, that access to credit has dried up for virtually every country and for businesses and industry right across the world.

MR. MACKINNON: You used the word "shocked". What I'm shocked about is that the Legislature hasn't met since November 25^th, the last day that we were in the House, and the fact that we haven't had an update since December is really most shocking. You talked about the situation involving deputy ministers being instructed to live within the reductions that they were supposed to live with, the figure I think you used was somewhere in the order of $43 million to $45 million?

MS. HARNISH: The schedule, in fact, is attached to our December 2008 update which I think is in your package. There's a schedule by department of the expense management initiative and the amount associated with each department and it totals $43.578 million.

MR. MACKINNON: What directions are currently being given to deputy ministers in the absence of a budget as we approach 2009-10 . . .

MR. CHAIRMAN: Just one point, the number you just quoted, could you provide us with that document, please?

MS. HARNISH: It's Page 7 of the Forecast Update.

MR. CHAIRMAN: Okay, thank you.

MR. MACKINNON: I'm just wondering, there must be directives going out constantly to deputy ministers from the Department of Finance in relation to budgeting. What's currently happening?

MS. HARNISH: Certainly, deputies, through their ministers and through deputies' meetings are constantly being advised to be very prudent in their expenditures, not to make unnecessary expenditures, to use efficiencies wherever possible, to live within their means, to live within their allocated amount. I'm sure that ministers convey that sentiment to them and I know that weekly at deputy minister meetings, I remind them of the same thing. It's a traditional admonition to deputy ministers of departments.

MR. MACKINNON: I was really pleased to hear that your husband holds a lobster licence. I'm involved with a forum that's being held in Lismore on April 9^th in advance of the opening of the lobster season in Northumberland Strait on May 1^st. We are looking at some very serious situations and you actually spell out lobsters in your short preamble here,

as well, with the problems, which I'm glad that you did. Having said that, I don't think it gives any comfort whatsoever to those fish harvesters that our situation is - to use the terms I think you used - more stable than other provinces. Do you have any advice for me on what I could say to those people about things being more stable in Nova Scotia?

MS. HARNISH: It's pretty difficult for a specific sector to be comforted by the fact that overall we happen to be more stable than many other provinces, but from the point of view of the ability of the province and provincial revenues to sustain the kind of program spending that we've become accustomed to, it is a significant thing.

MR. MACKINNON: I'm just wondering, over the past two years, I'd like to have the figures - certainly those involved in Public Accounts probably know this - how much money has actually gone into the Industrial Expansion Fund over the last two years to be controlled by Cabinet?

MS. HARNISH: I don't have that with me. I'm sure that the information is available publicly and I can provide to you, if you'd like, the amount of spending room. It's not actual spending. The Industrial Expansion Fund is a - it's called a statutory capital advance and it provides a limit, an authority to reach a certain limit of lending, basically, and it was the lending limit that was actually increased recently, not the amount of money allocated to loans but the limit to which they could offer loans to - somewhat in recognition of the fact that access to capital is very difficult these days for businesses and industry right across Nova Scotia, as well as Canada and the U.S. and other countries. So it is to provide a source of capital to generally good, solid business and industry that isn't able to access it through the banks.

MR. MACKINNON: I thought Nova Scotia Business Inc. was geared to . . .

MS. HARNISH: They're not the lending agency. Certainly the Industrial Expansion Fund is quite - yes, it's a different kind of fund. It complements what NSBI can do but it is a loan fund available to fund specific businesses for things like expansions, you know, items of that nature, when they are unable to largely access capital from the traditional sources of borrowing these days.

MR. MACKINNON: Certainly in parts of the province, it is a controversy over the two entities and who is doing what with how much money.

MS. HARNISH: I've read the paper, yes.

MR. MACKINNON: One of the things that I'm really concerned about is some of the infrastructure arrangements that are being made with municipal units where there is a requirement for one-third, one-third, one-third from the various levels of government. Is the

Department of Finance involved in any way in helping to orchestrate some of these situations that are . . .

MS. HARNISH: Our responsibility would be related to supporting government to decide how much spending it will make available in the coming year to cost share any types of federal infrastructure monies available to external parties.

MR. MACKINNON: How much time do I have left?

MR. CHAIRMAN: About two minutes left.

MR. MACKINNON: I think with those two minutes, my colleague has had so many questions that were unanswered this morning that I will turn it over to him.

MR. CHAIRMAN: Mr. Steele.

MR. STEELE: Just one quick question. Earlier in the session, I had some questions about comments made by the member for Argyle when he was Acting Minister of Finance. I was wondering if there might be any opportunity to direct questions to him.

MR. CHAIRMAN: No, I'm afraid not. (Laughter)

Any other questions? Okay, Ms. Whalen.

MS. WHALEN: Thanks very much, there's always more to go into here. I wanted to start on another line of questions here around the Crown share payment and see if we can get some background on that and perhaps these are questions you'll be able to answer, I'm not sure. I'm hoping so. First of all, have we received the payment for the 2008-09 fiscal year?

MS. HARNISH: No, we haven't. As you are aware, the regulations have still not been promulgated by the federal government to enable that Crown share payment. We would recognize the amount earned but the actual dollars have not yet flowed.

MS. WHALEN: So we have recognized it, or it would be on our books for this year.

MS. HARNISH: It would be.

MS. WHALEN: When would you be expecting that payment?

MS. HARNISH: I can't answer that, I really don't know when that's going to be. I'm not involved in the discussions, really, related to the finalization of the regulations. A lot of that is within the federal system right now.

MS. WHALEN: Would it not have to occur this year, where we're going to book it and show it this year?

MS. HARNISH: No, under our accounting we would recognize what we anticipate having earned; in other words, what we're entitled to.

MS. WHALEN: Is there a sense of urgency around getting them to do the regulations and to actually make the payment?

MS. HARNISH: Well, from my point of view, I don't have to have the money in the bank account in order to prepare either the budget or the financial statements. I can't speak to urgency that may be felt elsewhere, to see the successful conclusion of this.

MS. WHALEN: So do we know what the payment will be for this upcoming year? Do we know the amount?

MS. HARNISH: Well, the panel report certainly is - you're talking 2008-09 or 2009-10?

MS. WHALEN: Well, I'm thinking of the upcoming year but this year as well. I think this year we know for sure, don't we?

[11:30 a.m.]

MS. HARNISH: It's $95 million, according to the expert panel.

MS. WHALEN: And what happens next year, the following year?

MS. HARNISH: I think it was around close to $80 million or thereabouts - I'm not sure of the exact amount right now, so down a little bit next year.

MS. WHALEN: Is there some uncertainty about what it might be, since the regulations aren't in place yet?

MS. HARNISH: More of the uncertainty would be with respect to the gas prices that are underlying the actual calculation that was performed by the expert panel. So it is a formula-driven calculation, like many others are, and it would be dependent on gas prices, development costs, the whole expenditure, a whole host of factors that would be inside that formula.

MS. WHALEN: And we know you said earlier the gas prices are down for natural gas.

MS. HARNISH: They are.

MS. WHALEN: I asked you the exact amount and you aren't sure right now but they're certainly down.

MS. HARNISH: They are.

MS. WHALEN: So again, does that create a sense of urgency to get this moving forward and have the funds come?

MS. HARNISH: I don't think that it depends on having the regulations in place. The formula is - well, we believe the formula is fairly explicit, as set out by the expert panel.

MS. WHALEN: So the panel has given that recommendation. Has it been fully accepted by the federal government? Do you think there's any chance of recommending it?

MS. HARNISH: The panel hasn't recommended a formula.

MS. WHALEN: Can they change it?

MS. HARNISH: The agreement specifies that they are to adopt the formula as set out by the expert panel.

MS. WHALEN: So according to the letter that we have, they would be - and that was just in a letter, as I understood. Is there a more formal agreement?

MS. HARNISH: Well, you saw the signed - we have them framed, but there was a piece of paper to which Peter MacKay was a signatory, as was the Premier.

MS. WHALEN: Are there any assurances beyond that that we have that the federal government will be using that formula and maintaining those payments?

MS. HARNISH: Well, one would anticipate that they could expect that the word of the federal government would be honoured.

MS. WHALEN: Is the Premier's Office involved in this file with the Crown share now, to continue to push it? As you said, you have no worry because you can book it already, so from a financial point of view it is accounting, you can do that. What about the political side?

MS. HARNISH: Oh, I don't really know what they're doing on that.

MS. WHALEN: So do you know if the Premier's Office is in charge of the file?

MS. HARNISH: The actual discussions on the regulations themselves are ongoing through primarily legal counsel and staff at the Department of Energy.

MS. WHALEN: So it's not Treasury and Policy Board?

MS. HARNISH: No, it's the Departments of Energy and Justice that would be leading the discussions with the bureaucracy inside the federal Department of Finance.

MS. WHALEN: Can you say if the members of Cabinet have done anything at this point in time to lobby for the sort of conclusion of this and the payment of the money?

MS. HARNISH: They don't really share that with me.

MS. WHALEN: But you do attend the Finance Minister's meetings and you would go as the Deputy Minister of Finance.

MS. HARNISH: Yes.

MS. WHALEN: Do you know if it has been on our agenda as one item to bring . . .

MS. HARNISH: It hasn't been on the agenda of a Finance Minister's meeting, which is a very large number of people around the table. Certainly it is a bilateral issue, specific only to Nova Scotia and the federal government.

MS. WHALEN: I'd like to go back to some of the things that you said earlier about the unprecedented nature of the last six months, in terms of the financial situation. You talked about the magnitude of the swings that we're seeing everywhere - I assume that means here in Nova Scotia as well.

The other thing that you had mentioned was that you felt there was good business confidence in the province. What we are hearing from the CFIB - the Canadian Federation of Independent Business - is that in Atlantic Canada, Nova Scotia has the lowest level of business confidence. I wonder if that is something that you have taken into account as well in your projections, that the business community has a low level of confidence.

MS. HARNISH: Well, I would say that our models would be driven by expectations of investment. The investment would be driven by specific project knowledge, as well as trends and a number of other factors.

MS. WHALEN: So going back to projects, are there any major projects that you could point to that would account for the rosy outlook that you have for the third and fourth year - specifically the fourth year - of our growth?

MS. HARNISH: I think I said earlier, I can't speak to the specifics behind the forecast itself on a project-by-project basis. I don't have that information.

MS. WHALEN: But that would be very pertinent information to any projection of growth.

MS. HARNISH: Certainly, for example, Deep Panuke would be a significant factor in the forecast for 2009-10, as well as some of the other projects that we're aware of related to that particular development.

MS. WHALEN: In looking at the provincial forecast that was given just a year ago or, in fact, in the December update, they indicated the gross domestic product growth was going to be down to 1.4 per cent from an estimated 1.7 per cent last budget period - this was just looking back to the budget document last year - and all of your assumptions are listed here. Again, you talked earlier about the nominal gross domestic product and even that has come down. I wonder if you can indicate what percentage you believe it's down now at this point in time. Even in December, you had readjusted the real gross domestic product.

MS. HARNISH: That would be the last forecast available that I would be able . . .

MS. WHALEN: So at the time that you decreased it for 2008, would there have been an estimate at the very same time in December for what that might be for 2009?

MS. HARNISH: Generally not in the Forecast Update. I'm not sure if that's referenced or not, the December 2008 forecast for 2009.

MS. WHALEN: Because you had already pulled back on the 2008 figures, so I just wanted to know if you had made a change as well?

MS. HARNISH: Look, I can't answer that to tell you the truth. It has been awhile since that was prepared and I don't have it with me. I don't remember what the GDP comment was.

MS. WHALEN: The whole purpose of wanting to get more of a sense of where we're going has to do with creating greater confidence in the wider community as well - the business community, the investors, the people who might want to make large purchases which help in the HST; everything is connected as you know. The other provinces, as you've mentioned, that have tabled budgets, or are about to - this week, we have three more provinces that are scheduled to table budgets - Manitoba, Ontario, and Newfoundland and

Labrador are set for March 25^th and 26^th. So everybody else seems to be off and running, the only two that have no dates on budgets are P.E.I. and Nova Scotia, that have not taken a stand, have not given updates, have not provided the confidence that people need.

In the absence of the budget, is there any intent to provide even an official fiscal update to the Province of Nova Scotia?

MS. HARNISH: I've not been instructed to prepare such a thing at this point.

MS. WHALEN: So you have no instructions.

MS. HARNISH: Definitely it will be part of the budget, it always is.

MS. WHALEN: Even in the event that the budget is delayed another 30 or 60 days, whatever it may be - we know it's at least more than 30 days away because we have had no word about returning to the House - even in the absence of that, there's no reason why you would have to provide a fiscal update.

MS. HARNISH: The legislation is pretty specific that that final forecast is provided with the tabling of the estimates for the coming year.

MS. WHALEN: In my first questions to you, it really was about where the budget is at, and the minister who was here recently said you should be spending your time working on that budget rather than being here. But at the same time, as you've told us, the budget has been worked on for months and months, it's ready to go whenever the time has come and whenever new instructions are received.

MS. HARNISH: It does take a significant amount of time to put it together when the time comes. Departments have to build their spending forecasts, for example, line by line to prepare the Estimates Book. That doesn't mean that adjustments can't be made until very late in the process, however, there's always a lot of work to prepare the final numbers.

MS. WHALEN: So at this point in time, you wouldn't have received all of the numbers or even a snapshot of today's numbers from the departments. They would still be holding that information until you get the 30-day . . .

MS. HARNISH: We would have regular updates and we would have submissions on a regular basis of programs, pressures and proposals. Government has to sort through all of this and make decisions, and certainly when the House is called, we know we have 30 days to lock it down and print it.

MS. WHALEN: So, again, you could just keep working on this and tinkering with it and changing it and adjusting on a constant basis?

MS. HARNISH: According to the instructions of the Executive Council at the time, we'll do whatever they choose.

MS. WHALEN: Ms. Harnish, since we're living in unprecedented financial times - people have said it hasn't been like this since the 1930s perhaps for Canada - it would be clear the people are looking for confidence and for direction. An early budget or a budget now would signal that we have a plan and that we're moving forward; it would provide confidence. The delay is providing an instability for government. Are you able to say whether or not your advice would be to move forward?

MS. HARNISH: I'm sorry, what was the question?

MS. WHALEN: I'm not sure you can speak about your advice, but I'm saying that an early budget, a timely budget will send the signal of confidence to the Province of Nova Scotia, to the people of Nova Scotia, that we have a budget in place, that we're moving forward, that we understand the severity of the times, which you said, the magnitude of the swings, the unprecedented last six months financially. I'm saying that, really, government should move forward and I'm wondering if your advice would be to move forward, if you've been in any position to give that advice.

MS. HARNISH: Well, I wouldn't speak to advice that I may or may not give to the minister, of course.

MS. WHALEN: I understand that your hands are tied perhaps, but it's very important that we say it. If we don't move forward and make those plans that this province is not in good hands, that the delay is creating a sense of instability and actually doing the opposite of what you would hope to give as a signal to the province and to the business community who want to make those investments. The other part relates to the shovel-ready idea of this infrastructure plan that's already rolled out there. If you have your plan out there, really it needs a budget in order to go into play, in order to support the spending that you have in mind.

MS. HARNISH: As you're aware, the Department of Transportation and Infrastructure Renewal has been letting tenders for some time based on an anticipated level of spending. Under the Provincial Finance Act, as we discussed, projects can proceed and spending can occur up to 50 per cent of the previous year's amount. Our role will be to watch the spending to ensure that's not exceeded before a new appropriation is provided.

MS. WHALEN: Mr. Chairman, how much time is left in this round?

MR. CHAIRMAN: Just a little less than two minutes - a minute and a half.

MS. WHALEN: Mr. Chairman, I think it's a difficult morning, kind of a frustrating morning for all of us. I think it's worth noting that all of us feel a certain constraint. We are trying to ask questions on behalf of the province to see where it's going, to find out how we can make plans for our own communities, for industries like lobster, how we can speak to the people who are looking for answers to questions. The government is not providing answers to the questions and it is very difficult.

I understand that the deputy minister is here with a certain constraint, as well, because of the role that she plays. I am not a lawyer - I know she has a lawyer with her, I do not - and I don't know precisely what the legal answer would be to that, but I feel like the morning has been frustrating and difficult and it has been impeding our ability to get answers to the questions we have as members of the Legislature.

I would like to suggest - I guess we have a quorum here, I don't know how our numbers are - that we have a motion that would just say that we find that the witness's answers have not really answered our questions. I think the wording would be that we find her in contempt, but I don't mean that in a personal way, I want to be clear. I realize each one of us has to play a role and I believe Mr. Steele had begun to say that he felt the same way in his first round of questions, that the questions are not being answered and that there's a difference of opinion about whether or not she should be held to answer some of these questions. So I would like to suggest that we request our committee make a motion that we speak to our legal counsel and seek some advice about the best way to move forward for this committee.

MR. CHAIRMAN: I have a motion on the floor. Is there any discussion on the motion? Mr. Steele.

MR. STEELE: I just want to make sure that I understand. If the motion is to seek advice from our legal counsel and any further steps would be taken at future meetings, that's certainly something we can support, I just want to make sure. The intent of the motion, I assume, is not to have a finding of contempt today?

MS. WHALEN: I had suggested that, but as I said, I would like to seek legal advice, so I think you're reading it better, yes.

MR. STEELE: I am not at all happy with the way things went today. We are getting perilously close to the proposition that a fact is not a fact until the minister approves it and announces it publicly. Nevertheless, a finding of contempt is extremely serious and we should all take it extremely seriously; I certainly do. I think what we need to do is take some

time to reflect, seek legal advice, look at the transcript and see whether this witness did or did not answer questions that we have a right as elected members of the House to have answers to.

[11:45 a.m.]

So I would propose to my colleagues on the committee that we adopt the resolution, provided it is that reflection, and then circumstances will happen as they happen.

MR. CHAIRMAN: Mr. Bain.

MR. BAIN: Thanks, Mr. Chairman. It's my feeling that the deputy has responded to many of the questions that were asked. Once again, I have to question her appearance here this morning and that it should be more in the Public Accounts realm than in the Economic Development. I'd like to have that on the record.

MR. CHAIRMAN: Mr. Steele.

MR. STEELE: Could I ask the member, just for perfect clarity, so that there's no misunderstanding, to repeat her motion?

MS. WHALEN: Yes, I'm sort of rewriting the motion. I think the key part of it is really that I would request that the committee seek legal advice from our counsel, to examine whether or not the witness this morning has been in contempt in her inability to answer some of the questions.

MR. CHAIRMAN: Mr. Preyra.

MR. PREYRA: Mr. Chairman, I would support the motion as it's stated, in large part because I was very concerned by the comments of the Minister of Community Services, the honourable member for Argyle, when he spoke in his preamble, questioning the right of this committee to ask questions of the deputy and of the government itself. I think the principle of representative and responsible government that this committee upholds and the principle of no taxation without representation that requires us to ask how public funds are being spent, and gives us the right and the duty to ask those question, those principles have to be protected. If we have to take these measures to protect those principles, I would be happy to support them.

MR. CHAIRMAN: Mr. MacKinnon.

MR. MACKINNON: I find MLA Bain's comments to be questionable, and also the minister's comments when he was here. As you will recall, two meetings ago we agreed unanimously to invite the deputy minister to come before this committee. Mr. Bain, I believe,

was present at that meeting and was one of those who voted unanimously, I believe, along with the Fisheries and Aquaculture Minister who was here - I'm trying to recall who was sitting around the table at that time. I think it's almost unbelievable that the question would be raised about the wisdom of us requesting her to appear before this committee when it was unanimous. Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Bain.

MR. BAIN: Mr. Chairman, if I may, according to Functions of Standing Committees, with the indulgence of the committee, Section 60(2)(b) says:

". . . the Public Accounts Committee is established for the purpose of reviewing the public accounts, the annual report or other report of the Auditor General and any other financial matters respecting the public funds of the Province;"

(ba) the Economic Development Committee is established for the purpose of considering matters normally assigned to or within the purview of the Nova Scotia Economic Renewal Agency and the Minister responsible for the Agency and the Department and Minister of Transportation and Public Works and matters relating to the Technology and Science Secretariat . . .".

That is why I am saying this is something that belongs with Public Accounts and not with Economic Development.

MR. CHAIRMAN: Does anyone else have any other comments on this issue? On the question . . .

MR. TRAVES: Mr. Chairman . . .

MR. CHAIRMAN: I'm afraid you cannot participate in this discussion, you're out of order. Do any other members of the committee have any discussion on the motion?

Would all those in favour of the motion please raise your hand.

I want to see a record. There's one, two, three, four, five, six, all caucuses.

Contrary minded, please raise your hand.

I see that the PC caucus is against this and all others are in favour.

The motion is carried.

Is there any other business for the committee? Hearing no other business, we stand adjourned.

[The committee adjourned at 11:50 a.m.]