Past Session:

Proceedings of the Standing Senate Committee on
National Finance

Issue 19 - Evidence

OTTAWA, Tuesday, September 25, 2001

The Standing Senate Committee on National Finance met this day at 9:34 a.m. to examine the role of government in the financing of deferred maintenance costs in Canada's post-secondary institutions.

Senator Lowell Murray (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, this is our third meeting on the role of government in the financing of deferred maintenance costs in Canada's post-secondary institutions. We are pleased to have with us this morning representatives of the Canadian Association of University Business Officers and the Association of Universities and Colleges of Canada. Later we will have the director of Strategic Policy and Planning from Canada Mortgage and Housing Corporation.

For the present, let me introduce the witnesses at the table from the Canadian Association of University Business Officers: Tony Whitworth, Duncan Watt, and Maurice Cohen. From the Association of Universities and Colleges of Canada, we welcome Robert Giroux - and Mr. Giroux will be well known to some of you as a former senior public servant, deputy minister of various things around here a while back - and Robert Best.

We have two brief opening statements, one from the CAUBO. Mr. Whitworth, will you be making that statement?

Mr. Tony Whitworth, Vice-President, Finance & Resources, University of Saskatchewan: Duncan Watt, who was chair of the steering committee, will make the report on behalf of CAUBO.

Mr. Duncan Watt, Vice-President, Finance & Administration, Carleton University: Canadian universities have been under tremendous financial pressures through most of the 1990s. Universities have had to meet greater expectations with fewer resources. One of the consequences of this situation in the past several years is a steady deterioration in the physical infrastructure on our university campuses. To better understand this issue, the Canadian Association of University Business Officers, CAUBO, commissioned a Canada-wide survey to determine the extent of the problems facing universities in regard to their physical infrastructure.

"A Point of No Return: The Urgent Need for Infrastructure Renewal At Canadian Universities" was released in April 2000. It confirms there is an urgent need for major reinvestment in the physical plant and infrastructure of our universities. I know that you are all familiar with the report. However, I would like to summarize the findings as they relate to the extent of the problem.

The report shows the total amount of accumulated deferred maintenance - a term that refers to the backlog of all maintenance needs that have gone unfounded - was $3.6 billion. Put another way, the amount of deferred maintenance costs for every full-time equivalent university student came to more than $5,500. Or consider that for every square metre of university building space in Canada, the total cost of deferred maintenance was $214.

These are staggering numbers that should sound an alarm bell for every Canadian. However, the report suggests that they are conservative estimates that probably understate the problem. This has been confirmed by a recent Ontario study.

The 18 Ontario universities have initiated a Facility Condition Assessment program, which requires each university to undertake a comprehensive facility audit of their physical infrastructure. The first report from this program, prepared in July of this summer, concludes that the condition of the physical infrastructure in Ontario universities is much worse than the values in "A Point of no Return."

The estimated accumulated deferred maintenance of all Ontario universities as of March 31, 2001, is $1.74 billion versus the $1.05 billion stated in "A Point of No Return." The facilities condition index for all Ontario universities is 0.13, which is considered an unacceptable condition, versus 0.09, which is considered a fair to poor condition in "A Point of No Return."

In conclusion, we would like to reiterate a statement that we made at the press conference releasing "A Point of No Return." These surveys confirm our worst fears on the state of Canadian university campuses. University facilities have deteriorated to the point where the capability of the physical infrastructure to support the academic mission and core functions of learning and research is threatened.

On behalf of CAUBO, I would like to thank the Standing Senate Committee on National Finance for giving us the opportunity to discuss this important issue.

Mr. Robert Giroux, President, Association of Universities and Colleges of Canada: Honourable senators, on behalf of Canada's universities and degree-granting colleges, I want to commend you for undertaking this study of accumulated deferred maintenance on Canadian university campuses. We have all been preoccupied in recent days with the horrific events in the United States and their aftermath. These events will undoubtedly continue to occupy the attention of policy-makers in this country in the weeks to come. However, it is also important that we continue to accord a high priority to domestic, economic and policy requirements and continue in the direction of strategic investments in education and innovation. We truly appreciate your proceeding with these hearings on this important issue at this time.

Mr. Chairman, I was at a meeting of the Association of Atlantic Universities presidents. They have asked me to convey to you their deep appreciation for your study on deferred maintenance.

[Translation]

Canada's universities make an important contribution to the economic, social and intellectual life of our country. Universities are the economic and social anchor of many of the communities in which they are situated.

University graduates contribute to Canada's wealth well beyond the public investment in their education. Canada relies heavily on universities for innovation and research and development. We are proud of the contributions our member institutions make to Canadian society, and eager to build on those efforts.

The federal government has made innovation a key part of its agenda. Its goal is to place Canada within the top five countries in the world, in terms of research and development, within a decade. This is a worthy goal, and this country's universities are anxious to play their part. Achieving the government's objective will require significant public investment in university research. The federal government has already undertaken some very important initiatives in this area over the past four years, and has acknowledged that more such investment will be required, including support for the indirect costs of research.

[English]

Mr. Chairman, it is important to emphasize here that the need to meet increasing expectations with regard to the university research effort is not the only major challenge facing our institutions over the decade to come. The government also recognizes the importance of skills and learning to Canada's future.

We expect enrollment at Canadian universities to increase by some 25 per cent over the next decade. If we wish to achieve even higher participation rates, that figure will be higher. Over the same period, universities need to recruit 30,000 new faculty members in response to retirements, turnover and the expanding student population.

Attracting and retaining large numbers of faculty members in a competitive international academic labour market will require, among other things, healthy, well-maintained campuses. Accommodating large numbers of new students and assuring them a quality educational experience will similarly require healthy, well-maintained campuses including, in many instances, significant amounts of new space.

Universities face these challenges at a time when public support for Canadian universities measured in real per-student terms remains significantly below levels recorded a decade ago.

During the 1990s, universities, like other public sector institutions, had to tighten their belts severely. As senators are well aware, reductions in federal and provincial budgets left institutions with no choice but to focus spending on their core functions. As a result, in an effort to continue providing a high-quality education to as many young people as possible, most universities reduced their expenditures or did not invest in preventive maintenance.

Research funding was also a factor since the federal government had not reimbursed universities for the indirect costs of federally sponsored research. Faced with increasing enrollment and declining public funding, universities in general chose to focus on students instead of buildings. Consequently, universities maintained a high level of accessibility but not without costs. These included reductions in the number of faculty at Canadian universities, increasing class sizes and the accumulated deferred maintenance problem that my colleagues from CAUBO have documented and described to you this morning.

Universities are not alone in facing this challenge. As you know, federal departments and agencies had to make similar tough choices during the 1990s. Deferral of maintenance and repairs during that decade has left the federal Crown in a situation where up to 25 per cent of its office inventory will require top-to-bottom renovations over the next 10 years.

As a number of senators pointed out during the debate last spring, addressing university accumulated deferred maintenance will require a national effort. Addressing the problem is essential if our campuses are to be important players in the federal government's innovation agenda. Dealing with accumulated deferred maintenance will help strengthen the foundation upon which our contributions to this agenda are based.

While the figures associated with deferred maintenance look imposing, they pale in comparison to the cost of doing nothing. As outlined in our proposal, there is an opportunity for the federal government to make a one-time financial commitment that will reap benefits for years to come. We propose a $3 billion initiative. Ideally, the federal contribution would represent the lion's share of necessary resources, but we recognize that that may not be possible.

[Translation]

For discussion purposes, our document proposes that a40 per cent federal contribution would be matched by provincial governments, with universities contributing the remainder. The allocation of federal funds by province could be done by taking into account both provincial population and each province's share of the full-time equivalent university student population. An agreement between the federal government and the provinces would outline the parameters for project criteria and communications efforts. The funds would be restricted to addressing accumulated deferred maintenance of core educational and general facilities, as well as site infrastructure and utilities, and would not include ancillary facilities such as parking garages.

An initiative of this scope would not address all of the deferred maintenance projects, but it would allow universities to complete the more urgent projects as well as the bulk of the remaining work. It would also allow universities, with the legacy of the 1990s addressed, to focus on the future. None of us wants to see this situation recur and we are eager to work with government to ensure that universities have the flexibility to dedicate adequate resources to future preventive maintenance. This means improved core funding by the provinces and the establishment of dedicated funds, tax and other incentives to donors to encourage the growth of other revenue streams, or other measures.

I realize the events of the last two weeks have put into question the federal government's flexibility to fund new initiatives. Nevertheless, we appreciate the fact that the Prime Minister, the Minister of Finance and the Government House Leader have all stated in recent days that the federal government intends to move forward on the priorities outlined in January's Speech from the Throne.

Healthy university campuses are essential if we are to improve both Canada's innovation record and the skills and learning of Canadians. Assuming the availability of one-time money in the current fiscal year, the federal government has an opportunity to provide important leadership in addressing the accumulated deferred maintenance problem. We believe that our proposal represents a realistic and do-able approach to the challenge. We welcome your questions, and look forward to your report and recommendations next month.

[English]

The Chairman: Honourable senators, we have a specific and detailed proposal before us now from the AUCC. I presume that it is supported by the Canadian Association of University Business Officers. This study was undertaken at the initiative of Senator Moore. I will ask him to begin questioning, followed by Senator Bolduc.

Senator Moore: I thank the witnesses for coming and for their submissions.

The brief that we received from AUCC, in addition to your remarks, Mr. Giroux, indicate that the figure for deferred maintenance may be higher than the point-of-no-return figure of $3.6 billion which was an extrapolation of the responses said to be received from 91.5 per cent of the total enrollment at Canadian universities.

In view of the Ontario experience, which has now commenced an assessment of its accumulated deferred maintenance needs - now identified at $1.74 billion versus the original $1.6 billion - have you looked across the nation to see what the figure is? If it is not $3.6 billion, what is it now? Were there any situations where the amount might have been less?

Mr. Whitworth: Senator, we have not as an association had time to revisit our original numbers. Given the information that has come out of a specific study in Ontario, the opportunity should be taken over the next year or so to revise the numbers that went into the original report.

We have no reason to believe that the proportionate change as between our survey and the more recent survey would not apply across the whole country. In other words, our number might need to be increased by about 50 per cent.

Senator Moore: In the association's report and in Mr. Gi roux's remarks, the proposal that you have outlined and presented to us for consideration states that ancillary facilities such as parking garages would not be included. I understand that. Yet in section number 5 - "The Solution - A National Initiative" - proposes "... the replacement of core educational and general facilities, as well as site infrastructure and utilities. Ancillary facilities such as residences and parking structures would not be eligible."

Are you proposing that residences are not ancillary facilities to the operation of the university? Could you clarify that, please?

Mr. Giroux: We consider ancillary facilities such as residences and parking structures, as the kinds of facilities that are obviously very much necessary in a university environment. However, these are not what we would consider the core educational and general facilities such as the classrooms, the libraries, the laboratories and a number of these kinds of facilities. Residences and parking structures - and I will ask Mr. Watt or Mr. Whitworth to add to this - are being financed often to universities because they do generate a certain amount of revenue and they can be the subject of a different treatment. Whereas the core educational facilities are very much dependent on government operating grant funding and are not necessarily funded from a revenue production basis.

Do you wish to add something to that?

Mr. Watt: I can only add that for most universities, probably all, the ancillary facilities would be food service facilities, bookstores, computer stores, residences and parking facilities. That is the list. They are all supported from a fee structure and they need to be self-supporting based on those fees.

Senator Moore: Residences should be self-supporting. What about the accumulated deferred maintenance involved in fixing up those residences?

Mr. Whitworth: Likewise, we feel the focus of what we are presenting today is more on core academic requirements. There is a need, obviously, to fix up the residences and other facilities, but those facilities are self-financed. Inevitably, that might lead to an increase in residence fees and other fees. However, our focus today is addressing our concern about the core facilities.

Senator Moore: I know from my own experience, Mr. Chairman, that parents are particularly concerned that their freshmen students are on campus, particularly in the first couple of years. There is a demand that exceeds the supply in that regard. I notice one of our witnesses in a previous hearing mentioned that the University of Toronto is increasing its residential capacity.

I do not know if I see residences in the same light as a food store or parking garage. Perhaps that is a matter of personal opinion. I believe they are an integral part of campus and university life.

[Translation]

Senator Bolduc: Since 1990 or 1992, the federal and provincial governments have cut transfer payments to the provinces. The war on deficits was especially hard fought in 1994 and 1997, so much so that the provinces and the federal government delayed awarding transfer payments to universities.

Some measure of prosperity has returned since 1995 and funds have begun to flow again. Governments have wrestled their deficits to the ground. In 1998 and 1999, they managed to get their heads back above water. Since then, they have recorded surpluses. The federal government has reinvested funds, not through the general transfer payment formula, but through special funds dedicated to innovation, to university chairs, and so forth. Every day, the Minister of Health distributes funds for health care to different regions of the country.

Therefore, some measure of prosperity has returned in 2000-2001. In 1999-2000, university revenues increased by$15 billion, a 15 per cent jump over 1998-1999. I assume that a similar increase will be reported in 2000-2001. Money is being reinvested in the system.

The figures we have are based on trends observed from 1995 to 1999, but the situation is already starting to change. Government investment is on the rise.

However, there is no guarantee that governments will continue to record surpluses because the Minister of Finance is now telling us that this period of prosperity could be coming to an end. Consequently, if the government maintains its current level of spending, it will incur a deficit. On the public finances front, the federal and provincial governments must take into account the overall picture. There are health matters to consider, not merely university education. The needs are well known to everyone. Soon, DND will be requesting several billion in additional funding.

Recent events in the United States have created turmoil on both the political and economic fronts and disrupted all of the efforts already undertaken. Is it realistic to make a request of this nature, without first considering other ways of saving money?

In my opinion, students in Quebec do not pay their share. Ten years after they graduate, they are earning twice as much on average as other workers in society, whereas they cover only10 per cent of the cost of their studies.

In Nova Scotia, students cover 25 per cent of the cost, whereas in Quebec, it is only 10 per cent or 11 per cent. I am saying that students do not pay their share. The unions complain and the government caves in every time. That has been the pattern of university funding in our province over the last decade.

The Government of Quebec, however, covers 65 per cent of the cost of education, as compared to Nova Scotia, which picks up 43 per cent of the tab. There are considerable differences from one province to the next. Montreal is home to four universities. Could they not agree on a strategy for saving money? Before asking for additional funds, could these four Montreal universities not try to coordinate their efforts, instead of developing four parallel programs in business administration or social work? Have you looked into this?

These are some of my concerns further to recent changes on the economic front and to university administration. The data has changed considerably.

Mr. Cohen: If we look at Quebec, recent investments in post-secondary education - funds have been committed over a period of several years and the final objective has not yet been reached - have merely restored funding to the level of the early 1990s. The situation has improved, but it is still not that rosy.

Senator Bolduc: Compared to the situation at Harvard University or the University of Chicago?

Mr. Cohen: No, compared to public universities in the United States. We cannot compare ourselves to Harvard and other such institutions. We were already lagging far behind them and we have merely returned to where we were in 1990. In the interim, between 1995 and 2000, the United States increased funding and grants to public universities by 35 per cent over five years. In Canada, the average increase in funding was less than 6 per cent.

Senator Bolduc: Not in the last two years?

Mr. Cohen: It depends on the provinces. The situation has improved in the last two years, but there is still considerable ground to be made up. From a rationalization standpoint, as the former vice-rector of a Montreal university, I am seeing a tremendous spirit of cooperation. I served on the Council of Universities which reviewed all programs and establishedguidelines. The geology program at Concordia University has been scrapped. All graduate and post-graduate programs are pooling their resources. Considerable progress has been made on this front.

In so far as infrastructure is concerned, the problem is far more complex, if not impossible, to resolve. If you have 1,000 students, that is 100 in each class, you need 10 classrooms. If these10 classrooms are in need of repair, you have no choice but to do the work. We cannot rationalize on infrastructure. We can eliminate programs or save on the number of teachers by increasing the number of students per classroom. Universities have been doing this since 1980. Had we not taken these measures, we would not have made it through the 1990s.

Mr. Giroux: You have raised a very important question. When you undertook your review of this matter, the events of the last two weeks had not yet transpired. The AUCC is well aware of the priorities that are likely to arise and of the extreme pressure that the government will face from DND and from national security, customs and immigration services. A lot of the work will be done behind the scene by CSIS officials. There will be a demand for additional resources.

If the economy does slow down, the government will need to make some strategic investments to counter the effects of this downturn. Recently, it set some very important guidelines by stressing that innovation, research and development enhance human resources and the skill levels of our secondary school, college and university graduates. Therefore, while we acknowledge the seriousness of the present situation, the government must not lose sight of the fact that in three or four months' time, after the situation has been assessed, it will need to decide what steps to take to keep the economy on track and assist it its recovery.

Our proposal was premised on the assumption that the government will most likely record a surplus this year. The economic situation has not adversely affected this outlook thus far. The government was apparently poised to record a healthy surplus and the plan was to use these surplus funds to make an impact in other areas. You mentioned that universities were seeing an increase in their revenues. The Statistics Canada report on which your proposals are based refers to a 5 per cent increase over a five-year period, that is from 1994-1995 to 1999-2000. I am talking about increased government spending, with most of the funds coming from the federal government for research purposes.

The bulk of university revenues are derived from tuition fees which are up by 44 per cent, or by nearly $1 billion. Universities have been able to secure significant funding from the private and corporate sectors, but often, the money is targeted forscholarships, chairs and so forth. Universities do not have the flexibility to use these funds as they wish. The need continues to be great and that is why we are presenting these proposals.

[English]

Mr. Whitworth: If I might add to the previous comments, the senator raised many interesting issues. The federal investments that have been made, the CFI, the research chairs, together with the increased enrollments that we have experienced over the last 10 years have all put an extra strain on what we are talking about today, which is the deferred maintenance of our core infrastructure.

The concern is that as we try to accommodate these increasing pressures, without that major investment, we will not have the facilities to deliver what we want to deliver, which is quality education to our undergraduates and top quality research opportunities for our researchers. All of these extra revenue areas that have been mentioned and that you referred to are terrific. They only are supporting the direct cost of either teaching or research. Increasingly, we are concerned about the infrastructure. The deferred maintenance issues needed to be efficient in those particular activities.

[Translation]

Senator Ferretti Barth: I read the report of the Canadian Association of University Business Officers and I was struck by one observation. The Association claims that university infrastructures have deteriorated to the point where universities can no longer fulfil their academic mission and carry out core teaching and research functions.

Why is it that no one saw this coming? How could you let university institutions deteriorate to this point? In your presentation, you stressed that you need more funding to continue fulfilling your mission. Is that correct?

Deferred maintenance costs represent a total of $3.6 billion. Do you have any idea of what the true cost would be to all Canadian universities?

In your opinion, would a national university infrastructure program meet all of your needs?

According to the Association of Universities and Colleges of Canada, the proposed initiative would cost $3.6 billion. Air Canada is requesting a similar sum of money further to the tragic events of September 11. How can you convince the government of the urgency of the situation confronting universities and colleges?

[English]

Mr. Whitworth: We certainly did foresee the problem in the early 1990s. As was mentioned, all the universities across the country in the early to mid-1990s were facing a reduction in their real revenues. We had some difficult choices to make. We were faced with growth of student demand. The prevailing wisdom on many campuses was that the deferred maintenance problem could be addressed next year. Next year became the year after, such that the tremendous investment that has been made in universities across the country over the last 100 years is now at a point where, unless we take the issue seriously and make the reinvestment, we will not be able to fulfil the mandates that the honourable senator mentioned.

The scope of the problem does vary from university to university. Some universities have been able to invest more. Overall, there has been a general deficiency in what we have had to put in.

It is difficult to carry the day to invest $3 million to replace a boiler that keeps the facility heated in winter, compared to putting extra faculty members in front of students in the classroom. What you do not see, you tend to put to one side. Many of our deferred maintenance problems are, to many, invisible in the sense that they are the basic infrastructure of the university.

To answer your question again, yes, we did foresee the situation. We had to make some difficult decisions. We did hope, having gone through that trough of decreased funding, that we would get to a point where real reinvestment could start to take place.

I believe your other question as whether the $3.6 billion is a real number. We collected information on an institution-by-institution basis to come up with a number that is as accurate as we can gauge for all the universities across the country. It may be too low. At this point, we do not want to quibble about the accuracy. The $3.6 billion amount is what we have identified as our urgent need.

Another point raised by the honourable senator is the federal-provincial cooperation in this matter. We do not expect the federal contribution to look after all of the problems. We look on this as a joint provincial-federal-university problem. We really want to instil an understanding of the problem and to make plans to address it.

There was a comparison with Air Canada. One can compare other requests for subsidies. Farmers in Saskatchewan, for example, have made a case for subsidies. We do not look on this as a subsidy. We look on this request as a reinvestment in order to help the universities fulfil their mandate to support the research and teaching agenda for the country.

Senator Finnerty: In view of the fact that we may be short of cash after the events of the last few weeks, has there been any thought of categorizing the most urgent needs apart from needs that can perhaps be put off for a little while? Has anyone done a study about which universities or colleges are in the worst shape?

Mr. Giroux: Our colleagues from CAUBO have indicated that needs do vary from university to university. Some universities are not necessarily in bad shape in terms of deferred maintenance, while others are facing some serious problems. The $3.6 billion figure is, in our view, a very modest number. In order words, it is the minimum needed to tackle the situation across the country. Its application, however, will be uneven.

We are not requesting a program that would form part of the A-base of government expenditures, such as a five-year program with $1.2 billion doled out at $250 million per year. We felt it would be easier for the government to earmark a one-shot amount from current-year surpluses. We think the surpluses will still be there. The one-time amount could be put into a fund that could be allocated over a period of five years based on the federal-provin cial agreements to be arrived at. In my view, this is possible. We do not yet know the state of our surplus, but signs are that the surplus will continue to be there.

The previous senator asked how we compare this with respect to Air Canada and how do we hope to convince the federal government of this issue? We are talking about is an investment in the future. There is no doubt that Air Canada has some severe needs. However, that is why we feel that a committee such as yours is so important because you could have an influence on the government by saying that this work needs to be done and by asking the government to look seriously at it.

We will make the same case in front of the House of Commons Finance Committee next week. We will do so in a number of other fora as well. We always cast this spending as an investment that is needed to meet Canada's objective to compete in the knowledge economy.

Senator Wiebe: Mr. Whitworth, you mentioned that this is a joint responsibility - federal, provincial and the universities. Last week, we heard a presentation from CIBC and the University of Toronto on their debenture issue. Are the universities looking at this as an avenue?

Could the universities in Saskatchewan have the asset base to float a debenture issue such as that? Is that one way in which your organization is addressing the universities' joint responsibility to find new funds - not only for capital but for the replacement of capital?

Mr. Whitworth: That is a good and timely question, Senator Wiebe. The University of Saskatchewan has had before our provincial government a proposal for the last three years to be able to go to the capital markets for debt financing. Our province felt that it was not timely to do that. Last week, I was again speaking with our provincial officials to see if the idea could be revisited. It is under discussion.

The focus, though, is more on using debenture issues or capital markets to finance those facilities that have a revenue stream. Reference was made earlier to the residences, the parking and the other ancillary issues. We think it is more likely that we could use that approach to finance those deficiencies than to finance core academic requirements.

You made reference to the University of Toronto's recent debenture issue. That was a very good issue. The interest rate was very good. I am not sure if it was Standard & Poor's or Moody's that did a credit rating assessment on that university. They got a double A-plus. We feel that double A-plus or double-A would at least apply to most universities across the country, as we are well managed and have a good asset base. Yet, even that issue of debenture at U of T could be sold because it focussed on revenue-generating activities such as residences.

I am sure that the capital markets would not provide the amount that we are looking for to invest in deferred maintenance. They may invest in new facilities, but deferred maintenance raises too many questions for the private market to address, in my opinion. Thank you for the question.

Senator Wiebe: It is always great to hear that Saskatchewan, again, is amongst those that are forward-thinking. Unfortunately, the provincial government did not provide for that.

Is that the case with some of these initiatives in other provinces as well? With the exception of Ontario, are they being hindered by provincial legislation that does not allow them to do this?

Mr. Cohen: It varies from province to province as to who can actually issue bonds on behalf of the university - whether it is the university itself with the approval of the government, or whether the university can do it on its own, or whether the government actually issues the bond on behalf of universities, as happens in Quebec. It is the Minister of Finance in Quebec who issues bonds.

However, bonds are either general obligation bonds or revenue bonds. The only ones that have a chance of success are revenue bonds. They depend on guaranteeing the payment through revenue-specific facilities like ancillary services. That is why ancillary services may not be the highest priority for funding through government sources.

A general obligation bond issued on behalf of a university - be it by the government or the university itself - relies on the moral guarantee or the financial guarantee of the government. It is the equivalent of what we are asking in the long term. In other words, we can let governments issue bonds on behalf of a university for deferred maintenance, collect the $3 billion and put it in what we propose. There is no difference.

There is a difference in issuing bonds and going to the capital market and finding other sources if they can actually be guaranteed in terms of revenues. That is not the case for deferred maintenance.

I do not know if I have answered clearly.

The Chairman: Mr. Whitworth, what model were you thinking of in Saskatchewan in terms of involvement of the provincial government with regard to the university, for the capital markets?

Mr. Whitworth: As I say, this was a discussion three years ago. We were prepared as a university, and working with the RBC at the time, to either go with a long-term loan from that bank or to issue our own bonds. We felt that by being able to issue University of Saskatchewan bonds of sufficient creditworthiness we would be able to have our own pension plans by our own bonds. At that time, the government expressed the concern that the indebtedness of the university would show on the provincial books.

Given the precariousness of the Saskatchewan budget at that time, the government did not wish to see anything that would be implied as extra debt for the province.

The Chairman: Were you seeking a provincial guarantee?

Mr. Whitworth: We were not seeking a provincial guarantee. We felt that we had our own revenue base - tuition fees and other sources - that would enable us to sustain that long-term indebtedness. However, the interpretation by the provincial auditor and by the provincial controller was that regardless of that, it would be seen as a provincial debt.

The Chairman: Do you think a double-A rating would apply to the University of Saskatchewan?

Mr. Whitworth: Yes.

The Chairman: Do you happen to know where the bond houses rate the Government of Saskatchewan?

Mr. Whitworth: I do not know offhand, no.

The Chairman: The evidence we had the other day was that the rating that applied to U of T was better than that received by the Government of Ontario.

Mr. Whitworth: I believe it was similar.

Mr. Cohen: It is higher. It is one notch higher than the Province of Ontario's rating by the same organization.

The Chairman: The same situation would probably apply, knowing what we know of the fiscal situation in Saskatchewan.

Mr. Whitworth: Not blowing the University of Saskatchewan's horn too strongly, we operate at a surplus. We have positive reserves, and we have a well-managed institution.

Senator Tunney: Mr. Whitworth, inasmuch as I am a farmer and inasmuch as subsidies are not a very popular term now among farmers in Saskatchewan, I would recommend that farmers probably follow your tack in calling for funding by some other title. I hope there will be enough money for these farms, especially western grain farmers, this year, and then some for our universities. Certainly in my mind the universities are next in line in necessity, after food, and constitute an investment and not an expenditure at all.

Looking at the need for revenue - and maybe new revenue - and looking at the burden that university students are carrying now and will carry in increasing amounts later, when they are least able to fund their education, is it possible that some kind of a contract could be made with university graduates to pay later or defer costs?

I read in one of this morning's papers what the costs now are for rooms for students and then for meals for the day. It is pretty horrendous. Theory at least would tell us that when students graduate and establish themselves would be the time in their lives when they would be most able to pay. Are there thoughts of graduating now and paying some of the costs later? Maybe it is not really clever, but it is my theory that something like that might work.

Mr. Whitworth: Senator Tunney, as you may know, the universities across the country have grown their scholarship and bursary programs. Certainly the bursary programs based on loans are intended to help students repay the cost as they move into the labour market.

Saskatchewan has introduced more bursaries in the hope of linking those bursaries to having students remain in the province, to bolster the shortages we have in the teaching professions and some of the health professions.

There are programs out there - and I am sure they are applicable in different provinces - to help offset the cost of education for students. Perhaps Dr. Giroux could amplify on that.

Mr. Giroux: In that context, the research we have done shows that university graduates, about five years after graduation, earn significantly more income than, for example, college graduates or high school graduates. On the other hand, they also pay more taxes.

We need to look at that argument. By paying taxes, they are contributing as citizens to the economy. They are paying taxes to the federal and provincial governments, which, in turn, make investments in universities.

However, another element is becoming important. Senator Bolduc referred to the Statistics Canada report that showed a significant increase in bequests, donations and other activities that are coming to the universities. Universities are using their alumni in a very efficient manner. I know because I often get calls and letters, and I contribute.

The alumni are being used more, and they are contributing significantly to the revenues of the universities. The graduates who are out in the labour market make these kinds of contributions. The contribution from that front is not negligible. Over five years, these contributions made up 41 per cent in terms of the Statistics Canada data. That is significant.

I think you are asking whether the people who have benefitted from this education are contributing back. We maintain that the federal, provincial taxes and consumption taxes they pay, as well as the alumni contributions they make are fair indicators that they are paying some of that back.

[Translation]

Senator Ferretti Barth: Are universities enjoying full enrolment? Is enrolment down at some of the smaller institutions? As for the long term, have you given any thought to closing a few universities as a way of addressing the problem of deteriorating buildings?

Mr. Giroux: Over the next decade, we expect to see university enrolments decline by 25 per cent. Over the past two years, enrolments have increased by 5 per cent nationwide. As I indicated in my presentation, I attended a meeting last week of the Association of Atlantic Universities presidents. In Newfoundland and Nova Scotia, for example, demographic indicators show that university enrolment among students between the ages of 18 and 24 is likely to decline. All universities have, however, experienced an increase in enrolments this year. It seems that university is becoming an increasingly popular choice.

All universities contribute significantly to research. For example, the University of Toronto, which is a very large institution, conducts extensive research. Smaller universities like St. Francis Xavier University in Nova Scotia and the University of Northern British Columbia in Prince George play very important roles within their respective communities. Both have reported an increase in enrolments. Universities may differ in size and characteristics, but they are all equally important to us.

In British Columbia, some groups have started calling for new institutions. There has been some talk, among other things, of establishing a technical university in British Columbia and one in Ontario. We want to give private universities an opportunity to open in Canada so as to meet all needs.

Senator Ferretti Barth: The committee will need to focus its attention on national university infrastructure programs. That is the only way to lend universities the financial support they need to maintain their infrastructure. Government funding should be earmarked for this purpose.

Mr. Giroux: That is what we are calling for this morning. Our brief outlines our position on this matter.

[English]

Senator Cools: My question is different from the line of questioning so far. I am placing this before you because it is not often the business officers of universities are before one. I thought the opportunity is here, so I should respond to it.

My question has to do with a certain financial cost related to what I can only describe as a social phenomenon that seemed to sweep the universities in the 1980s and the 1990s, in particular, that wave of ideological orthodoxy where several faculty members were being fingered by students or by other staff members and being accused of anything: sexism, sexual harassment, misogyny. It was endless.

The fact is that in that time-frame, many fine faculty members had their careers ruined. We also know now that many of the accusations were quite false or unsubstantiated. I believe one university professor, Professor Fekete, wrote about it.

During that period of time, I remember reflecting on the fact that it seemed to be such an enormous waste of both financial and human resources. I am wondering anyone at the table has ever attempted to cost in dollars what had to be an enormous burden for universities, the legal costs, damages and lawsuits. I am wondering if anyone here knows or has an idea of the costs in dollars for the university and what is the impact of that period of time, which is quite expensive, on the current financial situation.

The Chairman: Well, senator, that is going quite far afield from our mandate to discuss deferred maintenance. However, you have made a presentation here. I will invite Mr. Giroux to comment.

Senator Cools: I also think, chairman, when people ask for money, you can also have an idea of how it is being spent.

The Chairman: That could lead us into quite an inquest. I do not want to go too far, senator.

Mr. Cohen: It is true; it is expensive when you live through those struggles. However, in terms of the overall expenditure and cost of conducting higher education, it is actually negligible. I would say it is actually much less than the costs, legal and otherwise, of reporting to the various governments.

There is accountability. Part of the tension arises from that accountability to the public. Sometimes we do in public certain things that others would do in private. In the overall scheme of things, it is a very small number and it did not last for that long.

Senator Moore: Mr. Giroux, you mentioned the matter of alumni who give to their respective alma mater. Does CAUBO have figures on alumni giving?

Mr. Cohen: We do have giving in terms of total received, the proportion that is alumni and the proportion that is non-alumni.

Senator Moore: Are you speaking of individuals or corporate donors?

Mr. Cohen: I do believe that this year, the StatsCan-CAUBO data separates individual giving from corporate giving for the first time. I do not have the numbers here but we could send them. We have that kind of data for one year only. We do not know if the non-corporate business donors are alumni. However, we can assume that the larger proportion comes from alumni.

Senator Moore: You probably are familiar with the manner in which political donations are treated as a deduction from the taxes that you are responsible to pay. Perhaps the answer to this problem is obvious. What impact would you expect on donations from individuals, alumni and otherwise, if donations to universities received similar treatment?

Mr. Cohen: We would obviously vote for it.

Senator Moore: I just wanted to get that on record.

Mr. Cohen: As officers of universities working in the environment and as alumni ourselves and as parents who give, we would agree to that proposal.

Senator Moore: The proposal from AUCC refers to a wholly federal fund complementing ongoing provincial funding of medical equipment purchases. That was the model. Mr. Giroux spoke about the proposed 40 per cent federal contribution being matched by provincial governments with universities contributing the remaining 20 per cent.

Some our provinces are not in as good a shape as others. As senators, we are responsible to speak up for our regions. I think of the Atlantic provinces and the large university student base there. Those provinces may not be able to participate in funding programs with a matching condition. How do we deal with that? As you say, the large number of users of university facilities is a major contributing factor in the deterioration of those facilities.

Mr. Giroux: Mr. Chairman, we recognize the uneven capabilities of provinces across Canada to cover their share. That is why we requested that the program to be spread over a longer time period, and we suggested five years. We also know that some provinces have already established certain programs or made certain commitments to funding. That should be recognized with a matching federal contribution.

We used a 40-40-20 split as an illustration. Obviously we would welcome the federal government paying a larger share of the funding. However, we want to be realistic about current fiscal conditions.

We are also well aware that, in Atlantic Canada, other federal agencies, like the ACOA, have been used in the past to provide the provincial share of the funding for such projects as the Canada Foundation for Innovation and the site-licensing project.

Flexibility allows recognition of the existing commitments and also a look at other possible avenues, such as the federal government possibly providing a larger share through if it used the mechanism of ACOA or other such agencies. We have been told that Manitoba and, to a certain extent, Saskatchewan would also find this difficult. It is not a particularly Atlantic problem.

Senator Moore: You are suggesting that the Western Diversification Fund could be used in this way?

Mr. Giroux: Yes. The federal government has been flexible in terms of its approach. We hope that a longer disbursement period would help. We need to recognize that this is achievable, without denying that some provinces will find the situation more difficult than others.

Senator Moore: I am interested in your options for allocating the funds under the proposal. You state that the number of people using university facilities is a major contributing factor in the deterioration of those facilities. Why do you not recommend your FTE - the full-time equivalent - undergraduate and graduate student population as the base?

Mr. Giroux: Mr. Best, as the one who developed the proposal, will answer.

Mr. Robert Best, Vice-President, National and International Relations Branch, Association of Universities and Colleges of Canada: Mr. Chairman, we formed a standing advisory committee comprising university presidents from across the country to oversee this project. You can imagine that there was extensive discussion and a great deal of interest in the allocation formula.

At this point, we wanted to point out the several alternatives. Obviously per capita is a formula with which the federal government is familiar. There are a variety of programs that have provided allocations to provinces on an equal per capita basis. On the other hand, our committee members wanted to acknowledge there were several ways to approach this.

We proposed, as an alternative, the notion of doing it by counting full-time equivalent students. Neither of those alternatives appeals to everyone. We wanted to find a model that reconciled the strength of equal per capita as a known system with the reality that the full-time equivalent number acknowledges some provinces as net recipients of students which, over time, puts more added stress and strain on the university infrastructure. If we could find something that came in between the two, it might have greater possibility of acceptance across the country.

A model already exists in the national infrastructure works program. It weights two factors equally in the allocation formula. We suggest that is one way to reconcile the two alternate views, but we are not absolutely ruling out either of the other two models.

The sense from our committee members was that this model provided a workable solution that would result in the provinces that are net recipients of students having that fact taken into account in their allocation. They would fare better under our formula than under the traditional equal per capita.

Senator Moore: My concern is that the Atlantic provinces would be a substantial net loser if we go with a combined formula. I do not know if I could accept that model given the needs that exist in our institutions.

Senator Bolduc: I wish to ask Mr. Giroux a question.

You said that the federal government has a substantial surplus this year. In fact, they had something like $17 billion. That will mean in the next year we will pay $2 billion less in interest service charges. Are you asking for that $2 billion?

Mr. Giroux: I think it is important that if you have a surplus, a certain proportion of that goes toward the debt. The Minister of Finance has already earmarked the contingency funding and so on.

On the other hand, as the economy goes down, a program like this will have significant impact on the local economies where the institutions are located. Universities know where the problems are and they can identify some specific projects. We feel that it is a good way of spending that surplus. There is no doubt if it goes toward the debt it will reduce the federal government interest costs over the longer term. It is that kind of balancing act that must be maintained.

[Translation]

We need to find a way out of the mess we are in as a result of the collectivization of public insurance over the past 40 years. Our registered retirement savings program works well. Why not look to it for inspiration and set up a similar registered savings program for post-secondary education? Parents would thus have an opportunity to set enough money aside to one day cover the cost of their children's education. A similar program could be developed for health care. The federal government no longer has the money to fund health programs. The solution to the government's financial woes lies in registered savings plans for post-secondary education, unemployment, heath and retirement.

People will have to manage their own finances, without any help from the federal and provincial governments. They will have to find some way to take care of themselves.

Mr. Giroux: The federal government has instituted an education savings plan whereby it covers 20 per cent of education costs. It could do more. However, as time passed, we observed that it would be in the best interests of Canadian families to take advantage of this plan. However, this does not preclude other forms of contributions.

[English]

I would invite our witness from the Canada Mortgage and Housing Corporation to come to the table, please.

The witness is David Cluff, Director of Strategic Policy and Planning for Canada Mortgage and Housing Corporation.

Mr. Cluff, I do not want to pre-empt the questions that will be put primarily by Senator Moore. There was some hesitancy on the part of CMHC to have a witness here, for the very good reason that CMHC does not now have a program related to capital costs at universities.

However, it may be that this is the very issue that Senator Moore and others may wish to address. He may wish to address programs that you have had along these lines in times past.

In any case, I do thank you for acceding to our request on such short notice to come here and expose yourself to Senator Moore. He was insistent that we hear from CMHC.

Do you have an opening statement to make, Mr. Cluff?

Mr. David Cluff, Director, Strategic Policy and Planning Division, Canada Mortgage and Housing Corporation: I do have an opening statement. As I understand it, the committee would like some information on the role CMHC played in the past, in particular about its student housing program. I will do that, then I will speak briefly about the main points in the evolution of housing policy in Canada. Then I will talk about what we do today with regard to student housing.

The Chairman: Please proceed.

Mr. Cluff: Between 1960 and 1978 section 47 of the National Housing Act identified the Student Housing Program. Loans were made to provinces, municipalities, their agencies, hospitals, school boards, universities, colleges, co-operative associations and charitable corporations for student housing. In each case, the province concerned had to approve the making of the loan.

The purpose of the program was to make long-term loans to assist in the construction of student housing, the purchase of existing buildings for conversion to this use, or for the improvements to existing residences. The housing may be dormitories, hostels or self-contained family units. Lounges, dining halls and other facilities, including hard furnishings such as beds and desks necessary for the operation of student housing, may also be included as part of the project.

The program itself provided a loan from CMHC, and therefore from the federal government, for up to 90 per cent of the prescribed house price for self-contained projects, and up to $15,000 per bed for hostel projects. These loans were secured by mortgages or debenture. The amortization period was permitted up to 50 years and almost all of the loans were made for that period.

CMHC obtained the funding for these loans from the CRF. That is, we have obligations that we have to pay back to the Government of Canada. We got the money and we lent it out to the groups that I mentioned for the purpose that I mentioned.

There were only a few conditions attached to these loans: the money, both principal and interest had to be paid back ton a timely basis; the project had to have adequate property protection insurance; it had to be used for student housing - it could not be claimed as student housing and then diverted to something else; and the property had to be maintained in a proper state of repair.

A 90 per cent mortgage for 50 years was quite a boon from the government. In those days, our financial markets were not as developed as they are now and that just was not available from any other source. In addition, the loans that were granted had an interest rate lower than the rate CMHC was charged. In other words, we borrowed at a certain rate and we lent at a lower rate. The Government of Canada has been reimbursing us for this interest loss over the life of the loans.

About 300 loans were made during the period of the program. The face value of the loans was roughly $400 million. As of today, there are 243 active accounts with a total outstanding balance of $246.1 million. The average interest rate on these loans is 6.6 per cent. The last loan will be paid off in 2028, which is 50 years after the last loan was made.

The loans have a wide geographic distribution. Of the 243, 88 are in Ontario, 67 in Quebec, 25 in Nova Scotia, 23 in British Columbia and so on. There is at least one loan in each province of Canada.

The mode of intervention was a loan, and we have been administering these loans since they were made. That means once a month, or perhaps less frequently in some cases where the security is a debenture, we get the payment, put in it the bank and repay the Government of Canada.

This portfolio has been relatively problem-free. In preparation for my appearance here today, I asked if we had had any arrears problems, usually a sign of a problem with a loan. In the last four years, we have had two occasions where a payment has been late, one for $6,000 and one for $3,600. As you can see, from a loan point of view, this seems to be risk-free.

However, in the early 1980s, there were some problem projects - their names are relatively famous - that were financed but that CMHC had to take back because of non-payment. The name Rochdale probably means something to many of you. I was there in Toronto at the time it was created. The other one is Pestolozzi, here in Ottawa at Rideau Street and Chapel. Apart from perhaps one other, there has been no record of default.

Why did this apparently popular and successful program, which we had from 1960 to 1978, stop? To answer this, I must give you an explanation of the major changes in Canadian housing policy.

In 1978 and 1979 - I was not there at the time, so I am speaking from material I found - the Trudeau government had to confront a financial problem. One of the decisions it took was to completely change the method of housing finance and the programs that CMHC offered. The pattern I have described for student housing existed for other housing projects - that is, long-term, 50-year loans with some sort of small interest rate subsidy, and, perhaps, in some cases, a capital contribution.

At the time of this problem in 1978 and 1979, all of that was replaced by a regime that lasted until 1986. I will read from our 1979 annual report because it is as close as I have come to an explanation:

In 1979, CMHC's direct lending and investment commitments declined sharply. This reflected policy and legislative changes completed early in the year which were aimed at increasing reliance on private rather than public funds for mortgage lending under the terms of the National Housing Act. This change in emphasis is being accompanied by a growth in subsidization and an increased assumption of risk by CMHC through NHA mortgage insurance.

The programs that followed in 1979 and lasted until 1986 were no longer 50-year commitments. They were 35-year commit ments. The capital funding was provided by the private sector, primarily by the banks. The CHMC insured them through its mortgage insurance fund and ensured that the projects met their objective, which was to provide adequate housing to low- and modest-income Canadians by subsidizing the interest rate down to 2 per cent.

The other change made at the time was a policy change. These were to be mixed income projects. It was done in part as a reaction to the ghettoization problems perceived in some large public housing projects. At the same time, there was an emphasis on serving families. Much of the public housing that had been done before was for the elderly. At that time, it became clear that families were being under funded.

Those changes are what led to the demise of the student housing program. It was not cancelled because of any inherent problem. It was in reaction to a major overhaul of the government's approach to housing programs.

The second change that affects our current role in student housing was the 1986 decision of the Mulroney government to hand over to the provinces, under certain conditions and with a strong accountability framework, the responsibility for the delivery of new social housing units, provided that they cost-shared 25 per cent. Since 1986, CMHC has not been providing direct delivery of social housing. It has been funding it through the provinces.

There are two exceptions. We continue to fund on-reserve housing programs. They are done in the way I just described: The money comes from elsewhere and we provide a subsidization of the interest rate. There was also the Co-op ILM program, which was kept out of the transfer to the provinces. That was an experiment with the index-linked mortgage.

The third significant event occurred in 1994 when the current government decided to continue the process that had been started in 1986 and offered to the provinces the administration of our remaining social housing portfolio. Since 1996, we have been signing agreements. Agreements are now in place with all but four jurisdictions - British Columbia, Alberta, Quebec and P.E.I - where we have handed over the administration of our portfolio and all the money that goes with it.

The student housing loans, because they were not seen as social housing, were not handed over, so we continue the loan administration. We continue to receive the interest rate subsidy, which is about $600,000 a year.

I have spoken about the jurisdictional change in policy. In 1986, another change occurred and that was to try to target the programs. As I mentioned, between 1979 and 1986, the programs were to be mixed-income. The federal government and all the provinces agreed in 1986 that federal housing funds had to be targeted to "the poor." Our definition of poor is the colloquial definition. Our expression is it must be targeted to those in core housing need. These are people who live in inadequate dwellings they cannot afford, where affordability is defined as spending more than 30 per cent of income on obtaining a unit for the median market rent in a particular location.

There was a change in who did the delivery, who selected the projects, and who the beneficiaries of federal aid should be. Those changes have continued in the social housing agreements I just described. When we hand over to the provinces the portfolio and the money, they are obliged to keep the same level of targeting that we did.

Essentially, since 1978, a federal housing program has not been specifically aimed at students. I am told, although I do not have the details, that under the non-profit programs or the co-op programs, some student co-ops may have been funded.

When I read the excerpt from the annual report, I referred to CMHC mortgage insurance and that brings us up to today. CMHC is one of the two providers of mortgage insurance in Canada. They insure lenders in case of borrower default. The other insurer is a subsidiary of General Electric. However, CMHC is the only provider of rental insurance.

CMHC rental mortgage insurance is available to build or purchase housing that provides accommodation for students. However, there is no special deal. It is available to anyone who wants to build a rental unit. Loans are made up to 85 per cent of the lending value of the property. There is an insurance premium that ranges between 1.75 per cent and 4.5 per cent depending on the nature of the loan. Investors must put in a certain amount.

Mortgage insurance is regularly provided on loans to private rental investors for self-contained rental units such as apartments and townhouse buildings. Many of these may obviously be rented out to students.

In the recent past, CMHC has provided mortgage insurance on two dormitory-style student residences: one in Halifax and one in Winnipeg. Normally, we do not insure dormitory-style buildings. This was done through our Centre for Public-Private Partnerships. It was made possible because the universities provided corporate guarantees on the mortgage loan.

That is my introductory overview of student housing, where it was and where we are today.

Senator Moore: Mr. Cluff, our hearing this morning is part of our study with respect to the accumulated deferred maintenance problem now being experienced by our universities. That includes residence maintenance. You have mentioned that CMHC is currently administering 243 active mortgages from the past program. Is it possible for a university to refinance with CMHC to get the necessary funding for renovating its buildings to bring them up to code?

I ask that question in the context of evidence that we have heard that the banks are reluctant to do that. Also, if the banks were involved, their interest rates would be quite demanding. Is it possible for universities that now have mortgages with CMHC to refinance?

Mr. Cluff: We have not been doing much, other than this mortgage administration, since 1978. It is fair to say that not much attention has been given inside CMHC to that. I cannot answer your question. I know universities are free to pre-pay their loans at any time, but, obviously, that does not solve the problem to which you are referring. I will undertake to find out whether that could be done under our current rules.

Senator Moore: I could not miss your full-page ad touting your success at raising $2.2 billion at 5.527 per cent. Given the fact that you have that money at that percentage interest rate, has the corporation given any consideration to re-entering or rejuvenating its student housing program? The conventional lenders are tough.

I equate, Mr. Chairman, our small universities to small-business people. They all have a tough time getting financing from conventional bank lenders. Perhaps the government could show leadership in this area. That is why I ask the question.

Mr. Cluff: You asked if any attention has been given. The answer is, no, it has not been. The CMV to which you referred was an inaugural issue. It is limited right now to home-ownership mortgages. The banks have their mortgages; they pool them together and these securities are issued. It is perhaps premature to tell how the CMV program will evolve.

Senator Moore: Is the intent to cover individual homes only?

Mr. Cluff: Yes, the current program is designed for individual homeowner mortgages.

I could add some context around the government's current priorities in housing. You may have noticed the increasing attention, starting in 1998 and 1999, to the problem of homelessness. The government reacted in December 1999 with a $753-million program and the naming of Minister Bradshaw as the homelessness co-ordinator. Clearly, that issue ranks as a high priority for the government.

Let us put that in perspective. I mentioned the definition of "core need." Our programs were designed to help people who could not afford housing when housing costs were at 30 per cent. The last data comes from the 1996 census and indicates that 1.7 million households in Canada fall into that category and are defined as having a core housing need or problem.

Vacancy rates in large cities have declined recently. Here in Ottawa, the vacancy rate is two units per thousand. In other large cities such as Calgary and Montreal, it is between 1 and 2 per cent and perhaps even lower than 1 per cent in Toronto. That is not considered healthy, especially when joined with Ontario's removal of rent controls.

We have a growing problem that is referred to as the "affordable housing problem." In the Speech from the Throne, the government indicated it would work with provinces to address that problem and promised some $680 million over four years for that purpose.

The third priority of the government relates to Aboriginal housing. I need not go into details, but housing conditions on reserves are considerably worse than in the rest of Canada. The only program that CMHC continues to deliver is housing on reserves.

Those are the three highest priorities in the federal housing agenda. There are many other requests to help with the disabled and with seniors and so on, all of which, by government decision, have been given lower priority. That is the context.

Senator Moore: You are now administering 243 loans?

Mr. Cluff: Right.

Senator Moore: Obviously, the borrowers are not sending in their cheques to pay out the loans in advance. The interest rate is preferred and it helps them in their long-term planning and budgeting.

I would like to return to the question of refinancing. Would you ask your people who are administering the loans now to explore the possibility of permitting the universities whose mortgages you currently hold to bring targeted proposals specifically to refinance for maintenance needs? We have been told universities need $1 billion of refurbishing immediately. Can the schools with existing debts have an opportunity to bring forward hard numbers and targeted refinancing proposals to you?

Mr. Cluff: Yes, but there is another aspect that I should mention. Our lending, as opposed to our insurance, is controlled through our capital budget, which is approved every year by the government. We would have to look and see whether we indeed have the policy approval to do that sort of thing.

I described how in 1979 the government withdrew from providing capital financing and replaced it with financing from the banks. That decision was changed back in 1993. The banks were, in the view of the government, not giving the best possible rate to social housing providers. Therefore, in 1993, we introduced the Direct Lending Program. In our social housing portfolio, what used to be financed by the banks is now once again financed by the Government of Canada, at a lower rate than the banks would provide.

This did not affect the student housing loans because, from the period of their initiation, hey were always financed by the government. I mention this because we can provide direct lending under the current policy regime only where we have an operating agreement and where we provide a subsidy. We do not provide a subsidy on student housing loans. It is not a simple question. However, I will undertake to look at it.

The Chairman: We are running out of time. It remains only for me to thank you, Mr. Cluff, again for coming on such short notice and for being so helpful. The information has been quite substantial and substantive.

You will get back to us on the question of whether the present rules would permit universities that have mortgages at the CMHC to refinance those.

The committee adjourned.

National Finance

Proceedings of the Standing Senate Committee on National Finance

Issue 19 - Evidence

Proceedings of the Standing Senate Committee on
National Finance