Hon. Messrs. Caldwell, Smith

Ms. Korzeniowski for Hon. Mr. Lemieux

Ms. Laurena Leskiw, Private Citizen

Ms. Pat Bowslaugh, Private Citizen

Mr. Don Berry, Private Citizen

Ms. Marilyn MacNaughton, Private Citizen

Mr. Brian Flaherty, Private Citizen

Mr. Anthony Denis Cattani, Private Citizen

Mr. Ron Zimmerman, Private Citizen

Mr. Terry James,

Mr. Alexander MacKenzie, Private Citizen

Mr. Glen Peters, Private Citizen

Clerk Assistant (Mr. Rick Yarish): Good evening. Will the Standing Committee on Economic Development please come to order.

Our first order of business is the election of a Chairperson. Are there any nominations?

Mr. Stan Struthers (Dauphin-Roblin): Yes, I nominate the Member for Assiniboia (Mr. Rondeau) as Chair of the committee.

Clerk Assistant: The Member for Assiniboia, Mr. Rondeau, has been nominated. Are there any further nominations?

Seeing none, Mr. Rondeau is appointed Chairperson. Mr. Rondeau, would you please take the Chair.

Mr. Chairperson: Our next order of business is the election of a Vice-Chairperson. Are there any nominations?

Mr. Struthers: I nominate the Member for St. Vital (Ms. Allan) as Vice-Chair of this committee.

Mr. Chairperson: Are there any further nominations? Seeing none, Nancy Allan is appointed Vice-Chairperson. This evening, the committee will be considering the following bills: Bill 18, The Teachers' Pensions Amendment Act and Bill 26, The Winnipeg Commodity Exchange Restructuring Act. We have presenters registered to speak to both bills. Is it the will of the committee to hear public presentations on the bills first? [Agreed].

Mr. Struthers: Could I suggest, Mr. Chair, that we begin with Bill 18. Hear those presenters, followed by Bill 26.

Mr. Glen Cummings (Ste. Rose): Just a suggestion. Also from time to time we have, if we anticipate being quite some time going through these bills, we ask the out-of-town presenters. That could mean that there would be people, depending on the list, that we might inconvenience some others. We leave that in the hands of the Chair.

Mr. Chairperson: Is that the will of the committee, to hear the out-of-town presenters first?

Mr. Struthers: Yes, and that is partly why I suggested Bill 18 first. I see there are four presenters listed as out of town, so I think we should start with them and give preference to the out-of-town presenters.

Mr. Chairperson: Is it the will of the committee to hear the out-of-town presenters on Bill 18, then 26? [Agreed] I also understand that there are two out-of-town presenters for Bill 26. Is it the will of the committee to hear them first? So we will hear out-of-town presenters on Bill 18, out-of-town Bill 26, and then slip back to 18. Are we allowed to do that?

An Honourable Member: No, we will not break that up.

Mr. Chairperson: Out-of town-presenters, 18, then the rest of the 18, then out-of-town presenters for Bill 26 and then the rest for Bill 26. Agreed? [Agreed]

I will then read the names of the persons who have registered to make a presentation this evening. Bill 18: Marilyn MacNaughton, Jan Speelman, Terry Clifford, Laurena Leskiw, Gordon Shead, Doug Reynolds, Pat Bowslaugh and Don Berry; Bill 26, sorry about that if I murder your names: Mike Gagné, Gord Cummings, Rob Dzisiak or Rees Jones, Brian Flaherty, Peter Lloyd, Anthony Denis Cattani, Ron Zimmerman, Vic Janzen, Curt Vossen or Terry James, Alexander MacKenzie, Lawrence Yakielashek, Glen Peters, Don Stewart, Greg Webb and Jim Mann.

We have already covered the out-of-town presenters in attendance. They will hear them first in order of bills. How does the committee propose to deal with the presenters who are not in attendance today but have their names called? Shall their names be dropped to the bottom of the list and then dropped from the list after being called twice? [Agreed]

Is it the will of the committee to set time limits on presentations?

* (18:40)

Mr. Struthers: I would suggest, Mr. Chairperson, that we allow 15 minutes for presentations and then 5 minutes for question and answer period.

Mr. Chairperson: Is that agreed? [Agreed]

As a courtesy to the individuals on the waiting list, waiting to present, are there any suggestions as to how late the committee wishes to sit this evening?

Mr. Struthers: I would suggest that we, so that everyone can have a shot at presenting to this committee, hear all the presenters on each of the bills tonight.

Mr. Chairperson: Is that the will of the committee? [Agreed]

If there is anyone else in the audience that would like to make a presentation, and has not yet registered, you may do so with staff at the back of the room. At the desk in the back.

Finally, for the information of presenters, please be advised that 20 copies of any written versions or presentations would be appreciated. If you require assistance with the photocopying, please see our staff at the back of the room.

Mr. Struthers: Mr. Chairman, with the leave of the committee, I would like to make the following membership substitutions effective immediately for the Standing Committee on Economic Development: the Member for St. James (Ms. Korzeniowski) for the Member for La Verendrye (Mr. Lemieux).

Mr. Chairperson: Agreed? [Agreed]

Mr. Chairperson: For the first out-of-town presenters on Bill 18, Laurena Leskiw, private citizen. Do you have written copies of your brief for distribution to committee members? Please proceed with your presentation. Ms. Leskiw, go ahead.

Ms. Laurena Leskiw (Private Citizen): Thank you.

Mr. Chair and committee members, thank you for placing me on the agenda for Bill 18 on The Teachers' Pension Act.

Although I am a member of the Brandon Westman Retired Educators' Association and the Retired Teachers' Association of Manitoba, I should like to share with you a more personal side to the pensions issue, which I assure you is representative of many of my retired colleagues.

I shall direct my comments to three specific areas: First, the full cost of living allowance, COLA, as assured at my retirement and obtained until just recently; secondly, maternity leave buyback for retired teachers as granted active teachers; thirdly, retired teacher representation on the TRAF governance board.

I support the intent of Bill 18 to stop double dipping. The recommended termination of double dipping will assist the funding of my first two points, as I see it.

1. COLA. For some background for our full COLA request, let me revert back to 1961 for some personal history that is common to many retired teachers. We had two children, a boy, 9, and a girl, 4. We decided that if we were going to get ahead, I would need to supplement our family income. Therefore, I took the one-year teacher training at Brandon College. I applied for a one-year teaching position in Brandon, our home city. Dr. Betty Gibson, who was assistant superintendent and primary supervisor, advised me that when I was interviewed by the superintendent, it would be better if I did not mention that I had a preschooler at home as Mr. Hill was averse to hiring female teachers with preschoolers. A mother's place was in the home. Fortunately, he did not ask and I did not tell him, and I was hired.

During those years, there was no income tax deduction for babysitting costs. School policy stressed you were to notify the board as soon as you knew you were pregnant and resign that term, Christmas, Easter or June; no tenure, no job security. In those years one observed that some female teachers had a real weight problem. Loose clothing was in the fashion. Yes, the camouflage covered up their secrets and allowed them to continue teaching a little longer and receive the needed salary. Occasionally, in enforcing the board policy, the superintendent or the principal asked for her resignation as he observed it was not just obesity.

At that time, high school teachers, regardless of qualifications, were paid $1,000 more than elementary teachers, mainly female. As I recall, if you were a married man, as the breadwinner you also earned a supplement. Later, pregnant teachers were allowed a leave of absence, usually a full or half year, never in mid-term. Finally, we were granted maternity leave. There are still many retired teachers who receive smaller pensions because they do not have university degrees, Class 1 to 3 on the salary grid. They paid what was often referred to as a huge portion into their TRAF pension fund plus full Blue Cross and salary continuance premiums. I was fortunate to live in a university town where I could attend summer school and night school to get my degrees, but for many rural teachers this was not possible. Many were farmers' wives with a full career on the farm, as well as raising a family, or they were miles from universities.

In these areas, male teachers were often able to go to summer school, but that was almost impossible for many mothers. Consequently, these women's pensions are comparatively small, their lifetime salary and savings small, their years of pensionable time, on average, much less than male teachers.

We need full COLA to meet inflation which still does not meet our daily increases in the cost of maintaining a home. Further, these costs change very little after the death of your spouse. Although your income may be reduced by half or more, the costs of home maintenance, heating, Autopac, medications, et cetera, still remain the same. In fact, you often need additional hired help.

Female life expectancy is also much greater. Wednesday I was called to a city meeting on seniors' housing, where the CEO of the new Brandon Lions Manor reported, with their new addition, the average age of tenants in the total complex had jumped from 83 to 86 years. Single women tenants occupy 93.5 percent of this total occupancy of this new building–staggering statistics. The cumulative effect of no reduced COLA would be drastic over an extended lifetime. Full COLA is a necessity. Our TRAF goals and pensions were developed with the intent of full COLA.

In 1988, my husband had a severe accident. For three months we doubted if he would recover. At a time like this one re-examines one's priorities in life. Thus, I took early retirement, thinking we could live a fairly comfortable life on his pension, my reduced pension and the assured full COLA.

In 1988, when I retired, my pension stub lists $18.80 as the Blue Cross monthly deduction. Today it is $60.50. This extended health insurance covers less each year with us paying fully for increasingly more services and drugs. The minimum level where Pharmacare kicks in rises yearly, drug costs skyrocket, escalating prices for gasoline, and yes, even the basic phone line. A phone is the lifeline for seniors and their families to allow a senior to live independently as long as possible. We must now pay for immunization shots, the public health nurse and, outside of Winnipeg, field vision tests as well.

A CentraGas spokesman told me today that our Manitoba gas bills have increased 65.3 percent from December 1999 to June 1 this year, with a further proposed increase of 31.7 percent by June 30. Seniors, often housebound, require more heating. Yes, our output often exceeds our input.

* (18:50)

For years I have been able to buy a year's supply of thyroid medication, priced at $18.02 last year. However, this May, I must now pay the doctor five dollars to write the prescription refill, or make a doctor's appointment to see him, with the health care picking up his office call charges. In addition, I am only allowed a three-month supply for $10.06, and then, in three months, I must repeat the process again. Now, as a math teacher, even I can see that this is not good economic planning–$18.02 versus $60.24. It definitely helps the doctor's and the pharmacist's income, but not mine.

You can see that a COLA matching this month's printed 3.9% CPI, or whatever percentage increase, usually does not cover the increased cost of living at the lower pension bracket, although sometimes it may at the higher end. We gave up disability pensions and made larger contributions to TRAF, so as we could be assured a full COLA in retirement.

The full COLA precedence has been followed. Without a full COLA, our standard of living will certainly deteriorate as inflation hits in the future years.

I know there are before you several proposals for revisions in the Pension Adjustment Account to enable a fully funded COLA. Please ensure that these legislative changes are made to The Teachers' Pension Act to allow this to occur. If over 60 percent of the TRAF fund is attributable to retired teachers, then surely we should share in the overall gains of the main fund instead of being penalized by the present restricted investment procedures of the PAA.

2. Maternity leave. The above historical information will enable you to see, also, the even greater need by retired teachers for the buyback of maternity leave, as granted this past year to active teachers.

3. RTAM on the Governance of the TRAF Board. My third point seeks representation of the Retired Teachers' Association of Manitoba on the TRAF Governance Board. In 1993, as a board member of RTAM, we began writing letters to TRAF and the Manitoba government asking for a representative on the TRAF Board. During my 1994 term as RTAM president, we met with TRAF, the MTS and the Minister of Education, Mr. Manness, again requesting the Lieutenant-Governor-in-Council to appoint representation from RTAM to this TRAF Board.

If one is to take seriously the basic principles of equal power, equal responsibility and equal partnership, then my graph–and once a teacher, always a teacher. I never miss a chance to do a little bit of math work with you. I also know that some people are visual learners and other people are auditory learners. I also know that the more senses that you can use, the better the retention of details. So please look carefully.

The red part is the part that is paid by the retired teachers. Need I say anything about the white part? In looking at the graph, you will see that our contribution should provide the rationale for RTAM participation as an important governance team member. We know first-hand what retirement entails. We have the time, the knowledge and the life experiences. I understand many pension boards in other provinces have one or two retired teacher representatives. I hope the Government of Manitoba follows suit.

Thank you for allowing me to present my side of the pension story.

Are there any questions?

Mr. Chairperson: Thank you very, very much for your presentation. Do the members of the committee have any questions for the presenter?

Hon. Drew Caldwell (Minister of Education, Training and Youth): I just want to thank Ms. Leskiw for coming. There are a few people from Brandon here, and I know both Scott Smith and I are here today. So thank you for your presentation and all the points that you raise are salient and ones that are active in my office. Thank you.

Mrs. Joy Smith (Fort Garry): I want to also relay my thanks, Ms. Leskiw. It was a very compelling presentation and, being a teacher myself, for 22 years, I can fully appreciate the points that you have put across. I certainly think that you have hit on some very salient points that have to be addressed right now in the year 2001. Thank you.

Mr. Chairperson: Ms. Leskiw, do you have any response?

Ms. Leskiw: I just hope that you are all going to act very favourably once you have heard my–

Mr. Chairperson: Thank you very much.

Mr. Doug Reynolds. Do you have written copies of your brief for distribution to committee members?

Mr. Doug Reynolds (President, Interlake Retired Teachers' Association): I certainly do.

Mr. Chairperson: Please proceed with your presentation, Mr. Reynolds.

Mr. Reynolds: Thank you, Mr. Chairman.

I was asked by my organization to present a brief to the committee. My definition of a brief is one page, so this will not take very long.

On behalf of the members of the Interlake Retired Teachers' Association, I would like to thank the committee for this opportunity to express the concerns of our organization and those of other retired teachers.

The basic problem for thousands of retired teachers is that it was indicated that a full cost of living allowance would be available to us, as it had been for a decade previously, and, therefore, we planned our retirements accordingly. Most of us were not aware that the COLA payment was based on the Pension Adjustment Account's ability to pay, and we were dismayed to receive far less than 100 percent over the last two years. Although we did appreciate the 2 percent that we got last year. Once again, it appears that the adjustment for the year 2000 will provide an increase that is less than one-half of the cost of living increase.

Of course, all teachers are being impacted, but should Bill 18 not be amended to ensure a full cost of living increase annually, it is the recently retired, and therefore the youngest retired teachers who will experience the most adverse effects as we can reasonably expect to depend on our pensions for some 30 years hence.

Recently, retired teachers are concerned that without a full cost of living increase, they will have insufficient funds to see them through 20 to 30 years of retirement. If retired teachers agreed to a cap of two-thirds of the cost of living index, a typical $20,000 annual pension in the year 2000 would have the purchasing power equivalent of $13,600 in the year 2030, based on the inflationary rate of 4 percent. So, as you can see, inflation can really erode the pension.

As well, teachers who have been retired for 20 or more years will be hard pressed to live a comfortable lifestyle, as their pensions were based on salaries that were half of what salaries are now. Therefore, the pensions were minimal and a reduction of COLA compounds the problem.

Comparisons of the teachers' pension plan with other pension plans have been made. This is, however, like comparing apples and oranges. Teachers sacrificed a disability clause and paid higher premiums to ensure that our plan would guard against the ravages of inflation.

We would ask that Bill 18 be revised to provide a better opportunity to realize a full cost of living increase for retired teachers, whose numbers continue to grow annually. If the government of the day were to meet their financial obligations to the pension adjustment fund, and if a formula could be devised that would enable surpluses to be transferred from account A to the PAA, the chance of realizing this would certainly be enhanced.

On behalf of my fellow retired teachers, I thank you for this opportunity to express our concerns. I am confident that this problem can, and will, be rectified to ensure the thousands of retired teachers in the province will have the retirement plan that they anticipated.

Respectfully submitted.

* (19:00)

Mr. Chairperson: Thank you very much for your presentation. Do members of the committee have questions to the presenter?

Mrs. Smith: Thank you, Mr. Reynolds, and I do commend you again for your presentation. The rate of inflation, I believe, is up to 3.9 percent right now, this year, and when you are asking for the cost of living, obviously it is a very, very important factor overall. It is really the umbrella under which this legislation should be put forward. I know last year it was 2 percent, which was below, I believe, the cost of living. Do you know how much below the cost of living that was last year?

Mr. Chairperson: Mr. Reynolds, you have to wait until I identify you for your mike to go on. Mr. Reynolds.

Mr. Reynolds: Certainly, it was less than the cost of living, but I cannot say exactly how much. But I know this year, we will be receiving 1.5 percent when the cost of living is in the neighbourhood of 3.25.

Mrs. Smith: So, it is quite self-evident that the cost of living is not there this year, or the year previous. You had a percentage, and obviously in the past decade the cost of living was given to the retired teachers, is that correct?

Mr. Chairperson: Mr. Reynolds.

Mr. Reynolds: I am sorry, Mr. Rondeau.

Mr. Chairperson: Mr. Reynolds, it is for the purpose of Hansard to recognize you, so that they can turn on your mike and record it. Mr. Reynolds, go ahead.

Mr. Reynolds: It is my understanding that during the early '80s when inflation was running away that COLA was unable to keep up with the cost of living. But it is also my understanding that, from 1987 through to 1997 or '98, there was a full cost of living provided to teachers, and I recall going to pre–retirement seminars and being told time and time again that, do not worry, teachers' pensions are full COLA.

Mrs. Smith: I, too, thank you, Mr. Reynolds. I, too, remember that, and fully expected the full cost of COLA–or the full COLA. But, thank you very much. All of us, I can say on both sides of the table, all of us are very concerned about this issue right now.

Mr. Caldwell: I just want to thank the Interlake Retired Teachers' Association for making a presentation. You represent the only group from school divisions that have, and I certainly appreciate it, and we are working towards some resolution of the COLA issue. Thank you very much.

Mr. Chairperson: Thank you very much for your presentation, sir.

Pat Bowslaugh. Do you have written copies of your brief for distribution to the committee members? Thank you. Please proceed with your presentation.

Ms. Pat Bowslaugh (Private Citizen): Good evening honourable Chairperson and honourable members of the committee, several of whom I am pleased to recognize around the table.

Thank you so much for the opportunity of presenting my plea to this august forum of decision makers. I have always believed that sharing one's point of view before a final decision is made is essential to people feeling that they truly are a part of the democratic society, given that their input is duly considered. Hence, I offer to you the following perspective. It is a personal story.

My father died almost 40 years ago at age 50. In a few short months, my mother will be 89. Although not always prone to tell my age, I am 59. I have the possibility of living to an age at least that of my mother, which would be another 30 years, or, I may live to an age average to them both, which would be about 20 years. Or, on the downside, I may not live another week, which would be of great benefit to the TRAF coffers.

When my father passed away, I had just turned 20 and was completing my second year of teaching. Although a very creative entrepreneur farmer for his era, my father, proverbially, ran out of time before he could ensure financial security for his family. As a family, we struggled for the next many years trying to escape the financial burden he had left behind. I silently vowed that I would be more attentive to my finances. I would be proactive.

Hence, as I left the employ of Brandon School Division in 1969 to have my first son, and, as you have already heard, there were no maternity leave clauses at that time. Unlike many of my female colleagues, I did not withdraw my accumulated pension benefits from those first nine years of teaching. And, when my children were little, I became a substitute teacher so that I could keep abreast of the changes in education. and be ready to return to the classroom when they were of school age. Ironically, my career as a substitute teacher flourished, and my first assignment, which was to have been six weeks, turned into exactly six months of tenure. I soon realized that I should not let the opportunity to contribute to my pension plan slip by. Substitutes in 1971 did not pay into TRAF, but I wrote to TRAF and asked if it was possible. Just send us your employer's verification of the number of days in the year that you are in the classroom and we will bill you accordingly. That was the response.

I retired from my principalship in June 1999, and I felt very gratified that I had 34.87 years of pensionable service, which included those almost four years of substitute teaching. I had guaranteed my financial security. Whoops, within a few short months I found out that this was not so.

Financial security, to me, means that my purchasing power will not be eroded as the years pass by. It soon became evident that the cost of living allowance, which was to maintain the value of a pension derived after my career spanning 39 years, was not forthcoming. I am in a panic.

Forty-one years ago, my starting salary was $2,900 per year. What would a person do with $2,900 per year now? Although my gradual increase in salary over the years reflected increased experiences and qualifications, much of the increase in pay was a result of the negotiations between the local school boards and the local teacher associations throughout the province. Having sat on negotiating committees several times, I am aware that most often salary increases were reflective of the Consumer Price Index for that particular year. In other words, the salaries reflected a cost of living allowance.

So how does this relate to the necessity of a full COLA for those teachers who have now retired and will be retiring in the future? My initial statement of a possibility of my living another 30 years would require that my pension would need to have the same purchasing power in the year 2031 as it has today. Conversely, let us look at what my salary was 30 years ago. I have a photocopy from my personnel file from Brandon Division 40, which indicates that as a Class 4 teacher in my 10th year of employment my yearly salary would have been $12,665, or approximately $1,050 per month before deductions. Had the results at the bargaining table not resulted in cost of living adjustments over the next 30 years, my exit salary 2 years ago could have been just slightly higher than the $12,665, reflecting my increased qualifications and my administrative assignment.

In the event that a full COLA is not forthcoming, the retirees that are here today, as well as those retired teachers both now and in the future, would effectively have their incomes frozen. The aforementioned example hopefully illustrates what 30 years has the potential of doing to erode the value of a pension which today might be acceptable.

In closing, I wish to point out that every single pension is also a part of the economy. Pensions are used to meet the ever-increasing daily costs of living, as you have already heard, and a satisfactory pension is the key to both physical and mental health. Citizens, teachers who have contributed to the success of our province through both their professional teaching and active citizenry should not endure the stress of worrying whether their pension will allow them to continue in the lifestyle which their training and experience allowed them to establish while they were in the classroom. Please remember that research is showing how stress precipitates a multitude of illnesses. Needless to say, our health care system cannot afford to support more afflictions. Please be proactive, as I tried to be at the beginning of my career, and address the concern for a full COLA in a positive way so that your retired teachers in Manitoba do not become a financial burden on the system as the future unfolds.

If I might just explain that, although presenting as a private citizen, I was recently appointed vice-president of the Westman Retired Educators' Association, and tonight I serve as the carrier pigeon and bring to you two pages of signatures from our members respectfully pleading for attention to this issue, and here they are.

* (19:10)

Mr. Chairperson: Thank you very much, Ms. Bowslaugh. Are there any questions for the presenter?

Mr. Caldwell: Just to say, hi, Pat, and it is good to see you and I know that Stan was in your school when you were at Meadows. Thank you. I appreciate your remarks, particularly on COLA. It has been a vexing issue for me for the last 18 months, and it is something that we are working on, as well as the governance issue. Those are the two major outstanding issues that we are working on. As I said earlier, it is a live issue in the office and please pass those remarks along to the Westman Retired Educators' Association.

Mrs. Smith: Hi, Pat. It is so good to see you. I know the number of years you certainly put in and the dedication you had and still have to the teaching profession. I just want to personally thank you for your very insightful presentation.

Mr. Chairperson: Thank you very much. Do you have any response?

Ms. Bowslaugh: If I might respond to the Honourable Mr. Caldwell and thank Mrs. Smith as well. I appreciate and you need to know that we really have imprinted on Drew's mind because in the parade, the Travellers' Day Parade, a week ago on Saturday, he actually, in chorus, in unison, called out to all the people on the route as we waved to him: COLA, COLA, COLA.

Now, if he may do the same to you in the next few weeks, we would be eternally indebted. Right, Scott?

Mr. Chairperson: Thank you very much.

Mr. Don Berry. Do you have the written copies for distribution? Thank you. You may proceed with your presentation, Mr. Berry.

Mr. Don Berry (Private Citizen): Mr. Chairman, members of the legislative committee, I thank you for giving me this opportunity to speak about the proposed amendments to the act governing teachers' pensions. I have two main concerns. The first one is a concern in the area of COLA, and the second is the governance of TRAF.

Like most teachers who have retired since the late 1970s, I retired with the expectation that my pension would be fully indexed, provided the pension fund generated sufficient funds to cover the costs. To make this possible, teachers agreed to increase their pension contributions and to pay their own disability insurance.

In the last year that I was teaching, that was 1998-99, I paid $4,094.02 into the pension fund, and $650.27 for disability insurance. I bring these figures to your attention to demonstrate the significance of teachers assuming responsibility for their own disability insurance.

I understand that the Government wants to peg our COLA at two-thirds of the CPI, similar to the COLA received by the civil service. This is not fair, because teachers are paying their own disability insurance and contributing at a higher rate. We have fulfilled our part of the agreement. To change our COLA to two-thirds of the CPI would be viewed by teachers as Government reneging on the deal that was made.

I realize that the Pension Adjustment Account does not have sufficient funds to pay the CPI this year. However, there is a large surplus in the pension fund, part of which could be used if the legislation was changed. I urge the committee to look at the historical facts, and ensure that fairness is taken into account when the legislation is changed.

This brings me to my second point. I cannot understand why retired teachers do not have representation on the TRAF board. Over 60 percent of the money invested by TRAF has been contributed by retired teachers. The pension plan serves all members, both active and retired. We are all concerned that the account performs well.

Retired teachers need to be represented to give retired teachers' perspectives on the result of any proposed changes. There are some retired teachers who have the knowledge and skill to make a significant contribution on the TRAF board. Other provinces have given retired teachers representation on their pension boards.

And the last point: the performance of our pension fund is vital to our health and welfare.

I just will add one point. Just because you retire does not mean that you lose all your skills. I serve on five boards. I cannot understand, as I say this one really irritates me, that retired teachers do not have a voice on this board. Thank you very much.

Mr. Chairperson: Thank you very much for your presentation. Do members of the committee have questions to the presenter?

Mr. Caldwell: Thank you. I just appreciate the good delegation from Brandon tonight. I am happy to see you here. I am always happy to have a lot of Brandonites in this building, because it does change the perspective of the way people think here. We are having Brandon perspective.

As I said to Pat earlier, Don, the issue of governance is something that is alive in the office right now, as is COLA. So we are working toward creating a solution to these vexing issues. Certainly I appreciate hearing your concerns tonight. They will go into our deliberations as we continue work on the Government's issue. Thank you.

Mr. Chairperson: Mr. Berry, did you wish to respond?

Mr. Berry: I just thank you very much.

Mrs. Smith: I want to thank you again, Mr. Berry, for your presentation. I have to commend you for the arguments that you made, because it shows the fairness that teachers have shown over the years–the good faith we all had. The point you made about the disability insurance, I know personally of a large number of teachers who have shared that with me. I know myself, when I was teaching, that was something we had to take on, and it is quite expensive.

I must point out, too, that in concurrence the other day, the minister and myself were talking about this very point of the COLA and of the TRAF governance. He did assure me in concurrence, when I asked him, that was something he was taking very serious consideration to. So I am assured that with your very capable presentation, it just reiterates some of the things, some of the questions, that I personally asked the minister, and he was very accommodating in assuring me that this was on top of his agenda.

Mr. Berry: I would just like to thank you for giving us your consideration, and, as I say, we are all interested in having this resolved in a favourable way.

Mr. Glen Cummings (Ste. Rose): Yes, I note in the bill that we have that there is a transfer of funds being made, but I would presume, or I would be pretty sure, that the teachers' association, The Retired Teachers' Association, has some idea of what needs to be done to permanently fix this. Is there a formula or any suggestions that yourself, or on behalf of the association, might make in terms of changes, additional changes that would need to be done?

Mr. Berry: There are some presentations to follow that I think will address your question.

* (19:20)

Mr. Chairperson: Thank you very much for your presentation.

Marilyn MacNaughton. Do you have written copies? Thank you. Please proceed with your presentation, Ms. MacNaughton.

Ms. Marilyn MacNaughton (Private Citizen): Good evening, Mr. Chairman, honourable members of the committee.

I am also telling a personal story. Maybe it is part of being a teacher; maybe it is part of being a woman. I am not sure of which. However, my story is slightly different from those that you have heard previously. This is not to say that it should in any way discount from the issues around the COLA, or around the issue of governance. Just that I wanted to bring another issue to the fore in another perspective.

At the beginning of my brief, I have stated, for example, that there are no quarrels with some of the other provisions, simply that I want to focus on the one aspect of the bill, and that being the 120 days that is being proposed for teachers to be allowed to teach while they are drawing pension.

I would like to suggest to you, among other things, that we have three issues here. One, being age discrimination; a second one being impracticability; and the third one being lack of support from the teachers of Manitoba.

In the first instance I suggest to you that Bill 18 targets and penalizes teachers between the ages of 55 and 65. There appears to be no problem with teachers collecting their pension and continuing to teach full time after 65. This bill, in itself, discriminates against a group of teachers on the basis of their age. If you are in this 55-to-65-year age bracket, I believe that you are unfairly penalizing mostly older women who choose to draw on their pensions, but need to continue to work part time.

Now, I am assuming that having heard the other presentations, you have already gotten quite a clear picture of why some of those needs might be in place. In any case, neither the pension that they would receive nor the part time work, by themselves, would provide sufficient funds to maintain a respectable lifestyle.

These older female teachers may have chosen to draw their pensions because, even if they taught until 65, they still would only get a minimal pension. They may have chosen part-time work because, at this age, the wear and tear of life and of work may be beginning to show. We have also heard about stress and we have heard about the health costs et cetera.

I would like to suggest to you as well that women tend to be the major caregivers for husbands, children and aging parents. In most cases, if the teacher is near or at pensionable age, long term insurance is withheld in favour of retirement and pension benefits. We cannot assume that there is additional financial support forthcoming from a spouse. We cannot assume that working at the local doughnut shop is an option, and I do not think we should assume that the female, older teacher should be living at a level of poverty.

In terms of impracticability, I have written a few things down. I am presently still teaching. By the way, I am teaching with Seven Oaks School Division and there are so many impractical aspects that this does very little justice to it. However, I think it is impractical for the teacher, for the school and for the division. All of them are hit by this in adverse ways. Contracts for part-time teachers are largely based on the needs of the school. They do not sort of look at the teacher and figure out if they need a bit of part-time work and then come up with a job. Of course, here or there, what cannot be fitted into the existing workloads is usually what results in the part-time position. These contracts may be allotted at 0.6 or 120 days, and I learned on Saturday that that whole issue is being questioned, as well.

You can see that at the time of writing, I was assuming that 0.6 might be the equivalent of 120 days out of our 200 school-year days, but I guess that is up for debate. Or, I may go on, these contracts might be any fraction that is workable for the school. It might be 0.67, 0.68 or whatever it is, or whatever it is that they might need. Given the provisions of the bill, the teacher in question would be forced to either decline the job or accept the job and cease collecting her pension.

Neither of these situations is desirable for the teacher or for the school in question. The sole reason in the first, and I am sorry, you will have to add place in there, for drawing a pension and continuing to work was to have sufficient funds to live on in an accustomed lifestyle while preserving one's health, and I think those two are becoming more and more critical. In the meantime, this school is without a teacher, particularly one that is trained in a desired area and has the experience to deliver a program at the level of quality. Just an aside, I am teaching fabrics, for example, in Seven Oaks. We are at a stage where we have absolutely no subs available at all. In fact, the only substitute person is me. So I have a 0.6 contract at the moment, and whenever I am available on a half day I am used, and particularly used, in an area of technology. So I am not sure who we are serving here.

The lack of support I would like to address lastly. Bill 18, I think, lacks the support in the teaching population. In fact, I am going to stick my neck out here and be a little stronger. Most teachers that I have talked to are unaware of Bill 18, and they are shocked to learn what is being proposed. Although information concerning the other portions of the bill has been distributed both by MTS and by TRAF, this aspect around the 120 days has been silent, whatever. Retirees of June 2001 were not aware of the proposed provisions contained in the bill. Many of those people will be basing their future, thinking that they might be able to get a part-time job and that may not be an option for them. In fact, retirement planning seminars frequently refer to such action as a reasonable and legal approach.

I thank you.

Mr. Chairperson: I thank you very much for your presentation. Do members of the committee have questions for the presenter?

Mrs. Smith: Thank you for your presentation, Marilyn. I think that you have brought up some very salient issues, and there has been discussion around this particular part of the bill, teaching more than 120 days. I think it is a very compelling point, when you talk about after teaching for so many years and then having part-time jobs and contractual kind of work, substitute kind of work, it shows not only the kind of dedication but the kind of work we have to do because the COLA is not in place and because some of those assurances are not there. As a former teacher, I really commend you for coming tonight and bringing those points. I think teachers need to be able to do that more often. I thank you for this.

Mr. Chairperson: Ms. MacNaughton, did you want to respond?

Ms. MacNaughton: Not really. I will add, I guess, since it seems that a number of us are telling our own stories, like the women before me. Actually next year I will have been teaching in Canadian public schools for 40 years. I did not have time off for all the reasons that you heard, although most of my beginning years were in another province. Even though I have put in the time, I guess, basically, the money is not there, but that is another one. For most of the people that are retiring today, they have to take a cold, hard look at whether they can completely retire, or whether they need to supplement, and how they are going to do that becomes a real issue.

Mr. Caldwell: I would just briefly like to thank you for bringing this perspective, because it is a perspective that has not been brought to the table. I do appreciate that. Thank you.

Mr. Chairperson: Thank you very much for your presentation. Jan Speelman, please proceed with your presentation.

Ms. Jan Speelman (President, Manitoba Teachers' Society): Thank you to the Chair and members of the Legislative Committee. I completely thank you for doing this on June 25, rather than July 25, and also at 7:30 at night, rather than four in the morning. I am very happy to be here at a reasonable time.

An Honourable Member: We are just glad you did not bring your motorcycle.

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Ms. Speelman: No, I did not bring my motorcycle tonight or my scooter.

Manitoba Teachers' Society commends the Manitoba government for its willingness to make amendments to the Teachers' Pensions Act. Since its election, this Government has encouraged input on teacher pension issues from the Society. This productive dialogue has resulted in the proposed improvements that have been very, very long awaited by Manitoba schoolteachers.

Although we appreciate the proposed amendments, the Society must register its concern that significant and long-standing issues remain unresolved. You have already heard about these, but I am going to touch on these again.

The Governance Model: Pension plan governance has changed significantly since the '60s. Governance of the teachers' pension plan today must be updated. A new governance model, consistent with what we believe are today's best practices for pension plan governance, is necessary to represent the interests of the parties to the deal.

In early 1999, the Teachers' Retirement Allowances Fund Board presented a proposal to restructure the governance of the pension plan. That proposal would recognize the joint partnership between the provincial government and the Manitoba Teachers' Society, and permit changes to our pension plan without having to go to the Legislature each and every time we want to make some changes.

Although the parties agreed to continue discussions on this topic, and, yes, we do have a memo of understanding, setting a deadline of December 31, 2001, to come forward with a recommended model, there have been no formal discussions this calendar year and the clock is ticking. High priority must be given to this issue.

Pension Adjustment Account: In December 2000, the Manitoba government agreed to continue discussions with the Society on (a) the method by which interest is credited to the Pension Adjustment Account; (b) the contribution rates; and (c) the level of future cost of living adjustments. This discussion was undertaken with a view to developing a long-term solution. The parties agreed to try to bring resolution to these matters, and, again, we have another memo of understanding, by July 1, 2001. That is just around the corner. Unfortunately, although discussions continue, we will not be able to meet our proposed deadline.

The issues of appropriate cost of living increases have been brought forward by the Society for many years. The Society believes that it must be able to assure members, both active and retired, that a reasonable rate is being used to credit earnings to the Pension Adjustment Account, and that all retired teachers will receive adequate costs-of-living increases.

The proposed legislation addresses this issue for a short term. It provides an amendment to authorize the transfer of funds to cover the liabilities for a 2% cost of living adjustment paid for the year 2000. But a long-term solution is urgently needed. July is fast approaching, and over 7000 retirees will once again face a situation whereby they will not receive an adequate cost of living increase. And you have already heard here, today, that it is barely a half of what the cost of living will be.

Our recommendation is that the act be amended so as to permit earnings to be credited to the Pension Adjustment Account based upon a three-year average of total fund earnings, rather than just the percentage that is credited at this point. When we base it upon a three-year averaging, that avoids the highs and lows of the markets and situations that we got into this year.

Changing the method of crediting earnings to the Pension Adjustment Account will not resolve the issue of adequate cost of living increases, but will enable TRAF to ensure that a reasonable rate is being used to credit earnings to the Pension Adjustment Account. This complies with the recommendation by the plan's actuary for a more diversified investment strategy; one that parallels that of the overall invested fund.

Maternity Leave: The Society is grateful that this provincial government has attempted to address some aspects of pensionable service for teachers on maternity leave. Though maternity leave has not been part of recent pension discussions, the Society takes this opportunity to indicate that the serious concerns outlined in our presentation last year on Bill 45 continue to be unresolved.

Again, I am speaking of the fact of retired teachers and, also, the fact that there is only a short window for teachers to buy back their pensionable service, rather than giving them right up to the date of retirement, as it deals with other times that they were away from their positions.

Since this remains an area that impacts a great deal on our female members, and you have heard that over and over again tonight, who constitute nearly 65 percent of the Society's membership, we will continue to urge this Government to respect the principles of gender equity and economic equality.

Adoptive Leave: In the last session, the Government introduced provisions for maternity leave that allow for the purchase of periods of maternity leave at the individual's own contribution rate.

The Society believes the adoptive leave provisions should match the existing provisions for maternity leave. Whether one becomes a parent through childbirth or through adoption, teachers who become parents should have equality before and under the law.

Commenting on the specifics of the proposed changes: In general, the proposed amendments clarify and update provisions of the act by defining what constitutes retirement and length of the period retired teachers can teach while receiving a pension.

In addition, the amendments clarify that pension eligibility will be based upon continuous service, not credited service, bringing our act in line with The Pension Benefits Act.

The proposed legislation also allows the purchase of periods of past service for parental leave, work under the Department of Education, or work as a member of a university education faculty.

On behalf of the public school teachers of Manitoba, we say, thank you. All of the above amendments are appreciated. Nevertheless, we do wish to raise concerns about specific amendments.

Definition of Retirement: The Society is pleased that the definition of "retirement" has been addressed. But we need clarification of some related issues.

Though "teaching days" is defined as in The Public Schools Act, and "school year" will be defined under the proposed 17(1), it is not clear how these sections will apply to individuals not working within the framework of the school year.

For instance, superintendents or individuals employed with faculties of education do not operate on the standard school year. That could lead to inequities in applying the 30 teaching day retirement provision. There needs to be clear understanding of how the clause will apply to those individuals.

Return To Work after Retirement: The Society believes retired teachers who work more than 120 days in the public schools should stop receiving their pension, and recommence making pension contributions.

As with the definition of retirement, this section needs to be clarified.

The Teachers' Pension Act defines a teacher as an individual with a certificate and a teaching contract.

Substitute teachers, though certified, are not under contract. It is our understanding that the 120 day limit on post-retirement work does not include work as a substitute teacher.

Further, the definition of retirement would not prevent an individual from substitute teaching within the first 30 teaching days of retirement.

Maximum Salary Permitted To Be Used for Pension Calculation under The Provincial Income Tax Act: Legislation to authorize the board to administer other pension or benefit plans is included in proposed section 41(17). This is a positive step. What is not clear with this amendment is what happens where excess contributions have already been made and no provision has been negotiated for a benefit to be paid on these contributions.

We recommend that where excess contributions have been made and no provision for payment of a pension beyond that provided under The Income Tax Act exists that excess contributions be refunded.

In conclusion, the Society again commends the Government for the consultative process which has occurred over the past 18 months on issues of teacher pensions. Clearly, progress is being made and good will is evident. However, the outstanding issues are a source of great concern to our 14 000 members across this province. The Society trusts that an open dialogue between the Government and the Manitoba Teachers' Society will result in a successful resolution to the pension adjustment account, governance and maternity leave issues. The public school teachers of Manitoba deserve no less. Thank you.

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Mr. Chairperson: Thank you for your presentation, Jan. Do members of the committee have questions for the presenter?

Mr. Glen Cummings: Just on a small point, where you referenced requiring some clarification on returning to work after beginning pension, is there a position that you want to put forward on that, or does clarification mean supporting the interpretation that you see as a definition of an individual with a certificate and a contract. Is that satisfactory?

Ms. Speelman: Yes, that is satisfactory.

Mr. Larry Maguire (Arthur-Virden): Thanks very much for your presentation, as well. I made a note in regard to the bill about the 120-day limit on teaching days in a year. Do you see anything restrictive in regard to that as we move forward into what is being touted as a shortage of teachers in the future?

Ms. Speelman: No. I think it still gives retired teachers an opportunity to teach 120 days. They certainly can teach beyond the 120 days. It just does not allow them to continue to collect pension, the problem being that when you have retired teachers who are collecting pension you have a job that a person who would be contributing to the pension plan would be in that position. It puts a real drain on the pension plan. We have to be careful about the viability of the plan. Yes, while we would like to see those kinds of situations resolved, we have to look at the viability of the pension plan.

Mr. Caldwell: Thanks, Jan. I appreciate the presentation by the Teachers' Society. It is as thoughtful as usual. I appreciate that. I am continuing the greetings from western Manitoba here today. It is great to see so many presenters from Brandon and Westman.

I just want to ask a quick question on page 1 about the governance model. We have heard a few times tonight already about having retired teachers on the TRAF board. Is that within the gamut of what is being proposed in that governance model suggestion?

Ms. Speelman: What we are proposing for a governance model is an equal partnership of teachers and government, and then either party can name their representatives to that board.

Mrs. Smith: I want to thank you for your presentation, very balanced. Your point about the need for the plan to be viable is well taken. So thank you for that.

Mr. Chairperson: Thank you very much, Ms. Speelman. Mr. Terry Clifford. Do you have written copies of your presentation?

Mr. Terry Clifford (President-Elect, Retired Teachers' Association of Manitoba): Yes, I do.

Mr. Chairperson: Thank you. You can proceed with your presentation, sir.

Mr. Clifford: Thank you, Chair. My name is Terry Clifford, and you should be aware that I am the incoming president of the Retired Teachers' Association of Manitoba. Perhaps I am a novelty here in that I come from Winnipeg. What I will be doing, not only reading the brief, but I shall be making some side comments as I go through, so that people do not get confused, not necessarily by ad libs, but by important points that I want to make not in print.

On behalf of the members of the Retired Teachers' Association of Manitoba, I thank the committee for this opportunity to address changes in pension legislation proposed in Bill 18.

Of about 7000 retirees who are in receipt of a pension, the association directly represents over 4000. As the number of teachers retiring in the next while rises, we expect our membership to increase steadily.

As with most people who are pensioned, our major concern is with the maintenance of the purchasing power of that income. Both CPP and OAS recognize that need, and increases are built into these plans. Current legislation acknowledges the need through the Pension Adjustment Account (PAA).

Regrettably, the PAA recently has not been able to meet reasonable demands placed on it. There was no money in the PAA to permit any cost of living allowance, COLA, for this year. Only the transfer of some $15 million of teachers' money to the PAA from the general account proposed in this bill will enable the increase of 2 percent be paid for the lifetime of current retirees. This funding provides a partial COLA, but it is a stopgap measure. The bill confirms that which has occurred. It does not address the need for long-term stability of the PAA and its ability to provide for full CPI. Certainly, we are grateful to this Legislature for the allocation of $850,000 earlier this year to pay its portion of a COLA, at least for part of that year.

Annually, the PAA is examined to see what cost of living increase is possible. This July, it appears that, in a year when CPI is 3.23, the PAA will be able to pay about 1.5 percent–less than half. On July 1, my associates and I will be poorer, maybe not by much in this one year, but cumulatively, it quickly compounds. This is where I break from the script, if you wish, Chair, just to give you a couple of examples.

I phoned up TRAF this afternoon. There were 326 people retiring. The average pension for a female retiring at the end of this week will be slightly over $20,000. For a man, it is ballpark $30,000. If you take the increase that we will be getting this year, the 1.5 over the 3.23; in 30 years half those teachers will still be alive. That $20,000 will be worth just $50 over $12,000. They will go from buying power today of $20,000 to $12,000.

Let me cite a different example. Let me cite, for example, an individual who retired 30 years ago, in the early '70s. If they were on maximum, did their salary, in fact reach five digits, and, indeed, if it did not, and take the usual computations in place, exactly how much is that today? We have, incidentally, in the province something like a thousand teachers who are over 80. They could well have retired fairly close to that time. There are problems.

There are solutions which we believe are possible if the desire is there to help the PAA. To be honest with you, Chair, we believe that that desire does exist.

There is a formula for funding PAA. This formula limits the amount payable, and, as a rate, is lower, on average, than the rate paid on the rest of the monies invested by TRAF, and the previous speaker made allusions to that.

There is a significant surplus being generated in investments which is not accessible to PAA. It should be made accessible. To give you an example of what we may suggest: If, for example, the surplus is in the order of $150 million, then perhaps $50 million of that could go towards PAA. The same amount could go to a cushion, because rates are going to fluctuate and there will be years when the actual interest paid is somewhat lower than expectations, or indeed, needs. Then perhaps $50,000 for the cushion that is needed for those teachers who are starting to teach. By the way, I would add that, while I am saying that one-third of it could go to the PAA, something over 60 percent of that money I am told, in the account is money paid in by retired people. So we are not even asking for the proportion; we are asking for 50 percent, not 60-something percent of that 150.

Another way of solving it and perhaps necessary in the longer term is to increase the contribution rates by teachers. Each time there is a change, either major or minor, it requires changes in a teachers' pension plan. The approval of the Legislature is required. Surely it is more efficient if some of those decisions were to be delegated to TRAF with, of course, due controls in place, as the TRAF's governance model proposes.

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There are some other features in the bill that I would like to address. We commend the Government for permitting teachers to buy back maternity leaves, but we are confused as to the rationale which limits this to active teachers. You could have twins in, let us say, their late 50s. One has retired, the other has not, and they had children at the same time. One could buy back, the other one could not. Now, I have heard that it is something to do with federal legislation. If, however, that is federal legislation, it is bad legislation and does need to be changed and certainly on behalf of our time, if we could assist the Government in any way to get that change made, we will be more than willing to assist. We do belong to the Canadian Association of Retired Teachers and represent, therefore, a fair number of retired teachers across the country. We agree to the effect of adding section 6.2, which deals with returning to work within 30 days of retirement. Such actions are an abuse of the concept. We do not agree with pseudo-retirement, and certainly clarification is needed with regard to that 120 days. Is it full time; is it part time? I am not quite sure.

There is a point to be made here, and it is a very awkward one. Certainly we would acknowledge that there are teachers whose pension is simply inadequate and there is a need perhaps for those individuals to supplement their income. This is one way of doing it. In fact, there is even the possibility in some manner, which I think many active teachers would retire, is looking at some concept of phased retirement. Exactly what it would be is subject to further negotiations. We are aware of the changes in governance model proposed by TRAF and we agree with this proposed model. TRAF pensions exist only for the benefit of retired teachers and their families. We believe that it is to the benefit of all parties that a retired person, preferably named by our retired teachers, be part of that governing body. There are several points with which this brief deals. All are important. However, let me be sure that there is no ambiguity. The maintenance of our purchasing power by the provision of a COLA, which equals CPI, is our priority.

On behalf of the members of the Retired Teachers' Association of Manitoba and, I suggest, all retired teachers, I thank you.

Mr. Chairperson: Thank you very much, Mr. Clifford. Are there any questions for the presenter?

Mr. Caldwell: I appreciate your presentation, Terry, in bringing your colleagues, Peggy and Murray, and so forth to this. It is always a pleasure to meet with you and discuss these issues. I do appreciate your comments about COLA, particularly in governance as well because, as I said earlier, those are two issues that are quite alive in my office right now. I do appreciate your advice on these matters, as well. I know that we have made a lot of progress over the last number of months because some thoughtful advice has been coming forth by RTAM, and I do appreciate that as the minister. I am also very happy to see somebody from Winnipeg at the podium. Thank you.

Mrs. Smith: I, too, extend my thanks to you, Mr. Clifford. You have brought up, I think, the major points now that retired teachers and all of us are dealing with at this point in time.

My question to you: The thing that keeps crossing my mind is when we talk about incentives to get new teachers to come into the profession. I think more and more teachers are becoming more and more knowledgeable about pension benefits and these kinds of benefits. Has the Retired Teachers' Association done any research or data on the new teachers coming in, in terms of what they are facing at retirement?

I know many new teachers now, although in the past I dare say when I was teaching we never really talked too much about retirement. It seemed that it was not in the forefront of our minds. Now I was speaking to a class of student teachers earlier this year and two or three questions from the class were centred on benefits and retirement and this kind of thing. Has this ever been an issue when you are putting all this under consideration? It seems to me that having an attractive retirement package and attractive benefits might be an incentive to attracting people to the teaching profession.

Mr. Clifford: Directly, the answer is, no, we have not, but obviously we believe we now have the hindsight, which is always useful, to say we wish we had thought about that earlier around. Certainly, I believe it is correct to say that there does need to be some serious re-examination of the whole formula for the funding of pensions in that longer term.

Mr. Chairperson: Thank you very much, Mr. Clifford.

Mr. Clifford: Thank you.

Mr. Chairperson: Gordon Shead. You can proceed with your presentation.

Mr. Gordon Shead (President, Manitoba Association of School Superintendents): Good evening honourable committee members. Before I start the presentation, I want to draw your attention to the cover page and clarify something. You will note that it is not as professional a cover page as it should be. It is a fax page. I was on the road to a meeting this morning in Wanipigow, up near Bissett, when the cell phone rang as I drove north and I heard, at that time, that I was coming to this meeting if I got back to Winnipeg in time. I did get to the meeting; it was late. I got back in time, but this is a cover copy page. That explains that. It also explains why it says "or alternate" is coming to this meeting. I did make it so you can cross out the alternate, thank you.

I am very pleased to be here on behalf of the Manitoba Association of School Superintendents, and I want to touch on this paper. I will not read it. I will hit some highlights of it and speak to a few points.

The mission of the superintendents' association is twofold: It is to provide educational leadership and advocacy for lifelong learning through public education and supports for its members. Superintendents are senior managers, senior executive officers of school divisions and have a very important role to play and a very balanced perspective to bring to the table with respect to looking at collective agreements, employee benefits and pensions. We have to balance those always against the needs of students in the system, whom we all seek to serve and support.

To those points I have three comments based upon input from our association which follow:

The first point is to do with the 30 days following the retirement from teaching, and the teaching more than 120 days. The point is in this day and age there are certain positions which are extremely difficult to fill with respect to vacancies that might arise. A couple of examples are given in the paper in terms of bilingual teachers, and particularly the example cited: Bilingual teachers with skills in mathematics and sciences. These are very rare commodities these days.

The association is of the opinion that we suggest to the committee it consider some sort of hardship clause or mechanism whereby people who have such skills who are still willing to work in the system may continue to work in the system without being penalized with respect to their pension. Again, that is a balancing act, we know, but this is a reality which we are facing as we speak today. There are real examples on the table where school divisions are having difficulty filling these positions, and they are going to their talented, experienced pool of retired teachers, who have voiced an interest to come back and work in the system in some capacity. So the 30-day separation–perhaps one approach is to waive it with the hardship clause notion; something similar to what we do with limited teaching permits, sort of a qualified perspective with respect to the certification that brings people into the business.

A second notion is to consider, and this was raised by an earlier presenter, the form 2A, form 2 contracts versus substitute teaching, and the clarification therein. It would seem that it may be possible for someone to substitute with respect to getting back into the teaching profession for that 30 days, and, therefore, step over that limitation which is currently in the draft legislation. Similarly, with respect to the 120-day limit, the association of superintendents is also suggesting that you consider some sort of hardship clause, simply to deal with the reality of allowing school divisions to access those talented, experienced people who may choose to work in the system a little longer than their earliest-out with respect to retirement possibilities.

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The second point that I would touch upon has to do with TRAF contributions and the link with respect to federal legislation. Again, one of the previous presenters touched upon this same point. The federal legislation puts a limit in terms of the contribution that individuals can put into TRAF, and whether or not there are no more earnings with respect to pension from that point forward. The association is aware that some organizations, some individuals, can negotiate individual agreements, RCAs, registered compensation accounts as a parallel to TRAF. The association is of the opinion that there is a bit of unfairness attached to that approach, that the TRAF really is intended to be a province-wide pension plan for all people contributing, and, we would add, at all levels. So we would suggest that be examined with respect to the earning power for the future of that pension amount relative to the cap.

In addition, we are thinking, too, the association is, that if the bill passes as it stands now, and federal regulations change with respect to pensionable amounts, contributions therein, that may, in fact, create some further challenges for TRAF and the provincial role with respect to supporting TRAF in the future.

The third point that the superintendents' association asks me to raise is, again, an issue with respect to input and tapping the experience base of the provincial association of superintendents on the board of TRAF, the governing board of TRAF, and we believe that the superintendents' association has a good balance of perspective, of expertise, of experience that they are more than willing to bring to the table and offer with respect to enhancing education for students, and enhancing benefits for members, including retiring teachers now and for the future. So we would suggest, with all due respect to the committee, that the involvement of the association be given due consideration with respect to a voice at the table in terms of the governance model.

Again, I want to thank you for the opportunity to be heard. We offer our support in helping Government deal with some very difficult and challenging educational issues for students and benefit pension and salary issues for employers as well–teachers, educators who are very, very important, the most important people in the public system.

Thank you very much.

Mr. Chairperson: Thank you very much, Mr. Shead.

Mr. Caldwell: Thanks very much, Gordon, for coming back down south to present this. I really appreciate your presence here, and I appreciate the advice that you give me on all sorts of issues. The issue around being on the governance board of TRAF is not part of this legislation, but it is something that, as I said earlier, is alive in the office right now.

What sort of membership would active superintendents or retired superintendents–what would the base be of that group, in terms of numbers? A couple of hundred, maybe? One hundred people. Okay.

Mr. Shead: There are superintendents, assistant superintendents, directors of instruction. A variety of titles make up the current active members and, in turn, the retired members that come from that same pool. So, actively, it is about one hundred members. Retired-wise, I honestly do not know. That could be found out.

Mr. Caldwell: That could be a couple of hundred. Okay, I appreciate that. Thank you very much again for that brief.

Mr. Struthers: Yes, thank you, Mr. Shead for your presentation. I would be interested to know what kind of impact you see this having on schools that are a great distance from the city of Winnipeg, schools that are remote. I know that when we look at teacher shortages, usually the first areas of a province that get hit are up north and in some remote rural areas. As a matter of fact, the Frontier School Division got so hard up for teachers one year they even offered me a job.

I would like to know what impact do you see this bill having on your ability to ensure a sufficient supply of teachers in some of those remote communities.

Mr. Shead: It is a good question. It is a challenge which we face in the North in a number of school divisions, that is, a shortage of teachers looming as we speak. In the last couple of years, more and more superintendents from the North are hiring people from out of province, eastern Canada. More and more we have seen a trend of hiring people who have recently retired, either from this province or from other provinces, coming to work in Manitoba and in the North. That has been a phenomenon which has only surfaced I would say in the last two to three years, and now it is something which we pretty well expect as a matter of normal operations, normal business.

The ability to access retired teachers to fill some of these vacancies that are difficult to fill through any other normal means is really an advantage for northern school divisions, not just Frontier, but others in the North as well. I would say that, yes, that is a reality we face as we speak. We do not want to see that closed out necessarily in a very slamming the door fashion if there are maybe some options or some flexibility that can be built into that, recognizing again the balance of financial contributions to TRAF and the need to put teachers in front of students on a daily basis. How you do that with great wisdom, that is a challenge.

More and more we are hiring retired teachers and teachers out of province as a matter of routine, and it is something most of us never thought we would be facing three, four, five years ago.

Mrs. Smith: Thank you, Mr. Shead. I thought the two points that really struck me are, well, first of all, the hardship clause suggestion, because clearly you are taking a really close look at the needs of the students in the province and the resources that we have here, the possible shortage of teachers in math, science, particularly at the senior levels, and the capable retired teachers out there who could fill that. I guess all of us would prefer Manitobans to get those jobs, and I commend you for doing that because that is something that needed to be voiced.

Also, the Manitoba Association of School Superintendents is an integral part of the education system all across Manitoba, and to point that out as part of the teaching staff and the educator part I think was very important to hear tonight. I certainly commend you and thank you for your presentation and the effort you took coming all the way back to get here. Thank you.

Mr. Shead: Thank you.

Mr. Chairperson: As my former boss, I thank you very much for your presentation. It was very informative.

Mr. Shead: As an aside, Mr. Rondeau, the people of Cranberry Portage FCI say hello to you.

Mr. Chairperson: Thank you. That is it for the presenters on Bill 18.

Mr. Chairperson: We will be moving on to the presenters on Bill 26. I understand the two people from out of town, presenters on Bill 26, are on a plane and have not arrived as yet, so if it is the will of the committee we will just proceed as per the list, rather than wait for the presenters. Is that agreed? [Agreed]

Okay. So we are dealing now with the presenters on Bill 26. Mike Gagné. Is Mike Gagné present? Mr. Gagné, we will give you a minute just to get organized and have the room clear.

Do you have written copies of your brief for distribution to the committee members, sir?

Mr. Mike Gagné (Interim President and Chief Executive Officer, Winnipeg Commodity Exchange): Yes, I do.

Mr. Chairperson: Please proceed with your presentation whenever you are ready, sir.

Mr. Gagné: Thank you, Mr. Chairman. Members of the committee, my name is Mike Gagné, and I am here today as the Interim President and Chief Executive Officer of the Winnipeg Commodity Exchange, Canada's only commodities exchange. I have been with the Exchange since 1992, first as director of finance and now as president.

Thank you for this opportunity to speak in favour of Bill 26, The Winnipeg Commodity Exchange Restructuring Act. Bill 26 is necessary in order to repeal the current mandating legislation of the Exchange, that is The Winnipeg Commodity Exchange Act, and permit the Exchange to continue as a share capital corporation under the provisions of The Corporations Act of Manitoba.

The Winnipeg Commodity Exchange is currently in the process of demutualizing. Demutualization refers to the process and procedures by which a not-for-profit membership organization transforms itself into a share capital, for-profit corporation. With a couple of minor exceptions, notably the Minneapolis Grain Exchange and the New York Board of Trade, every other securities and derivatives exchange in North America has demutualized, or is in the process of doing so.

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The other two exchanges in Canada, the Toronto Stock Exchange, the senior equity exchange, and the Montréal Exchange, a financial derivatives exchange, have already demutualized, after obtaining legislation from their provincial governments that enabled them to continue as for-profit, share capital corporations and obtain the necessary tax rulings for their members. Demutualization is only one change that these exchanges have recently undergone. In an effort to grow and preserve their markets, the TSE, the ME and the Canadian Venture Exchange in a well-publicized effort reorganized. Recent reports suggest that the TSE and CDNX are now merging. All of this points out that constant change is a reality in the exchange business.

As committee members are aware, the Winnipeg Commodity Exchange provides an important service to the agricultural business community and provides, directly and indirectly, significant employment in Manitoba. It is the position of the WCE that Bill 26 must be approved to support the ongoing viability of the Exchange. If the bill does not pass, the Exchange will not be able to demutualize.

The decision of the Winnipeg Commodity Exchange to demutualize was made after considerable analysis and review. That analysis was very detailed and included a historical review of the industry, the current status of the industry, recent trends in the industry, a comparison of WCE to other exchanges and the advantages and disadvantages of demutualization to the WCE. A committee of members, including representatives from the grain companies, from Futures Commission Merchants, those are the members that deal with the retail public, and floor traders, met over several months. After completing their detailed analysis, recommended to the Board of Governors that in order to continue to be viable, the Exchange was required to demutualize for reasons I will outline for you shortly. Due to concerns by some members and due to the significance of the proposal, the board held an information meeting of members on November 14, 2000, and a special members meeting on January 10, 2001.

On February 20, 2001, the membership of the Exchange voted by 83.5 percent to demutualize. This vote was held by secret, mail-in ballot. Of the 239 members of WCE eligible to vote, only 12 did not vote, resulting in the highest voter turnout in the past 25 years; 36 members dissented, some of which are probably represented here today.

Exchange by-laws allow that the Exchange can be wound down with an affirmative vote of two-thirds of the membership of the Exchange. If the membership of the Exchange was satisfied that the Exchange could be wound down completely with a two-thirds affirmative vote, then clearly a continuation as a share capital corporation should be able to be accomplished, if approved by a similar percentage vote.

The Exchange is not a leader in the trend to the demutualization of exchanges. In fact, probably over 90 percent of the exchanges in the world have already demutualized or are in the process of doing so. What has led to this trend?

Technology has enabled non-traditional competitors to challenge the product monopolies of traditional exchanges. Technology has also enabled traditional exchanges to list competitive products and to offer lower cost transactions to a greater number of market participants. The majority of the recognized commodity exchanges have demutualized in response to competition and to take advantage of opportunities to grow their business in new and innovative ways. By demutualizing, or adopting a for-profit structure, traditional exchanges are making the transition from membership-based organizations to competitive, consumer driven operations.

At this point, I would like to put into context for you the size of the Exchange relative to its competitors. A noted industry group, the Futures Industry Association, publishes an annual report of derivatives exchanges throughout the world, and the volume of contracts traded. Out of the 40 exchanges listed for 2000, our Exchange was listed 34. What this means is that the Exchange's competition is all much larger and has considerably more resources, both monetary and in terms of staff, to deal with the global challenges facing the business.

Whenever change is proposed, there will be those who raise objections, for various reasons, whether they be personal, ideological, business related, et cetera. During the lengthy and exhaustive review of demutualization, there was one overriding concern that was expressed by certain members. That was that once it demutualizes the WCE will immediately close the floor and move to electronic trading. The fact is that currently, as a membership organization, the board of governors could decide now to change the trading platform of the Exchange from open outcry to electronic trading by a simple majority vote.

Demutualization is not a prerequisite to such a determination. Exchanges everywhere are converting to electronic trading platforms as the world becomes technology driven. At some future point, the board may determine that an electronic trading platform is necessary and in the best interests of the Exchange. However, the decision will have to be made whether or not the Exchange demutualizes. These are two separate and independent issues.

In an effort to reassure concerned members that this decision would not be taken lightly, a resolution has been adopted whereby approval of 60 percent of the shareholders will be required before a change to electronic trading can be implemented. This is a more onerous test than is currently the case.

A secondary concern that has been expressed is once the Exchange demutualizes the Exchange will be sold. Certainly over the past year or two many exchanges have been in discussions concerning potential alliances, and these discussions continue. Exchanges have also been talking to technology providers, B2B's and other potential partners concerning possible mergers, alliances and partnerships, all with the view of trying to be competitive and to create opportunities to grow their business in new and innovative ways. This industry is no different than any other. We must be positioned to consider what is best for the organizations and the markets they provide.

Another concern that may be raised today is that certain current members may be disenfranchised in some way or another. I can state for you today, categorically, that this is not the case. All members are receiving an equal number of voting shares for each membership certificate held. Everyone who is currently on the trading floor can continue trading under contractual agreements. Demutualization does not benefit or hinder any type of member or any type of market participant, including farmers. Contracts will continue to be developed and maintained, as they are today, for the benefit of all market participants. The Manitoba Securities Commission, as our regulator, will insist that this be the case. On this point, the committee should be aware that regulators in Canada and abroad have not been concerned that demutualization will negatively impact the markets.

It is the position of the board of governors that demutualization will provide for several advantages for the Exchange and its membership that are not available under the current structure. In the very near future, we will need to make major decisions concerning fundamental matters that include alliances and new business relationships, industry consolidation, technology issues, involvement in cash markets and diversification into new products. Faced with these issues and the rapid pace of change in the futures industry, demutualization can be expected to provide the Exchange with an improved governance and a managerial structure, an improved financial decision-making model, the flexibility to pursue new business opportunities, access to capital and a more flexible access policy.

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While demutualization will enhance the potential prospects of the WCE, it will not guarantee success in what is becoming a very competitive industry. However, demutualization improves the flexibility and speed at which the organization can act. The for-profit corporation model increases the likelihood of the right decisions being made in a timely manner, and provides the flexibility to implement the best strategy. A very large majority of the members, 83.5 percent, voted to demutualize, because they believe that it is in the best interest of the Exchange to do so.

On behalf of the members, I seek support of Bill 26 from all members. Thank you, Mr. Chairman.

Mr. Jim Penner (Steinbach): Thanks, Mr. Gagné, for that excellent presentation. Some of the questions that have been put to me, I will put two of them to you. How many votes do the five largest members have?

Mr. Gagné: I do not have the exact answer here, but I will perhaps guess about 80. I do not have the exact answer here.

Mr. Jim Penner: I would not expect all that information to be readily available. Another question was, how many members owning multiple memberships could control the voting outcome?

Mr. Gagné: Again, I do not have the answer here. All I can comment on in that regard is that the Exchange for the last 130 years or so has operated on the basis of every membership has one vote, as is the case with, as far as I know, all the other exchanges and also for shareholder corporations: one share, one vote; one membership, one vote.

Mr. Jim Penner: So it is not 83 percent of the people. It is 83 percent of the memberships.

Mr. Gagné: That is correct.

Mr. Chairperson: Any further questions?

Mr. Stan Struthers (Dauphin-Roblin): Thank you, Mr. Gagné, for your presentation. If we were not to proceed with this bill, what do you foresee happening? What impact would that have on your operation?

Mr. Gagné: The Exchange is in a very competitive industry. There are pressures to keep costs down, and there are also pressures on our revenue side by one of our elements of revenue, which is the sale of our market data. So there is pressure on the revenue side. One of the options is always to increase fees. But at a certain point in time if your fees get too high, market participants will decide to trade somewhere else.

Mr. Chairperson: Mr. Maguire, did you have a question?

Mr. Larry Maguire (Arthur-Virden): Yes, thank you, Mr. Chairman. Thank you very much for your presentation, Mr. Gagné. Shares on the Exchange presently can be purchased by anyone?

Mr. Gagné: That is correct.

Mr. Maguire: So they are at a marketable trade position? You do not have to demutualize so that you can increase your share numbers, that sort of thing?

Mr. Gagné: No. That is correct. Any current member or anyone who is not a current member has the opportunity to purchase memberships.

Mr. Maguire: You mentioned in your presentation, and we have heard a lot about demutualization and electronic trading. You also mentioned to me that was of interest that the Winnipeg Commodity Exchange is 34th out of 40 exchanges in size. Is that in regard to trading volume?

Mr. Gagné: That is in regard to trading volume.

Mr. Maguire: So, if that is the case, what kinds of functions are you going ahead with that would allow the Commodity Exchange to become more viable in the future?

Mr. Gagné: We have spent a lot of time looking at different types of contracts. We continue to look at agricultural contracts. For example, we are launching the Canola meal contract tomorrow, and in July we will be launching a revised field pea contract. However, we also have in our market development area people who research other contracts, other types of products that we may trade, for example, lumber, energy and that type of potential contract. We believe that if we can list some of those products that would bring in more revenue which would then distribute the costs that we have over more contracts, so the unit costs would be good.

Mr. Maguire: Having participated in the launch of some of those that are still there and some that are not, I would appreciate the diligence that you are going through in regard to competing with these other jurisdictions. There have been a lot of comments here. You mentioned one as a concern to some that there be electronic trading take place in the Exchange. Can you just give us some background on how much of an necessity it is to move to demutualization to have electronic trading?

Mr. Gagné: The two are not related at all. As a matter of fact, if you look at the history of a lot of the exchanges that are in the process of demutualizing or have already demutualized they have had electronic trading systems in place before they have taken that step.

Also, for example, the Minneapolis Grain Exchange has announced the acquisition, or are in the process of implementing an electronic trading system. Again, that is for later this fall. They are looking at that. They are not demutualized. They are going ahead with that. It is a separate decision. They are looking at that to list new contracts.

Hon. Scott Smith (Minister of Consumer and Corporate Affairs): Thank you for your presentation, Mr. Gagné. I guess Mr. Maguire caught part of my question, but just to be perfectly clear this legislation does not allow electronic trading to take place. A lot of the other exchanges have gone to electronic trading prior to demutualization, and I guess you answered that piece of the question.

Without demutualization, where would you see the Exchange two years from now?

Mr. Chairperson: Mr. Gagné, for a quick response.

Mr. Gagné: We have done some financial projections of course, and unless there are additional sources of revenue or increased fees we will be hitting the wall and getting into a problem with revenues. There are decisions the board will have to make. I think what we are trying to do with this bill here is to provide the flexibility for the Exchange to pursue new opportunities.

Mr. Chairperson: Thank you very much for your presentation, Mr. Gagné.

The next presenter is Gordon Cummings. Do you have written copies of your presentation? Thank you, sir. You may proceed with your presentation whenever you are ready, sir.

Mr. Gordon Cummings (Chief Executive Officer, Agricore): Thank you very much, Mr. Chairman. Good evening, ladies and gentlemen. I am here this evening as the chief executive officer of Agricore Co-operative Ltd., as well as the current chairman of the Western Grain Elevator Association, both based in Winnipeg. Agricore Co-operative Ltd. is a farmer-owned co-operative operating on the Great Plains of North America. We employ over 2000 people, with over 250 being employed in our head office in downtown Winnipeg.

Agricore has over 80 000 farmer members across western Canada, is one of Canada's grain handling and marketing businesses and is the leading supplier of crop nutrition and crop protection products in western Canada. In the newest list of largest corporations in this country, it is interesting to note that the top five, it says here "in Winnipeg," but it is really Manitoba companies, are all from the agricultural industry, of which Agricore is one of them.

The grain industry in western Canada is undergoing fundamental restructuring currently, as indeed is the grain farming communities within western Canada, and there will be other committee hearings on that. One of the common threads of all its restructuring is the necessity of becoming more competitive from the world scene and reducing costs ultimately to the western Canadian farmer, indeed those of Manitoba.

The other aspect is the globalization of the marketplace, the need to have institutions that are truly competitive globally, and I guess I would add to this that there is no doubt now that price discovery around the world is instantaneous because of electronic communications and that that is a new reality. Our organization since its founding in the 1920s as Manitoba Pool Elevators and the Winnipeg wheat pool has valued the presence of the Winnipeg Commodity Exchange to provide marketing management tools to try to hedge some of the risk of trading grain worldwide.

The WCE has become more important in recent years with the growth of the Canola crop in western Canada, the crop that is marketed totally on a commercial basis around the world and in which at this point, as best we can tell, Agricore is the biggest single exporter of Canola in the world. We do not only deal with Canola from western Canada but also from Australia and Europe.

Agricore, along with other players in the industry, have become increasingly concerned about the ability of the Winnipeg Commodity Exchange to survive in a medium to longer term, and certainly this is in keeping with some of the questions that were asked of the previous presenter. In particular, we are seeing a rapid change in other exchanges, including a move towards 24-hour trading in many cases. This is particularly important to us, in that many of our trades really are in Asia, in that the large markets that we sell to, two of the three, are in Asia; namely, the two biggest markets that Canada sells to are Japan and China, and obviously they are in the exact opposite time zones. It is night there when it is day here and the opposite. Basically, most of the transactions we do with our customers in Japan and China are when the Winnipeg Commodity Exchange is closed. So we are always carrying risk for about 12 hours we would rather not carry.

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I happened to have been a member of the WCE committee that looked at the benefits and implications of demutualizing last year. A committee I think that spent a long time at it did a lot of research and certainly, as Mr. Gagné has outlined, found that we were not at the vanguard of this demutualization but near the other end of it. I am currently chair of the implementation committee, which will hopefully successfully implement the decision of over 80 percent of the members of the WCE to demutualize. The committee that I am chairing is not questioning whether demutualization is good, bad or indifferent, but it is simply carrying out the wishes of the 83 percent that voted positively.

I would also point out that the grain industry is an exceedingly important one for Manitoba and the city of Winnipeg and that although in the late 1880s, when the grain industry was primarily established in this city, that markets in history no longer suggest that Winnipeg need be the centre of the grain industry in western Canada. When Agricore was created in 1998, we seriously considered whether our head office should be in Winnipeg or Calgary. Ultimately, we made the decision to choose Winnipeg, and one of the reasons was the presence of the WCE in this city. After we made the decision, we had several other participants in the industry comment that, had we decided to locate in Calgary, they would have had to reconsider whether they should have been in Winnipeg or Calgary. Therefore, the presence of the WCE is one of the linchpins of the grain industry being in Winnipeg.

On February 20 of this year, 227 of the 239 member holders of the WCE voted to demutualize. It was passed by the margin of 83.5, I think a clear indication that virtually all the factions of the WCE, with the one exception being the floor traders who do not want to see much of any change, there was a need for demutualization of the Exchange.

Mike has pointed out to you, not only have many insurance companies demutualized in Canada, but both the Montréal and Toronto exchanges have done; and, therefore, we are not leading the way down the path, but we are going down one that has been well trodden by others, not only in Canada, but a lot of the rest of the world.

I would trust that the Legislative Assembly of Manitoba, and you as a committee, examining this, would make the decision to pass the legislation that is in front of you and realize that rejection of the legislation puts at risk the WCE.

It is apparent that the utility and value of the WCE is the people who use it and the transactions that go through it, not the physical assets. The Exchange itself is of no value if it is not used. I do not wish to sound as if I am issuing you a threat but only to try to deal with this thing as realistically as possible. The reality is if the major users of the WCE do not find the Exchange operates in a manner that suits their purposes then the ultimate decision they must make is to start the Exchange anew, or indeed to throw in with another jurisdiction or another exchange. The fact that the Canola contract is with the WCE is more a function of history than a necessity of tomorrow.

Rather than focus on the negative, I would rather focus on the positive of continued and sustained strong presence of the grain industry in Manitoba, and indeed in Winnipeg, and the need to move forward with the times and allow the WCE to demutualize so that in fact the WCE can grow. If you look at it as we stand now most of the member owners are focussing only on agriculture. Mike mentioned lumber. The fact of the matter is if there was an investment made to trade lumber the current members would not approve it, because the current members would not benefit from lumber. The Exchange has to go beyond where it is if it is going to survive and to grow. We need to demutualize. Indeed, within the Exchange we took time to evaluate this decision. Ultimately, the vote was a strong reflection of the vast majority of people understanding that.

I look forward to the approval of Bill 26 by the second session of the thirty-seventh sitting of the Legislature of Manitoba, and appreciate the opportunity to address this committee on this important matter for Manitobans. Thank you very much.

Mr. Chairperson: Thank you very much, Mr. Cummings. Are there any questions for the presenter?

Mr. Maguire: Thank you very much, Gordon, for your presentation. You indicated that you were the chair of the implementation committee, that you were also on the committee that studied this whole process. So I assume you feel there was due diligence done in the studying and the process of this whole bill to come forward?

Mr. Gordon Cummings: We took a long time on this matter within the committee. Lord knows we had big enough file folders and binders in the end. We did seek outside advice, both legal and business, on this so that we could not only be aware of what our thoughts were but also what had other people done and what were their experiences. We had a committee in terms of the evaluation committee and demutualization that included all the constituencies, including the floor traders. So there was a full and frank review of the facts and the alternatives and also a full and frank exchange among all types of participants in the Winnipeg Commodity Exchange before the decision was reached.

Mr. Gagné has outlined the extensive communication process that went on after the recommendation of the demutualization committee, which allowed members to have several months to consider it before the vote was held. So we both took time in terms of reaching a recommendation and then I think bent over backward to allow there to be ample communication with the membership before the vote was finally held.

Mr. Maguire: Thank you, Gordon. I guess, whether it is 83 percent, 83.5 percent, that is a wide margin; there is no doubt about it. I think the fact that is more pertinent to the whole process is you only had 12 votes, it does not matter where they came from, but 227 of 239 members voted in favour of demutualization. Is that correct?

Mr. Gordon Cummings: Mr. Chairperson, 227 of 239 voted, so we had 12 non-votes, which would imply that we certainly managed to communicate to everyone pretty well and virtually anyone who had an interest voted. Of the 227 who voted, 83.5 voted in favour.

Mr. Maguire: Thank you for clarifying that.

I guess the question I would have is just a practical one. Whether or not you demutualize, the Exchange is going to be having to look at some changes down the road. I remember being a public governor, and we had to look at changes in governance, and I looked at a number of issues over the last decade. I find farmers today in the rural areas electronically trading live quotes with Chicago Board of Trade. Now they are bypassing the Winnipeg Commodity Exchange. It is not a function, I do not think, of the fact that they cannot trade here, because there are lots of mechanisms for them to do that. But they feel that that is where they can get some of the greatest opportunity to protect their investment in their farms today.

So I guess with that, and in light of the fact that you made your comments earlier here, in regard to the recognition for the changes needed for the aspects of globalization in the marketplace, and the need to have institutions that are truly competitive globally, would you agree that demutualization will help the Winnipeg Commodity Exchange be more flexible in that whole area?

Mr. Gordon Cummings: Yes, it will make the Exchange more flexible in the end. Clearly, the Exchange does have to handle more contracts and different types of contracts than it is handling to be more viable. Clearly, with owners currently basically focused on one class of trade, it is a very narrow ambient to be playing in. Indeed, I think by having a wider class of trade, which I hope will be one of the things that comes out of demutualization, and the ability to attract more capital. Because some of the things we have described as well, Mr. Maguire, require capital.

Again, as long as we are going along on status quo, the Winnipeg Commodity Exchange works fine, but if we needed to invest a million dollars in new contracts or new systems, it would be very hard to come up with that under the current ownership structure. That would probably be a point where you hit a wall.

I guess the last point I would like to make, and it is tying two questions together; the thing that matters on this Exchange and in the Canola contract is liquidity. If you look at the trading volumes that occur on the Exchange, about 20 percent are done by the floor traders and 80 percent are by the rest. Now obviously, those of us that represent the 80 percent want the other 20. I mean we want as much liquidity in trading as possible. You know, we are not out to try to knock one group off the floor or out of the Exchange's operation. But I would point out that about half the transactions that go across the floor in the Exchange are from the larger companies that were asked about. You know, these represent a significant part of the total volume. It is important that we create an environment which will attract all types of traders to this, and, indeed, more than today, so that we create the viable thing in the future as well.

Mr. Chairperson: Mr. Maguire, for a very quick question.

Mr. Maguire: Just a quick question I guess in regard to your quota of institutions that truly being in favour of institutions that truly are competitive globally. Your comments about more volume in trade. You know, I assume then that you would believe that all institutions, including the Canadian Wheat Board, would be better off then if there were some choices for those farmers out there today enhancing their operations in regards to being able to have a greater, truer value for finding the true market value of those products. That choice would allow farmers, and particularly on feed barley and feed wheat, which the board does not sell a lot of, to get a truer value for the pricing of those commodities in western Canada and enhance the Winnipeg Commodity Exchange as well.

Mr. Chairperson: And for a very quick response, Mr. Cummings.

Mr. Gordon Cummings: Well, without being unkind, I think that is well outside of the matter I was here to talk about tonight. Mr. Maguire and I have exchanged thoughts on this one at other forums, and I think I will leave it to that.

Mr. Chairperson: The honourable Mr. Smith for a very quick question.

Hon. Scott Smith (Minister of Consumer and Corporate Affairs): Mr. Chair, I never realized that that was part of the bill. Mr. Maguire might have seen that slipped in where I did not see that piece to be dealt with, but, Mr. Cummings, just a very quick question.

You had mentioned that you represent some 80 000 formal members in your organization through Agricore. I guess my question would be: Would you feel–obviously you have spoken in favour of the bill and demutualization–that the 40 000 farmer members in the, I guess, grass roots, if you will, are well represented by demutualization?

Mr. Gordon Cummings: Yes, I would say that they are. I mean, in the end, for the producers who produce things like Canola and indeed feed wheats or feed barleys that are traded on the Exchange, it is in their interest to have the strongest possible exchange that has the highest volume of transactions going through, so that there is the best possible price discovery, and there is the ability of farmers to trade when they want. Having a viable exchange is important to them. I strongly believe that our ability to have a strong exchange, based in Winnipeg, that handles these Canadian commodities is served best by having the demutualization of the Exchange.

Mr. Chairperson: Thank you very much, Mr. Cummings. Thank you for your presentation. The next presenter, I understand, is Rees Jones. Is Mr. Rees Jones present?

Do you have written copies of your brief for distribution?

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Mr. Rees Jones (Chief Financial Officer, CFG Futures Canada Inc.): Yes, I do.

Mr. Chairperson: Thank you. You can proceed with your presentation, sir.

Mr. Jones: Thank you, Mr. Chairman, ladies and gentlemen.

I am pleased to have the opportunity to speak in favour of Bill 26. The firm that I represent is CFG Futures Canada Inc. CFG is a futures commission merchant with our head office here in Winnipeg, 10 branches across Canada, and 60 employees. We specialize in the trading of commodity futures contracts. We have over 2700 clients in western Canada, the vast majority of whom are agriculturally based. Over the past year, we have received many calls regarding the future of the WCE and demutualization, but we have not received one call voicing concern, or objection to it, or that it could have a negative impact on the western Canadian farmer.

Global trade and the application of new technologies have rapidly changed the way business is conducted, and have forever changed many traditional business models. The commodity futures and stock markets are no exception.

At this time, the major exchanges around the world are merging and creating alliances in order to reduce operating costs, share the costs of developing new technologies and improve efficiencies. The driving impetus behind these alliances has been to reduce costs and increase trade volume.

Eurex, a relatively new European exchange operating on an electronic trading platform, now trades the largest volume of contracts in the world, eclipsing the major U.S. exchanges, which at one time appeared invincible. As a result, many of the U.S. exchanges are experiencing grave financial and other difficulties, and, in some cases, the equity in their seat values has been reduced significantly.

In Canada, we have seen the merger of the Vancouver and Alberta exchanges into the Canadian Venture Exchange, which subsequently took over the Winnipeg Stock Exchange; and now, very recently, has been taken over by the Toronto Stock Exchange. Both Montréal and Toronto exchanges have voted in favour of demutualization, supported by their local regulators and provincial governments. Most other major stock and futures exchanges in the U.S. and Europe have also completed or are in the process of moving to for-profit organizations.

The WCE, however, continues to operate much as it has over the past century. The Winnipeg Commodity Exchange is a small, regional exchange with limited resources and options under its current structure of governance. As a non-profit institution, the WCE is not able to raise venture capital or enter into business alliances in which the potential for profit exists.

The passage of Bill 26 is critical to ensuring the future existence and viability of the WCE. CFG was represented on the demutualization committee of the Winnipeg Commodity Exchange that met last summer to sift through all of the information relating to demutualization and the ramifications of this issue on the future of the WCE. The committee was comprised of a broad spectrum of industry personnel representing the various industry stakeholders who use the services of the WCE.

The conclusion of the demutualization committee was strongly in favour of demutualization. There is no other logical decision given the rapidly changing structure of the marketplace and use of technology in the futures industry. Demutualization will not change how the WCE operates or jeopardize the services that it provides to its various stakeholders. Rather, demutualization will allow the WCE to react quickly to competitive threats and improve the overall efficiency of its operations, thereby reducing costs. Demutualization will also allow the WCE to raise venture capital, seek new business partners, enter into joint ventures and explore new business opportunities. This will allow the WCE to grow, strengthen its financial integrity, and ensure that it is able to continue to provide the services of risk management and price discovery that it was originally created to perform.

The membership of the WCE voted overwhelmingly in favour of demutualization in February with that 83.5 percent approving the change in structure. The vote was also the highest turnout in 25 years. The only voter bloc that is opposed to demutualization is the local floor traders, who fear demutualization will result in a closing of the trading floor and a move to electronic trading. Local traders on the floor of the WCE account for just 10 percent of the total membership, as a group account for only 1 percent of WCE revenues.

While we empathize somewhat with this group's concerns, demutualization of the WCE is not synonymous with electronic trading. In any event, the WCE does not need to demutualize if it wanted to bring in electronic trading. There is no guarantee that demutualization will secure the future of the WCE or its continued operation in Winnipeg. It is yet unclear what business model is the best one for the futures industry as strategic alliances, technology and business plans constantly change. The WCE presently does not have the resources or time to take a wait-and-see attitude. A major portion of the WCE's revenues is shrinking, due to consolidation and the use of new technology and the "vendor arena." It is clear that the status quo will force the raising of fees on the WCE to a level where business may be forced to move to other marketplaces. In a short period of time, this will create a non-competitive environment where the upward migration of fees will make the WCE unviable relative to other markets.

As the baseball immortal Yogi Berra, once said: When you come to a fork in the road, take it. The WCE is at that fork. We do not know, with certainty, which road will lead us to success, but we do know that the status quo will, in a very short period of time, lead to the end of the WCE. It would also send a message to the rest of the world that the WCE is not willing to take notice of the changing world, is not open to new opportunities and that it thinks that every other major exchange in North America that has moved to demutualized share capital model is wrong.

In short, demutualization will allow the WCE to react to changing market forces and take advantage of future business opportunities. The end result will be the continuation of the services that the WCE provides to its customer base, mainly price discovery and the offset of market risk. These are the reasons that the WCE was originally created, and should continue to be the overriding factors to consider in the future operation of the WCE. Bill 26 needs to be enacted in order to put the WCE on a level playing field with every other major commodity exchange in North America.

I thank the committee for this opportunity.

Mr. Chairperson: Thank you very much, Mr. Jones. Are there any questions for Mr. Jones from the committee?

Mr. Smith: Mr. Chair, thank you very much, Mr. Jones, for your thoughtful presentation. You mention the ability to grow from demutualization, and you also mention the possibility of the Winnipeg Stock Exchange to actually lose advantage and remain here in the city of Winnipeg without demutualization.

Would you say, without demutualization, that there would be a good chance that the Winnipeg Commodity Exchange would wind down, compared to the rest of the larger markets and partnerships being created right now?

Mr. Jones: Yes, I would, over time.

Mr. Chairperson: Thank you. Any other further questions? I would like to thank you very, very much for your presentation then, Mr. Jones.

Mr. Jones: Thank you.

Mr. Chairperson: The next presenter is Mr. Brian Flaherty. Is Mr. Flaherty present?

Mr. Brian Flaherty (Private Citizen): Present.

Mr. Chairperson: Thank you. I understand that you have a presentation that you would like to present tomorrow, because you still have it in rough draft form, sir.

Mr. Flaherty: Yes. I would like to make the written submission available to the committee tomorrow.

Mr. Chairperson: Is it the will of the committee to accept the presentation tomorrow, rather than tonight? [Agreed] You can just continue with your oral presentation. We will get it tomorrow and distribute it tomorrow.

Mr. Flaherty: Thank you, Mr. Chairman, honourable members of the committee. I have been a member of the Winnipeg Commodity Exchange since 1985, and privately, personally or through my company, Flaherty Grain, since 1993.

I have been a member of the board for approximately three years. However, I do not purport to represent the positions or interests of the board. In fact, it may be fair to say that I am at odds with the board.

I would like to just go through the summary points of my presentation and then come back to each of them and do them individually. First, the proposal, the demutualization report, was, in my view, not properly vetted within the WCE. There has been no formal outside assessment and the public, including the farming community, has not been adequately informed.

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The second area of concentration is dealing with the arguments for demutualization, including competitiveness, flexibility to pursue business opportunities, access to capital, improved governance structure. These, in my view, do not stand up to scrutiny.

Thirdly, I would like to deal with the separation of ownership from trading privileges and how that will irreversibly alter the fundamental nature of this long established and important institution and how, in my view, rights will be removed.

Then I will deal with electronic trading and the fact that it has been an essential element in the argument for this demutualization. Then, finally, I would like to talk about the required level of membership approval. In my opinion, the proposal was not properly vetted within the WCE. There was no formal outside assessment and the public, including the farming community, has not been adequately informed.

While 83% approval appears substantial, closer examination reveals that the WCE membership is divided in relation to this contentious issue. I would further say that it is not only locals or the small independent companies who are opposed to demutualization. The volume of trade represented by those who oppose demutualization is not reflected in the 83% figure. Individual entities at the WCE may effectively own, through their membership representatives, multiple memberships and, in some cases, up to 15 or more.

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