Finance Committee on Oct. 5th, 2016

[Norm Hall, President, Agricultural Producers Association of Saskatchewan]

Thanks, Wayne.

Agriculture is a strategic sector in the Canadian economy. Nationally, agriculture and agri-food products generate $55.4 billion in export sales for Canada and also one in eight jobs in Canada. With over 40% of Canada's cultivated land in Saskatchewan, our agricultural exports generated $15 billion in export sales for Canada. Saskatchewan producers are amongst the most efficient in the world, and we are always investing in our farms to increase productivity. Our investments here spur economic growth across the country, creating jobs and opportunities in all regions of Canada and all economic sectors. Investment in agriculture is an investment in Canada's economy.

Budget 2017 presents an opportunity to address key challenges facing agricultural producers. This presentation will provide a very brief overview and recommendations for the committee's consideration.

Issue one is generational change. Canadian agriculture is in a state of transition, with over $50-billion worth of farm assets to be transferred within the next decade. Ninety-five per cent of farms in Saskatchewan are family operations, and we want to maintain this for future generations. One starting point is n Canada's Income Tax Act. We need changes to that in order to help facilitate the transfer of farm assets to the next generation. In particular, APAS supports initiatives like Bill C-274 and other tax measures aimed at levelling the playing field for those operations seeking to transfer assets to the next generation. A resolution very similar to Bill C-274 was passed at the 2011 APAS AGM, and this has been forwarded through the Canadian Federation of Agriculture, the Saskatchewan Chamber of Commerce, and the Canadian Chamber of Commerce. This not only affects agriculture but all small businesses across Canada.

Issue number two is infrastructure and communications. Proximity to markets and access to services has always been a major issue for Saskatchewan agricultural producers. Being so far away from port and export positions, we rely heavily on Canada's transportation infrastructure, principally the rail network, to move our products to market in an efficient manner.

Access to digital infrastructure is also essential for agricultural businesses. Today, download speed and coverage levels in rural Saskatchewan lag behind the rest of the country. Inadequate access to Internet services directly affects our businesses. We need reliable access to broadband Internet to conduct our daily business transactions.

Our recommendations for infrastructure include the following. Funding for rural roads and highways must keep pace with increased productivity and the evolving transportation needs of Saskatchewan producers. Grants and tax incentives should be used to encourage investment in the short-line rail networks, thereby ensuring that more grain moves by rail as opposed to truck.

Federal funding should also be targeted to expand broadband Internet in rural Saskatchewan. In particular, APAS supports the goal of 25 megabytes per second by 2020 and the development of a new funding mechanism supplemental to the existing national contribution fund designed to directly target expansion rather than maintenance of existing services.

Issue three is the environment. Climate change is a major priority for the federal government, and action is required to deal with carbon, but decision-makers must understand that farmers cannot pass along increased costs from carbon taxes to our customers. We just don't set our own prices. Agriculture is a low-margin business, and raising the price of our inputs simply reduces our margins and makes our farms less viable without reducing carbon.

Producers in Saskatchewan have been real world leaders in developing management practices that reduce our carbon footprint. Research shows that zero-till agriculture in Saskatchewan sequesters 8.5 billion additional tonnes of carbon annually. This is equivalent to one million cars. We're the largest sector of private land managers in Canada, and we would like to see those efforts recognized.

We need more federal support to help with beneficial management practices, like planting trees and protecting and expanding native grasses and wetlands.

Budget 2017 is a chance to take positive action, including restored funding for agro-forestry initiatives, including in particular the Indian Head Shelterbelt Centre, to provide producers access to affordable trees; the creation of a grassland trust to provide federal support for ranchers operating in the former PFRA pastures, who are managing grasslands and providing access to grassland landscapes in the interest of all Canadians; and increased funding for federal water management initiatives, including federal partnerships to map flood plains and develop water infrastructure in rural Saskatchewan, including dams and reservoirs.

Thank you for this opportunity to present today.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Norm.

We have covered the map. We'll try to get everybody on. We are running a little behind time.

The first round of questions is five minutes.

Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, everyone, for being here.

What strikes me and all members of this committee is that when we come to a province or a city to hear from a panel of witnesses, we get a very good snapshot of what's occurring, all the bright spots—certainly all the challenges as well—in Saskatchewan and elsewhere. It's pretty clear that a lot is going on in this province. For that, I salute you.

I want to ask SARM, perhaps Mr. Hall as well, and frankly anyone else who would care to comment, to perhaps expand a little on the following. We have phase two of infrastructure funding coming. Certainly this government has made infrastructure of all kinds a priority, not just traditional water, sewer, roads, and so on, but also social infrastructure of the kind that Mr. Moran addressed in his presentation.

Could you just comment a little more on funding formulas for rural communities?

You mentioned there's a cost-sharing arrangement, Mr. Orb, that you're looking for. How is that going with the province? Are things working smoothly? Is the framework in place so that those funds can be spent quickly? I'd ask you to comment on that, and perhaps Mr. Moran and Mr. Hall as well.

[Raymond Orb]

Yes, I'd like to comment on that. We have actually been working closely with the FCM, the Federation of Canadian Municipalities, and I am the chair of the rural forum. Actually, we had Mr. Easter on one of our panels at the AGM in Winnipeg.

We're working with the province, in my case the Province of Saskatchewan, and we're looking at seriously changing the criteria so that smaller communities can qualify. The threshold of the population is a big factor, because right now 100,000 or fewer is considered rural, which puts us, in the province of Saskatchewan, in the same pool as every city except the cities of Regina and Saskatoon, and we can't compete.

We realize, though, that water and wastewater projects are high priority, and so is transit, especially in some of the larger cities like Saskatoon and Regina. We are asking for a rural infrastructure fund to be created. I was on a conference call yesterday with Minister Sohi's political staff, and we gave the pitch on behalf of FCM. SARM also supports us, so we think we're making some good headway with the federal government. They realize that they have already committed to at least 50% funding, so it leaves it all up to the provinces. Each province may have different criteria, which is a good thing to have because it's flexible. What works in Ontario might not work in Saskatchewan. I think we are off to a good start with phase two. It's very promising.

Thank you.

[Steven MacKinnon, Liberal, Gatineau, QC]

Very good.

Mr. Moran and Mr. Hall, do you have a comment?

[Norm Hall]

I want to focus on electronic infrastructure. I mentioned broadband, but it's also cell coverage. As you may or may not know, rural Saskatchewan is getting more and more rural as there are fewer and fewer people outside of the towns and we're working further and further from the population. It used to be that if you broke down or had an accident on this corridor, you only had to walk maybe a mile or two to get help. Now it's miles and miles that you're going.

The need for good cell coverage across Saskatchewan, across Alberta and Manitoba, is a safety issue. It's also business, because you're doing business in your mobile offices, the tractors, combines, swathers, or whatever; but it's also about safety. If you have an accident, as Ray brought up, with emergency services, then you can call. But right now if you don't have the cellphone coverage and you don't have the emergency services, you're dead.

I ask that you just encourage more investment in electronic coverage.

[The Chair, Liberal, Wayne Easter]

You have time for one quick supplementary, Steve.

[Steven MacKinnon, Liberal, Gatineau, QC]

I wanted to ask a question on another topic.

Mr. Potter and Mr. Hodgson, this is a very interesting project you have going on there, obviously. Have you had discussions with Western Economic Diversification in respect of their ongoing programming, or even the Public Health Agency? Is this something that could fit under their respective mandates?

[Andrew Potter]

The short answer to that is yes. We've been talking to WD now for the last two years, I believe it is. They are extremely supportive, but so far the timing hasn't been right for funding. We've also had the support of Minister Goodale, who has been a strong supporter of this facility, obviously, and how one moves forward. I would add that we are about to sign an agreement for a joint venture with a non-profit group in the province of New Brunswick, as well as a small company, to join New Brunswick and Saskatchewan together in the infectious disease field, so this facility is absolutely key. Not only is WD a potential but ACOA in the Maritimes comes into play as well. It's all about partnerships.

[The Chair, Liberal, Wayne Easter]

Mr. Aboultaif.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Good morning, and thank you all for the wonderful presentations.

We're in Saskatchewan and I think we need more Saskatchewan in Canada for the prosperity, the economic performance, that you guys are having. Saskatchewan is agriculture, resources, mining, and oil, which all sound good. I heard from SARM and I heard from Mr. Hall and we know that we're facing a different world. Environmental responsibility is a key to going into different markets and coping with where the world is going, especially with our economic friends on the other side of the world.

The question is on the carbon tax and how we can remain competitive, because at the end of the day, no matter how good our products are, we have to be competitive enough to be able to sell and to expand and, if anything, for Saskatchewan to be able to expand beyond labour opportunities. Because we have the ground and we have the infrastructure and we have the product, the population will be the important element in growing a bit beyond and contributing further to the total Canadian economy.

In your opinion, Mr. Hall, and SARM's too, what's the alternative to a carbon tax? If we have to deal with that, do you see an alternative that could deal with environment and, in the meantime, not require us to put a levy on the businesses we operate?

[Norm Hall]

Thank you, Ziad.

As we've said, in the direct heating sequesters, we've had an extra 8.5 million tonnes of carbon per year. The last thing we heard from any federal officials on this carbon tax, and this was months ago, was that this was going to be considered business as usual and that we would not be credited for any of the carbon we have sequestered over the last 20 years, or anything into the future. It is the same within the livestock sector. There are efficiencies in the production of livestock that are reducing their carbon footprint.

We've done all of this already, but we're not going to be credited for it. That's a really hard pill to swallow because agriculture is part of the solution to the problem, as we do produce carbon. As Ray said, the cost for the average-sized farm from this tax would be about $10,000. The figures I've seen for this tax were $40 a tonne, and as the Prime Minister said, it will go to $50 a tonne by 2022. At $40 a tonne, the average-sized farm would see about a $10,000 hit directly out of our bottom line, because, as we said, we don't set our own prices. You said it directly too, that we need to be competitive. Those prices will not be reflecting that dollar figure.

Overall in Saskatchewan that's going to affect us to the tune of $300 million to $400 million per year, coming directly out of producers' pockets. That comes directly out of our investment in our farms and our efficiencies. Without recognition of the work we have done already in sequestering carbon and trying to do more, you're going to see a de-evolution of agriculture in Saskatchewan.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Mr. Orb, would you like to comment on that too?

[Raymond Orb]

Yes, thank you. I would.

Very briefly, if I said anything different from what Mr. Hall said it would be simply the fact that farmers, of course, can't pass the costs on. That is a big problem because it comes out of their bottom line and there are already costs.

We're not denying that something needs to be done with climate change. We're onside with that, but we need to be able to consult with the province and to be able to consult with the federal government, because we feel that with anything that's rushed...2018 is not that far away and we need to sit and think about this before we do anything.

One of the things that we're promoting, which is in our submission, is we believe that as much as possible, federal infrastructure money should be put into short-line railroads to mitigate greenhouse gas reduction, to take trucks, vehicles, off the highways. We have a lot of these short-line railroads in this province, more than any other province in Canada. I think we have 14 short-line railroads operating right now and we believe there needs to be a thoughtful plan put through on this. We need some more time to think about this.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Mr. Chair, will you allow me to have Ms. Schwann comment on this briefly?

[The Chair, Liberal, Wayne Easter]

Go ahead, Ziad. We may run over time a little.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I would also like Ms. Schwann to comment on the same topic.

[Pamela Schwann]

Sure. I do really want to echo the same perspective from the agriculture sector here. We have a lot of best-in-world technology already, so it will be very challenging to have the emission reduction targets. It's not that there is not more we can do—we can look at that—but we think it has to be a consideration. When you're already the best in the world at something in terms of energy efficiency, it's pretty difficult to get any lower than that, particularly when you have other countries that do not have emissions targets, will not have a carbon tax, and we're increasing our input costs and can't control the price we've getting at the end of the day. So this has to be thought through.

We're being challenged by a lot of potash development in Russia. They don't have these same input costs and they're already telling us that they can produce at half our cost per tonne, so any increase in costs that is not transferrable is difficult for us, and the carbon leakage that you hear about is very real.

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Weir, we'll give you five minutes if we can. It's pretty tight.

[Erin Weir, NDP, Regina—Lewvan, SK]

We're here in the birthplace of medicare, Ms. Schick, so I greatly appreciated your comments about home care and pharmacare. Could you speak to the importance of significant and predictable annual increases in the Canada health transfer to extending public health care into those areas.

[Holly Schick]

Certainly we need to have consistency and, in fact, expansion of services such as home care. At the moment in Saskatchewan, for instance, different services are provided in various health regions. In most cases it is medical needs that are being met through home care, and we need to see that expanded.

People need a variety of services to be able to stay in their own homes. They need help with home maintenance and with looking after their homes and yards, and they need access to all kinds of services to help them stay in their own homes. In order to do some of those things and in order to deal with rising drug costs, significant funding needs to be available to provinces so they can work together with the federal government to find ways to address these ongoing needs among the increasing percentage of our population that is made up of older adults.

That is very important.

[Erin Weir, NDP, Regina—Lewvan, SK]

Indeed. Of course, the federal government was elected with the promise of a new health accord, but the health minister indicated that she was accepting the same formula for health transfers that the previous government used. In fact, because that formula ties the Canada health transfer to growth in GDP, health transfers are actually lower for future years under budget 2016 than they would have been under budget 2015.

I wonder if you could just say a little bit more about the importance of knowing how much money the province is going to receive for health care from one year to the next, rather than having it tied to the vagaries of external economic conditions.

[Holly Schick]

Certainly longer-term visioning and planning are very helpful. Knowing what kinds of finances are available for health care and for other needs is of key importance.

I believe that we also need to think about what is included in the Canada Health Act and what is being funded through those transfer payments and through the health accord. We are going to be talking about some of the seniors issues, in relation to the health accord, that come up at forums across the country. I think it is very important for the government to hear some of those concerns and to know that in order to provide the kind of consistent services that help people to remain healthy, contributing members of their society and to reduce costs for things like long-term care, we do need to have consistent funding coming into the province and consistent ways of working together.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Eisler, as a University of Regina graduate, I greatly appreciated your presentation. I'm also struck by how much more expensive it is to attend the institution now than it was when I was a student. The federal government has provided some welcome funding for specific infrastructure and research initiatives on campus, but, as you know, Statistics Canada recently reported that Saskatchewan has the third-highest tuition fees in Canada, so I wonder if you could say a word about the importance of increasing the Canada social transfer as a way of paying for universities' operating costs and reducing their reliance on tuition fees.

[Dale Eisler]

Thank you, Mr. Weir.

There's no question that the cost of education is steadily rising year over year. Our operating costs now are funded by the provincial government. It's provincial funding that supports our operating costs, and roughly speaking 53% to 54% of our operating budget is paid for by the province. The federal funding comes mostly through research grants, funding agencies, and things like that, which of course are very helpful, and other avenues such as the strategic infrastructure fund, from which our university captured $30 million just this year.

In terms of access to education, we see increasing numbers of students all the time, so in a macro sense there doesn't appear to be a huge impediment from in terms of the cost of tuition because enrolments keep rising, but we are fast approaching a point where I think it's not going to be sustainable. If we do not receive adequate public funding from the government, we can't keep turning to tuition to fill that gap. It's just not feasible.

We're definitely facing funding pressures, and anything that the federal government can do to support the university in terms of research and infrastructure capital needs would take a lot of pressure off. We're always hopeful that we're going to see more from the federal government.