Thank you, Mr. Chairman. Supplementary Appropriation Act, No. 4, 2007–2008, requests authority for additional appropriations of $28.205 million for operational expenditures for the 2007–2008 fiscal year.
There are two items in this request:
$10.9 million for the Department of Municipal and Community Affairs to record a grant-in-kind for the costs associated with infrastructure that has been transferred to community governments. There is no outlay of cash as the funds were expensed in previous fiscal years. The impact on government operations is nil as the department will record an offsetting revenue amount.
$17.3 million for the Department of Health and Social Services to provide contribution funding to fund the projected accumulated operating deficits of Health and Social Services authorities as at March 31, 2008.
That concludes my opening remarks. I am prepared to answer questions Members may have.
At this time I’d like to ask the Minister if he’ll be bringing any witnesses.
Yes, Mr. Chairman.
Does the committee agree that the Minister bring his witnesses?
Agreed.
Sergeant-at-Arms, could you escort the witnesses in.
Mr. Roland, could you introduce your witnesses, please.
Mr. Chairman, to my right I have the secretary to the FMB, Ms. Kathleen LeClair, and to my left is Mr. Sandy Kalgutkar, director of budgeting and evaluation.
Thank you, Mr. Roland. Welcome, witnesses.
General comments in regard to Supplementary Appropriation Act, No. 4, 2007–2008? Detail?
Detail.
We are on Bill 9, Supplementary Appropriation Act, No. 4, 2007–2008, and also the preamble and the schedule at this time, for which we will move to page 5 of the bill, Municipal and Community Affairs, Operations Expenditures, Regional Operation, not previously authorized: $10.885 million.
Bill 9, Supplementary Appropriation Act, No. 4, 2007–2008, Municipal and Community Affairs, not previously authorized: $10.885 million, approved.
Total Municipal and Community Affairs: $10.885 million, not previously authorized.
Bill 9, Supplementary Appropriation Act, No. 4, 2007–2008, Total Municipal and Community Affairs, not previously authorized: $10.885 million, approved.
Health and Social Services, Operational Expenditures, Health Services Programming, not previously authorized: $17.32 million. Mrs. Groenewegen.
Thank you, Mr. Chairman. I understand that this allocation is to address the various deficits in the operating budgets of some of the health authorities. Several are in financial deficit; several are not. This is not a new happening. This is something that has been happening with health authorities for a number of years.
In the past there was some level of participation sought from health authorities when they were in deficits to work with the government in terms of a recovery plan. I can think of one time when the health authority was expected to work with the government to come up with 50 per cent of the deficit over a period of time. The problem with that occurs when you get into this level of deficit and then with the forced growth and the continuing pressures on the government to provide seemingly an ever-expanding number of services, pharmaceuticals, competitive wages, salaries and benefits for our human resources component of the health system. There are just so many challenges that I won’t go into naming them all; we know what they are.
If we did seek some kind of participation in the recovery process, I can’t see that doing anything but putting more pressure on the delivery system. The last thing you want to do is do things that would impose hardship on the patients and the clients our services are meant to serve.
I’d like to ask about this. What are we doing to analyze why we are getting into this level of deficit with some health authorities? Some are in good shape, some are breaking even and some have surpluses. What are we doing in terms of analyzing why the situation is occurring? Either we are perhaps underfunding the health authorities, or perhaps it has something to do with the management of the funds we do provide to them. I’d like to know from the Minister what we’re doing to try and address the causes of such a substantive deficit.
The Minister of FMBS, Mr. Roland.
Thank you, Mr. Chairman. The Member is correct on the process, the program that’s in place and the policy we have with authorities. On the side of deficits, the boards are to address the deficits through their annual plan. With surpluses, they are allowed to put 50 per cent into a reserve fund to offset future deficits. We have two health authorities who have deficits at this point.
I want to say for the record that the deficits have started as late as the year 1999. Since ’98–99 a number of boards have been in and out of deficit. The Government of the Northwest Territories in past supplementary appropriation exercises has paid out half of the debt at that point but had health authorities working to come up with a plan to find the rest of that.
When we found that the deficits were going higher, FMBS had become involved with the Department of Health and Social Services and progressed to the point of doing a zero-based exercise. That exercise was initially to take a snapshot view of how the health authorities were spending their dollars. We started with Stanton, and we’ll be going forward to the Beaufort-Delta Health and Social Services Authority as well. From that, we’re hoping to gain a better understanding of how the money was being expensed. Was it an area of underfunding, or was it an area of enhancing program delivery that was beyond the mandate of the Department of Health and Social Services and the authorities?
The Department of Health and Social Services has now taken that information under review and has been working with the authorities on coming up with a plan to deal with the expenditures going forward. FMBS has reviewed this scenario of where the authorities are and felt that to start this process and do a proper review, it would not be, as the Member stated, appropriate to burden the existing arrangement with an old debt that’s been collecting and starting to grow.
I’m wondering what incentive managers of health authorities have to live within their means and stay on budget. This sends a pretty big message for a deficit of this magnitude to be addressed with a straight bailout, so to speak. What incentive is there, then, for the authorities who have stayed within their budget or very close to it? What incentive is there for them to do that going forward, knowing that we can vote a $17 million budget item to address a deficit?
Mr. Chairman, the surplus and deficit policy allows the boards that are in a surplus situation to hold on to 50 per cent of that surplus. At one point all the money used to be returned to the department. Of course, there are a number of health authorities that are doing okay or holding surpluses. There are a few that are into a deficit, and the two major ones are Stanton and the Beaufort-Delta Health and Social Services Authority.
A serious question we have to address, even going forward, is: what is the expectation? Right now I think a lot of not only authorities but also people of the Northwest Territories feel that health care is an important or crucial element of delivery in the Northwest Territories, to the point where we fund the programs and continue to fund health authorities to keep their operations going.
We’re at the stage now in the Northwest Territories where we can’t afford to let these situations continue to grow. There’s a need to deal with that, and the Department of Health and Social Services has been putting a plan together dealing with the authorities and reviewing it.
Questions we have to ask ourselves in these areas are, for example: Stanton being the territorial facility, if other authorities are unable to provide a service because they’re unable to find the right mix of doctors and nurses in the other facilities, do they send a larger load to the Stanton facility to take care of that? That is something we also have to look into as we proceed with this ongoing work.
This is a really sizeable amount of money, $17 million. I want to know: are there any intermediate steps that would be taken when you’re heading down this path to a $17 million deficit, where at some point somebody might say, “We’re in trouble here” and take some intervention steps to do some analysis along the way as opposed to trying to sort this out afterward, this far into deficit? It just seems like it’s a little too much after the fact. Sometimes with health authority boards there has been a necessity in the past to step into the situation. The Minister will take on a role of appointing a public administrator to deal with situations when things seem like they are going off the rails to the point where the system is under this kind of pressure and there’s this kind of exposure of public funds in public facilities and public programming.
I guess I’m concerned about how far down this path we are right now. Weren’t there some warning signs going off quite a while ago? This total amount came about as quite a surprise to me when we were actually starting to learn of the magnitude of it. I want to know what policies are in place to make some kind of an intervention before things get to this state.
Mr. Chairman, we work through the territorial health and social services act, and that lays out the relationship that departments have with the board and how FMBS can become involved in the operations of an authority.
Under the last government, initiatives were taken to bring FMBS to the table. That’s how the zero-based initiative was started: with the involvement of FMBS, the Department of Health and Social Services and the Stanton facility to come up with a program on reviewing its expenditure patterns and looking at how it was carrying on with the management of delivery of that service. That was going to be the model that is used for other authorities that are facing a similar situation.
Now, Members going back in previous supplementary appropriations would be aware that previous actions have been undertaken with the Department of Health and Social Services, coming forward with 50 per cent of the deficit of that fiscal year and having departments or the authorities come up with a plan to recover the deficit from within that year. That has been the exercise undertaken. It has now gone to another level where FMBS has become involved in looking at the collections of the authorities to ensure we are receiving our revenue from providing services to other jurisdictions or the federal government, for example, as well, and the billing system that is in place.
Thanks, Mr. Minister. Next on the list I have Mr. Ramsay, and then Mr. Robert McLeod. Mr. Ramsay.
Thank you very much, Mr. Chairman. I just want to follow up on my colleague’s questions. It’s interesting, I guess. I find it hard to believe that we’d be here today facing this $17 million item in a supp, $11.5 million of it for Stanton alone, when it was over two years ago that alarm bells were first rung over the deficits that were accruing at Stanton Territorial Hospital. That was two years ago. It’s nice to see the government finally waking up and wanting to do something about it. But this is not a problem that just happened overnight. It’s a problem that’s been going on for awhile.
As for the previous public administrator I’m not sure if they were asleep at the switch or what was happening. We haven’t addressed the unfunded positions at that hospital. To be honest with you, I just don’t see a palatable game plan going forward. I know the Minister has hired somebody from Calgary who’s familiar with the hospital. They’re not here on the ground. They’re not out there every day trying to figure out what’s going on at that hospital. To my knowledge they still live in Calgary. It’s only a three-month time frame, so I’m wondering how you can fix what amounts to eight years of neglect in three months. I don’t know exactly how that is going to work.
The Premier talked about it. The Minister of Finance talked about it. We went to a zero-based review, and you know what? As soon as the zero-based review is done, that hospital doesn’t pay their payroll for six and a half months. Maybe it’s ironic with the timing — I’m not quite sure how that works — but they’re into FMBS for $26 million. I’d like to ask the Finance Minister if we could get a breakdown of that $11.5 million and what it went to pay. Is it all for salaries? There’s been some discussion that maybe part of that $26 million that the hospital is into FMBS for is part of that $11 million. I’m not sure, but can somebody please try to help me out with that? I’d like a breakdown of the $11.5 million.
The Minister of FMBS.
Thank you, Mr. Chairman. For the record the Member has, on a number of occasions now, talked about the fact that the payroll situation has only been six and a half months. It’s been a couple of years since the department became involved. It was a lesser rate, and, yes, it has grown significantly over the last piece. That is a different piece of the puzzle. This is dealing with the accumulated deficit building over a number of years. We are dealing with it now and going forward with a newer plan.
For the actual details of how it breaks down, or the work that’s been done to date, I’d have to go to the Minister responsible for Health and Social Services, and she can provide some of that detail.
The Minister of Health, Ms. Lee.
Thank you, Mr. Chairman. The breakdown for the $11.5 million accumulated deficit is for $7.4 million for the fiscal year ’07–08, $5.8 million for ’06–07 and $3.2 million for ’05–06. Another thing I want to say is that the public administrator functions like a board but with detailed instruction and interaction with me as to what work he’s doing on the ground at the hospital. It doesn’t necessarily mean he has to be at the hospital. When he was here for three weeks, he interviewed staff and management extensively at the hospital. He continues to work on this issue even though he’s not on the ground.
Going forward, one thing we are doing differently is that FMBS has directed me, as the Minister, to come back to the authority on a quarterly basis to get an update on exactly what the fiscal situation of each health authority is so we stay on top of the financial picture of the authorities. As a department we need to continue to work on system-wide initiatives to make sure we have a good handle on exactly what is a cost driver and what efficiencies could be found, if any, and what structural or other changes need to be made. I think the zero-based review gave us a good guideline, and it will be used to do work in Inuvik as well. Right now the public administrator at Stanton Territorial Hospital Authority is using the information gained from zero-based review and doing more detailed analysis on the ground level to get more information about what is driving the deficit and how we could prevent it from going forward.
Mr. Ramsay.
Thank you, Mr. Chairman. I thank both Ministers for their response. It puts us as legislators in a very untenable situation when you’re faced with these big deficits. Like I said, they haven’t accrued overnight. They’ve been there, as the Minister broke it down for us, since ’05–06. Now we’re just finally going to wipe out $11.5 million of accrued deficit with the stroke of a pen. That’s just at one authority.
To me, Mr. Chairman, the accountability just is not there. Where’s the accountability? Where has the previous Minister of Health been? This Minister of Health is trying to do something. Where was the previous government on these accrued deficits that were building up at this hospital? They knew about it. They didn’t do anything about it. That’s what I want to point out, again for the record. There’s no accountability there. We just take it and wipe it off the sheet: $11.5 million, almost $17.5 million. It’s a lot of money.
The last time I checked, we were in a reduction exercise. We’re trying to run a tight ship here. Well, we’re leaking like a sieve in our health authorities. Let me tell you: we’d better try to fix this. We’d better fix it fast. I’d like to see us come up with a plan on how we’re going to get more control over the health authorities because if they’re leaking like this, we need to ensure we have control and we have some mechanisms in place to allow us to manage the growth there and the cost overruns. It just doesn’t make much sense to me how we let it get to this stage where we can just erase it.
As legislators we’re put between a rock and a hard place because, as other Members have said, it’s the health of the people we represent. We can’t go out there and all of a sudden tell the Stanton Health Authority or the Beaufort-Delta Health and Social Services Authority they have to cut services and they have to cut programs. That’s just not acceptable to the public we serve. We wouldn’t be looked on favourably in the public eye; that’s for sure. Again, it’s the accountability.
Mr. Chairman, I want to ask the Minister of Health: how many unfunded programs are currently at Stanton and how many unfunded positions? What’s the strategy to address that? In my mind that’s a big part of the problem.
Thank you, Mr. Ramsay. Minister Roland.
Thank you, Mr. Chairman. I’ll let the Minister give some of the detail, but for the record, once again, the fact is that previous governments did initiate action. A zero-based review exercise was undertaken. A plan was being put together on how to move forward on this file to the point where FMBS got directly involved and remains involved to date.
In the other areas of the breakdown of services the Member is quite correct. When you look at the fact that we’ve had as much concern as Members of the Assembly about reducing to the levels we have, there’d be even a greater level of concern if we were to turn this back to health authorities and tell them to live within their means totally before we came up with a plan as to how to recover from this. That exercise is ongoing at this time.
For the actual detail the Member has asked for, I’ll have the Minister of Health and Social Services respond.
Thank you, Minister Roland. Minister Lee.
Thank you, Mr. Chairman. I want to echo the Premier by saying that the action we are taking right now is a stage. It has been led by incremental steps that have been taken since ’05–06. The information we have is that the major deficit for Stanton as well as Beaufort-Delta began in ’05–06. While the policy states that each authority should absorb 50 per cent of deficit and then the government will give 50 per cent of that, at that time it was thought to be too much for authorities to absorb.
As the Members have stated already, we do not want to be, or be seen as or be perceived as, rewarding that behaviour. Not that you could judge government department spending by good or bad behaviour, but it was incumbent on the government to figure out exactly what was causing the deficit.
It was in ’05–06 that real discussions and earnest — well, intense — discussions happened. I know this from reading briefing notes between the FMBS and the department and the authority on how we could get to the bottom of what was causing the deficit. Since the years of ’05–06, ’06–07 and ’07–08, incremental small infusions of the cash were given to the authorities. In the meantime, any kind of major action like what we are doing here was deferred until we could get more clear analysis. The mode of doing that was the zero-based review that was decided upon, and that was instituted. It was talked about in ’06–07. It was instituted in the spring of ’07, and it was finished.
In April of this year we had a preliminary report on that zero-based review. It gives a cost accounting of how much it costs to deliver the programs we are doing in Stanton and Beaufort-Delta, but it doesn’t give us extra information as to whether we’re doing what we are doing as well as we can or whether we could do it differently. There are extra layers of analysis that we need to do, and that’s exactly what the public administrator at Stanton is doing. What we are gaining from the zero-based review as well as the public administrator’s work at Stanton will be followed up on with Beaufort-Delta.
Mr. Chairman, I have to say there is just a very complex set of factors that we think are contributing to the deficit. As the Member indicated, we need to be measured and careful about what steps we take because it does impact the front-line services and programs, and we need to do a good job at that.
Going forward, another action this government is taking is that we’re asking the authorities to have a balanced budget this year and that they be accountable every three months. That’s a step we’ve never taken before. We’re taking it to make sure we’re not in the same position as we are now. In order to do the balanced budget, we need to clear out the debt because there’s no way for the authorities to absorb some of these deficits.
Mr. Chairman, the other area of this is the review. Members are aware of that in Refocusing Government, looking at boards and agencies and their role in delivering the services across the Northwest Territories. This is one of those areas where we have to take that review and see how we do, in fact, deliver services to the people of the Northwest Territories.
Thank you, Mr. Chairman. Just a couple of other questions. The Minister didn’t answer the one question I had: how many unfunded positions are there at Stanton, and how many unfunded programs are at Stanton, and what game plan have we got going forward to address those? I’d like to get a better understanding of under what authority these unfunded positions and unfunded programs came into being. I’d like to start there.
While I’ve just got a couple of minutes, maybe the Minister can answer this question too. Going forward, she talks about having balanced budgets for the authorities. How is Stanton ever going to be able to have a balanced budget when they’re into FMBS for $26 million? They’re starting out at negative $26 million. I’d like to ask the Minister — maybe the Finance Minister or the Health Minister — when we can expect that stuff to come forward so we can wipe that debt off, because it’s going to be a huge one.
Talking about this year would be another matter. Talking about this supplementary appropriation for previous years’ expenditures is one thing, but a large amount of what the Member’s referring to is the fact that we need to collect on revenues that are owed to the Stanton authority as well as the Government of the Northwest Territories. For the 2007–2008 fiscal year, there are a number of unfunded programs. Of course, that would mean unfunded positions. But they’re, again, delivered through the fact that they have some flexibility in the delivery mechanisms within the territorial health and social services act. I’ll have the Minister respond to that detail.
I apologize for not getting to the unfunded positions. What I would like to say is that I don’t think we could attribute the deficit in the authority to unfunded positions. Unfunded positions come in different shapes and sizes. These authorities are block funded, and they do have flexibility within to create positions where they think they are required.
Stanton, for example, has 53 programs. I believe they are mostly funded, but the important thing I want to say is that…. Mr. Ramsay is worried, and I can see why, that given the level of deficit these authorities are going through, how could they possibly be able to balance their budget?
But that is a requirement we have. We have to live within 3 per cent growth. Something different that this government has undertaken this year is to be fiscally responsible. It has raised the base of authorities by — well, the department as a whole got $44 million extra funding. About half of that is going to the authorities. The department has been active in the last two to three months to let the authorities know right up front exactly how much they’re going to get, and they have had to balance their budget based on last year’s spending.
That also included taking some interim measures and taking measures, as much as possible, where it would not impact front-line service. They have to take steps to increase their revenue potential. Authorities like Beaufort-Delta and Stanton do provide services to third parties like WCB or out-of-town residents or Nunavut residents, where they are supposed to collect those monies. System wide we need to make sure those monies are collected.
We’re looking at capacity issues to see if both boards have enough capacity there to do the work that is required to make sure they balance their budgets. It is a very aggressive but very fiscally responsible step we are taking. Part of the reason we need to have this supplementary appropriation to start with a clean slate is that we’re taking more fiscally responsible actions going forward.
In terms of the unfunded positions in Stanton, the number I heard was about 27, but I can’t verify that. Zero-based review showed it has 53 programs. I, as a Minister, think it’s not a good measure to say we’re going to be fiscally responsible and just eliminate all unfunded positions, because we need to ask the next question about why those positions weren’t funded. Are there some unfunded positions that should be funded? Maybe some other positions that are funded should not be. That’s the kind of program review the public administrator’s engaged in.
Thank you, Minister Lee. We’ll go on to Mr. Robert McLeod next.
Thank you, Mr. Chair. I’m not sure if this is the forum or not, but I’m trying to understand the process of the hospital. That, I think, will go a long way to my understanding the reasons, especially in respect to the $4.3 million at the Beau-Del regional hospital.
Maybe the first question I could ask is…. I’ll ask two at the same time here. The $4.3 — is that just for this year or is that over three years like Stanton? My second question is: when the Beaufort-Delta regional hospital provides services, they are required to invoice. I believe that’s correct; I think that could be my second question, Mr. Chair.
Thank you, Mr. McLeod. Minister Roland.
Thank you, Mr. Chairman. The deficit of Beaufort-Delta Health and Social Services started as far back as 1998–99 and grew. At that point it was in the range of half a million dollars. It fluctuated. They came out of the situation for a couple of years, but back in 2003–04 it started again, and they continued to grow a deficit. At the same time we, as a government, over a number of years through supplementary appropriation, funded half of their deficit situation.
Some of this, for example, is when there are utilities costs that go up on an annual basis that were not budgeted for at the beginning of the year. They grow throughout the year, and we have to look at addressing that. We’ve done that with departments a number of times. When you look at, for example…. Fuel costs that were not budgeted for at the beginning of the year have risen; there has been a number of supplementary appropriations that came back. From time to time we’ve — not only health authorities but departments — told them we would pay half of it and they would have to fund the other half. As we see costs continue to rise, we’ve realized it is not in the ability of the authorities to pay down those costs, which continue to climb and are out of their control.
Some of these are due to the fact they’ve also gone for a number of years having revenue owed to them that was not collected. That is where we, as FMBS, have become involved — in the collections side of the authorities as well.
I thank the Minister for that. He did mention the collection of the revenue, but my second question is: the authority invoices for services they provide; if those invoices are not sent out quickly enough, is that reflected in this $4.3 million too?
It is reflected in these numbers. When invoices are not sent out in a timely fashion, they become, for that year, a debt owed to the authority. It continues to grow after that. That’s why we’ve become involved, now, in looking at the collections side of the ledger.
So FMB is going to look after the collections and the invoicing. Do we have any idea how much we have outstanding in invoices? Were these invoices ever sent out? You’d have to send an invoice out to not get paid and then have FMB come and do the collection. I’m just concerned that…. Is there a box full of invoices that were never sent out and therefore can’t be collected on? With FMB getting involved, were you going to go into the office there and go through all the paperwork and determine if we have a lot of outstanding invoices that haven’t been sent out or haven’t yet been collected? Thank you, Mr. Chair; I think there was a question there.
Mr. Chairman, the Department of Health and Social Services in the previous Assembly did, in fact, send up an individual and help the authority go through its finances and begin to look at its books to see where it was having problems. So some of that work has been started. FMBS at Stanton, as I’ve stated, has become directly involved with the collections side. Invoices have been sent out and are due. We’re working with the appropriate bodies to get payment on those.
Just in closing…. I’m not one to point fingers, but if we’re having an issue with collections or invoicing, my opinion would be that it’s up to the CEO to monitor and make sure these invoices are going out and being collected on. It does, as the Minister said, reflect in this $4.3 million. I think if that gets tightened up just a bit, we may not see a deficit coming forward in the future — hopefully. The Minister did state that, before, there were a couple of years where we didn’t have a deficit. Maybe those were the years the invoices went out in a prompt manner and were collected on as soon as possible.
Like I said, I’m not one to point fingers, but we talk about accountability and that in the Assembly here, and we all feel we’re accountable. I think all the departments should be accountable to the Legislative Assembly. We’re talking $17.3 million here — that’s quite an amount of money. I think I did ask the Minister before: does FMB have any idea of the actual dollar amount of unpaid invoices for the Beaufort-Delta regional hospital?
There’s a number of questions there. The issue of the CEO and taking account for what’s happening within a facility is one that is accurate, but the CEOs report to boards, and boards…. We work at arm’s length through the territorial health and social services act in delivery of that service. That is one of the reasons we have to look at the boards’ and agencies’ work in this Assembly and come up with another model for delivery if we can’t get a hold of what’s going on, or change the process we’re involved in, in this environment. FMBS has worked with the authorities, and we have come up with the figure from the authorities. For the Beaufort-Delta, we’re looking at $2 million dollars in receivables. At Stanton I understand we’re about $12 million in receivables.
Thank you, Mr. Roland. Mr. Bromley.
Thank you, Mr. Chair. Just following up on those comments of the Minister and the collections brought up by my colleague. For Stanton, I believe about half of the debt for the Stanton Territorial Health Authority is due to billing disputes for services to Nunavut residents. I’m wondering if the basis of this dispute has been remedied. Are we no longer accruing debts because of billing disputes, and do we have a billing protocol that’s acceptable now in place?
Thank you, Mr. Bromley. Minister Roland.
Of the $12 million, approximately $6 million is billing to Nunavut. We have been working with Nunavut to try to come up with a satisfactory arrangement. For that detail I’ll get Ms. LeClair to give some more information.
