FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, September 26, 2001

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[Translation]

The Acting Chair (Ms. Albina Guarnieri (Mississauga East, Lib.)): The meeting will now come to order. Welcome everyone.

[English]

Our illustrious chair will be a few minutes late, so I've been asked to warm his seat in the interim. He's asked us to proceed because he knows everybody's time is valuable.

Today we are delighted to have a most unique collection of organizations appearing. We have the Canadian Museums Association, the Community Foundations of Canada, the Heritage Canada Foundation, the Canada Foundation for Innovation, and the Canadian Library Association.

Welcome.

I think all of you have been briefed on the time allocation. We'll begin with the Canadian Museums Association, Francine Brousseau, president, and John McAvity, executive director.

Please begin.

[Translation]

Ms. Francine Brousseau (President, Canadian Museums Association): Good afternoon, ladies and gentlemen.

[English]

As always, we appreciate the opportunity of appearing before the committee to discuss Canada's museum community in the context of the coming budget. We have appeared in the past before this committee, and this year we are pleased the government has acted on some of our recommendations, such as new tax relief for donations from artists' estates.

[Translation]

Some may find it a little strange to be here discussing Canada's museums in light of the tragic events of September 11 that are still very much on our minds.

[English]

Yet, while it may not be apparent, we believe the two issues are related. Our current focus is naturally on the immediate need to improve our security and bring the terrorists to justice. When we consider the long term, however, museums have a particular role in furthering social harmony and combating the forces within society that spawn the kind of atrocity we have just witnessed.

Museums are bridges to social understanding. They do this by gathering, preserving, studying, and explaining to Canadians the evidence of our cultural development, and by bringing people together from all walks of life to learn and share their diverse cultural past. Museums do not simply dwell within the past. They stimulate debate and understanding about the values that define our present and project our future. They do this as a mission of public trust on behalf of all Canadians.

[Translation]

In spite of this, the ever-growing complexity and diversity of our society has compelled our museums to constantly adapt to change, to understand the forces that shape us and to reflect today's society through their collections and exhibits.

The task is a formidable one, requiring extreme dedication, strong skills and a keen awareness in order to work with the various social and economic forces competing within our communities. It is also a task that requires your support.

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You have received our submission in which we focus on two key issues tied to your budgetary considerations. Briefly, we would like to outline our main concerns.

We wholeheartedly support the government's efforts to develop a stable, sustainable basis of funding for our heritage institutions. However, the present funding structure is a clear impediment to the attainment of that important goal.

A coherent national heritage policy is needed. This would alleviate the problem of inadequate funding across Canada and harmonize regional and national priorities and goals.

[English]

It should set in place the foundation for a truly sustainable museum community. It should simplify and reduce the administrative strain on struggling institutions, and it should include a substantial infusion of new funding for our sector, which was badly hit by the deficit-cutting era.

Our museums are still reeling from these cuts, and there has been little relief.

[Translation]

However, this process will not unfold overnight. Indeed, it may require two, and possibly more, years to come to fruition. Meanwhile, there remains an urgent need for an increase in the level of funding dedicated to the specialized needs of our museums. We urge the government to augment the Museums Assistance Program, even if as an interim measure over the next three to five years. An increase to $30 million would recapture the ground lost over the past two decades. It would do much to alleviate the continuing financial pressure on museums, especially those in struggling communities, while work proceeds on the larger strategy. And it would cost less than one dollar per year for every Canadian, a modest investment indeed.

We also urge the government to stay the course and to truly implement the various cultural investment commitments announced last year by the Prime Minister and by the Minister of Heritage.

[English]

We do not treat these proposals lightly. We know the government is wrestling with great uncertainty and many competing demands as it forges the new budget. We also understand that some may question the place our cultural heritage programs should occupy in the list of national priorities. To those, I would say that if anything, the present circumstances underscore the importance of assured access by all Canadians to healthy and vibrant heritage institutions that promote social understanding, harmony, and the best of ideals.

[Translation]

Thank you.

[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): Thank you very much, Madame Brousseau.

We'll now hear from the Community Foundations of Canada, Ms. Monica Patten, president and CEO.

Ms. Monica Patten (President and CEO, Community Foundation of Canada): Thank you for the opportunity to be with you again this afternoon. The remarks I'm going to make reflect the issues and perspectives that are reported by the membership of Community Foundations of Canada, which at present is about 113 community foundations right across the country, with about another 15 in the emerging stages.

At the end of the year 2000—obviously it's a bit different today—those community foundations held about $1.4 billion under investment collectively, and made about $73 million in grants to support important community initiatives undertaken by local charities. We're part of a very rapidly growing community-based vehicle for local funding and sustainability.

For lots of reasons, community foundations and others in this sector will never be able to fill the gaps that have been created by government restructuring, but we are proving to be very important financial and community-building resources in Canada's communities. We reach about 80% of all Canadians, contributing to social and economic well-being through the availability of opportunities for donors, volunteers, and organizations and agencies providing services, and through the work we do to seek out and support innovative and creative responses to local community priorities.

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I think we all agree that no one sector is able to tackle all the urgent needs and priorities in Canada's communities. Community Foundations of Canada contributes to the efforts of many others in the voluntary and charitable sector, as well as in the private and public sectors. We do that by offering what we do best, which is to raise and invest funds for the long-term benefit of our communities, make grants that address the short- and long-term priorities, mobilize citizens and organizations for the good of their community, and model the highest standards of accountability, transparency, and governance.

In recent years, the Government of Canada has worked with the voluntary, charitable sector to improve its ability to carry out our mission and those of other charitable organizations, and we're very grateful for the efforts that have been made, most notably the reduced capital gains tax on gifts of publicly traded securities.

But we think much more has to be done. I want to offer just two ideas for the committee to consider, which will be, I think, of particular benefit to Community Foundations of Canada in this environment, but also to other public foundations and charitable organizations.

The first is to say urgently to you, at the very minimum, extend the reduced capital gains tax on gifts of publicly traded securities permanently, or preferably, eliminate it entirely. Community Foundations of Canada and its members, and others in our sector, have repeatedly asked for assurance that this measure, introduced in 1997, will continue. Yet to date, there has been no such formal assurance. As the five-year period draws to a close, there is some concern that this highly successful tax incentive will disappear.

It has been said many times before this committee and others that the benefits to communities through community foundations have been well documented—over $150 million in new gifts to community foundations, and a corresponding increase in grants to community organizations who have neither the time nor the expertise for raising those funds in that particular way themselves. I could give you lots of stories to back this up, lots of evidence. I'm not going to do that. I'm simply going to strongly urge an immediate announcement that this tax provision will be extended permanently and that consideration of its complete elimination is underway.

The second piece I want to focus on is the regulation that Community Foundations of Canada—and I speak only about us in this presentation, but I realize we share this particular challenge with many others—must disburse 4.5% of the market value of endowed capital for charitable purposes. I'm oversimplifying the formula, but in a sense that's probably the easiest way to describe it. We are required to adhere to this disbursement amount, which I know was set in the early eighties, and, I understand, has never been reviewed since then.

We are also expected to abide by prudent investment policies. Community foundations have to balance numerous commitments: the commitment to protect the long-term value of their portfolios in order to remain available to the community permanently; the commitment to donors; the commitment to the role as community grant-makers; and the commitment and requirement to comply with the Income Tax Act. They have to do this in good years and bad—and we know we're in the midst of a bad time.

This year, and—if we are to believe the analysts—over the next several years, Community Foundations of Canada and other public foundations like us may well be unable to successfully balance all of their commitments. Some will be tempted to encroach on capital. Others will draw down on reserves they have, but will wonder how long they can continue to do that. Many will have to reduce important grants to their local communities, and others will downsize their operations just at the time when the community needs them the most. And, of course, what happens beyond this year is unknown.

This problem should not, in fact, be seen as a one-year problem. We have spoken about this problem before on several occasions, and recently a senior person in the Department of Finance said to me that no one had ever put this issue in front of them before. I beg to differ. We have, and I know lots of other organizations have as well.

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So this is not a brand-new problem. It is not just a problem of today. It's a problem we have been responsibly foreseeing, one that will be with us for some time. We do need to get it, keep it, and put it in front of us, so our future grant making is secure, our portfolios maintain value to the extent they can, our donors have confidence that their valuable gifts will do what they, the donors, want them to do—have an impact on the quality of life, that's what donors want—and that we are in compliance with the Income Tax Act.

Our recommendation, then—and in fact it's a strongly urged recommendation—is that the disbursement quota regulation as it applies to public foundations, such as community foundations, be reviewed. As a start, an analysis of the last twenty years' fluctuation in interest rates and disbursement quota impacts could be undertaken. We'd be pleased to participate in such an exercise and perhaps even provide some leadership on that.

Following that analysis, we hope that some changes could be considered, perhaps a floating rate or perhaps a complete removal of disbursement quotas for community foundations since they see themselves as being—and indeed are—subject to governance by members of the public and so are transparent and accountable. They are not likely to overspend because we're committed to protecting capital, and we're not likely to underspend because we would not want to fail in our commitment to supporting communities.

In the meantime, we're very much hoping that CCRA will look favourably on the requests of individual community foundations for administrative relief this year until such regulations can be reviewed and, hopefully, changed. I understand that such relief is possible, and we will encourage our members to consider that.

Let me just conclude by saying that we share with other voluntary sector organizations and foundations a commitment to a balanced social and economic environment that is of benefit to all Canadians. We, along with our voluntary sector colleagues, believe that partnership between the public, private, and voluntary sectors must be strengthened so our common goals can be achieved.

Clearly, my organization and the rest of the voluntary sector is appreciative of the current voluntary sector initiative, and we are also very pleased to be extensively involved in that work. There is much appreciation for the existing tax incentives for our donors, especially those introduced in 1996 and 1997.

However, as to the immediate need to strengthen the capacity of community foundations and of other funders so they can support locally based organizations that day in and day out are the ones tackling urgent community priorities, that need is immediate and it is high.

With the serious downturn in the markets, the capacity of community foundations and others is significantly eroded, and it will be into the future. The recommendations proposed in this presentation would, I think, go a long way to addressing some of the immediate and long-term challenges.

Thank you.

The Chair: Thank you very much, Ms. Patten.

We'll now hear from the Heritage Canada Foundation, Mr. Brian Anthony and Douglas Franklin. Welcome.

[Translation]

Mr. Brian P. Anthony (Executive Director, Heritage Canada Foundation): Thank you.

Madam Chair, members of the Standing Committee on Finance, let me first of all thank you for the opportunity to appear before you today in the course of your pre-budget consultations.

As is mentioned in our brief, which you have before you, the interest and support of this committee has been most helpful and is much appreciated. In thanking you again and for the record, I want to underscore the importance to the Heritage Canada Foundation of that interest and support.

[English]

As committee members will recall, Canada has lost between 21% and 23% of its heritage building stock in the past thirty years—that is to say, nearly one-quarter in one generation.

While it may be difficult to imagine an attrition rate of this magnitude, it is by no means difficult to do the math and comprehend the inevitable consequences if this trend goes unchecked. At this rate, in three more generations or 90 years there will be very little left of our past, and none of us wants that devastation to continue. Indeed, each of us wants to assure future generations the rich legacy that is our built heritage.

In order for this trend to be halted, however, we must develop a comprehensive national strategy involving all orders of government and providing a complete array of tools at the disposal of those governments, including, in particular, fiscal incentives. We believe the federal government could, should, and, with your support, will show leadership in this area, and anything this committee can do to further encourage such a welcome development would be highly valued.

[Translation]

There are two fiscal incentives we would like to see put in place, as committee members know. The first is the favourable tax treatment of restoration costs of heritage buildings. The second is the elimination of capital gains tax on donations of heritage properties, as is the case with donations of movable cultural property and environmentally sensitive land. These two tools would have a major impact in encouraging the retention and restoration of our built heritage.

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[English]

Now, we recognize that before these fiscal incentives can be contemplated, let alone put in place, the universe of eligible properties has to be defined, standards must be established in order to define what constitutes legitimate restoration activity and what is not, and a certifying function must be put in place to provide the appropriate checks and balances. This issue was addressed and referenced in the February 2000 budget, and the reference is appended to the brief you have before you.

We were therefore greatly encouraged when the Prime Minister and the Minister of Canadian Heritage announced earlier this year a major investment in cultural growth and development, including the first step in what has come to be called the historic places initiative, a national and comprehensive response to the staggering rate of loss I referred to earlier. That first step included funding for a national register of eligible heritage properties, national standards and guidelines for their conservation, and a certifying role in those regards to be played by the Department of Canadian Heritage. Details of this announcement are also appended to our brief to you.

The mechanisms, then, and the funding for the prerequisites have been put in place. The next logical and much needed step is to follow through with the fiscal incentives under discussion.

[Translation]

As the Historic Places Initiative referred to earlier unfolds, other requirements for support for some of its components will become evident. The establishment of a true national trust for Canada is one example mentioned in our brief, and we look forward to discussing such subsequent developments with you during future hearings. In the short term, however, the pressing need is for these fiscal incentives to be put in place in the next federal budget.

[English]

As you know and as we mention in our brief, the Heritage Canada Foundation promotes the preservation of our built heritage for cultural and historical reasons primarily, but we also believe it makes sound economic and environmental sense to do so.

In the summer edition of our magazine, which is also in the kits provided to you, you will find the program for our forthcoming conference, Preservation Pays: The Economics of Heritage Conservation. In the autumn edition, which is also in your kits, you will find a summary of our forthcoming publication Exploring the Connection Between Built and Natural Heritage Preservation. The full reports on the environmental links and on our annual conference on the economics of heritage preservation will be made available to the committee soon, and I know that you will find them of interest and of use.

In closing, Mr. Chairman, I want to thank you and your committee colleagues for the support you have given us to date and for anything and everything that you can do to ensure that the federal tax regime contributes to the restoration and retention of our invaluable built heritage assets.

[Translation]

Thank you very much. I would now welcome any questions you may have.

[English]

The Chair: Thank you very much, Mr. Anthony.

We'll now proceed to the Canada Foundation for Innovation, Dr. David Strangway and Ms. Carmen Charettte, senior vice-president. Welcome.

Dr. David W. Strangway (President and Chief Executive Officer, Canada Foundation for Innovation): Thank you.

Mr. Chairman and members of the committee, we appreciate the opportunity to appear before you as you proceed to the pre-budget process. The events of two weeks ago make this a year like no other. All the rules changed in the blink of an eye, making the task of identifying and setting the government's fiscal priorities more complex and challenging than it has been in generations. So right from the beginning of my presentation I'd like to wish you well in the deliberations you must involve yourselves in for the weeks ahead.

Before September 11 the spotlight was on innovation as never before. Here in Ottawa and around the country, everybody was talking about it as the major driver of new public policy initiatives. I am here today to suggest that it is an opportune time to turn that spotlight back on. The business leaders of our country agree that an investment in innovation is an investment in our future. Greater innovation means stronger industry and making Canada a more attractive place for investors.

Against a backdrop of concerns about a return to deficit spending and a potentially significant downturn in the economy and of increased fears for personal security, you will be faced with the consideration of options to address these near-term imperatives. However, it will be equally important that the government continue its leadership role through the continuation of its investments in innovation.

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In reality, this is an investment in a brighter future, which serves as a beacon of hope in these times of doubt and great uncertainty. While we are understandably greatly distracted by the September 11 tragedy and its fallout for the North American economy, confidence will surely be further eroded if governments detour from policy commitments that can have positive long-term effects on our economy and our way of life.

The Canadian government's innovation agenda is surely one such commitment. Greater innovation means stronger industry, making Canada a more attractive place to invest. Against a backdrop of continuing concerns about productivity, competitiveness and the brain drain, the government has promised a white paper on the subject this fall.

Innovation may sound like a vague concept, but in fact the idea of innovation is precise and important. The creation and exploitation of new ideas, processes, medicines, and new ways of analysing or understanding human and physical phenomenon drive our modern world, increase our national well-being, and ultimately transform our lives. It is less well understood how innovation is fostered.

History suggests that a richly endowed, robust, publicly funded academic research endeavour is a necessity, and often the birthplace for new ideas. Educational and research institutions enjoy the longer time horizons that few industries can risk.

The facts speak for themselves. In the United States, 73% of papers cited in U.S. patents were the direct result of publicly funded science.

Innovation must continue to be a hot topic in Ottawa. Canada's investment in research and development was among the lowest of the OECD nations five years ago. Currently, we are sixth out of the G-7 nations, trailing only Italy.

Five years ago, the U.S. government was doubling support for the National Institute of Health and adding one-third to the budget of the National Science Foundation. In fact, it is even looking at doubling it at the present time. This built on 20 years of generous support for university research, yielding an impressive list of billion-dollar industries, micro-processes, graphic displays, and biotechnology, and the list goes on.

In the past few years, Canada has also begun to meet the challenge, and our governments now have a more positive story to tell. It is one of our best-kept national secrets that the federal government and the provinces have made great strides in reversing this alarming trend in R and D. From being an embarrassing fifteenth among its OECD competitors in amount spent on R and D, Ottawa has made it a priority to bring us to the top five by 2010.

This will require mobilization of all sectors, not only governments and universities, but also industry, which will have to accelerate the pace of innovation. There must also be vehicles to accomplish this.

Thanks to the federal government, one of the key instruments is already in place. The Canada Foundation for Innovation was launched in 1997 as an independent agency mandated to rebuild and reinvest in research labs, installations, and facilities in universities, hospitals, and even colleges across the country. The CFI was mandated to ensure that Canadian researchers had the tools needed to generate tomorrow's ideas and to be world leaders in their fields. So far, the CFI has supported more than 1,400 projects at 100 universities, hospitals and colleges.

It is proving to be very effective. Each one of the over 1,400 projects funded by the CFI, to the tune now of over $900 billion, has enabled institutions to find matching funding from the provinces, and additional moneys from the private sector and the universities themselves.

The CFI's 40%-60% funding formula is a unique example of both intergovernmental cooperation and agencies addressing priorities that have been defined by those research-performing institutions themselves, which employ Canada's major pool of researchers. In the brief that was submitted to this committee in August, we cited a number of examples and statistics that demonstrated how effective these programs are.

Governments seldom get credit for foresight and creativity, but the CFI is one good example of just such an initiative by the federal government. Not only is it set up with secure funding, but its decisions are made by experts. More than 1,000 researchers, managers and users in the public and private sectors from around the world have served on panels. This ensures the CFI's integrity and its credibility with provincial and other partners.

Another example is the Canada research chairs program, which will provide 2,000 positions for researchers at Canada's universities across the country. The federal government will reach the level of $300 million per year in funding these chairs.

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For its part, the CFI will invest $250 billion between 2000 and 2005 to provide the chair holders with the world-class research facilities they need to compete globally, and to train the next generations of Canadian researchers. The CFI is helping to create the right conditions to make these positions attractive.

We thank you very much for the opportunity to appear.

The Chair: Thank you, Dr. Strangway.

We will now hear from the Canadian Library Association, Ms. Vicki Whitmell.

Ms. Vicki Whitmell (Executive Director, Canadian Library Association): Thank you, Mr. Chairman and committee members. We appreciate you taking the time to hear from us today.

Like other witnesses, we recognize the impact recent events have had on the work of this committee and this government. In an information age, when knowledge is considered to be a country's chief asset and is key to the ability of Canadians to interpret and understand current events, CLA believes it is well placed to help achieve important public policy objectives. With this in mind, CLA has two points it would like to offer to committee members for their consideration.

First, we would like to argue that libraries are the best way society has of ensuring that the public has access to the Internet. Second, the most efficient way for the federal government to assist libraries in taking advantage of new media opportunities is through the creation of a new granting agency to be called the Canadian council of libraries.

The government, by selecting libraries as its preferred means for making the benefits of the Internet accessible to as many Canadians as possible, would be contributing smartly toward the achievement of all three of its budgetary goals.

Libraries, whether located in schools, colleges, or communities, can help the government extend the reach of the new economy. While provinces and municipalities will remain the main source of support for libraries, the federal government has an overall economic responsibility for investing in the nation's information infrastructure.

First, libraries have become the public institution of choice for developing that new factor of production, knowledge. Individual entrepreneurs, small-businessmen and women, students, and employees considering new careers all need access to the Internet for the purposes of researching job and market opportunities, finding relevant government programs, and tendering applications.

Second, libraries can help provide equal opportunity. Libraries house trained staff readily available to serve individual Canadians face to face. That custom-tailored assistance can transform generally available information into personally useful knowledge. For any number of reasons, such as location, family circumstances, or language, not all Canadians have the same opportunities to participate in the new economy. Libraries provide a visible community-based and non-intimidating way to improve everyone's chances.

Finally, libraries contribute to our quality of life. Libraries are not simply about making us all more productive; they also play an important role in our leisure hours. They are places of discovery, where we can learn about other countries, other times, and indeed, other worlds of the imagination. If libraries are departure points on voyages of discovery, they nevertheless remain anchored to their community and invariably reflect its interests and preoccupations. Through their bulletin boards, meeting rooms and cultural activities, libraries foster social interaction and contribute to the local quality of life.

In short, the government has three good reasons for investing in this particular network of our knowledge-based infrastructure.

Turning to our second main point, we find that libraries, unlike archives and museums, cannot turn to a central funding agency. Libraries must knock on a number of different federal department doors, and tailor their requests to current program-funding criteria. To be sure, CLA is grateful for the support it has received over the years. We believe, however, that the importance of libraries as a social institution and an instrument of public policy merits the creation of a permanent arm's-length and stakeholder-driven federal agency.

This agency would be dedicated to the development and support of a world-class library system for Canada. Such an agency would lead to the establishment of all-inclusive priorities and better planning, as a result of longer and more consistent funding. Such an agency could also take the lead in developing comprehensive, timely, and accurate data on all aspects of library services in Canada. Without such data, how can we get an idea of how Canada and Canadians are faring in the new knowledge-based economy?

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In conclusion, the government has committed to investing billions of new dollars in research and development between now and the end of the decade in order to foster innovation and to ensure Canada's place among the top five OECD countries. In order to achieve this goal, a lot of generic information is going to have to be transformed into useful knowledge. Libraries are the agents that can help make this happen. The committee's support for increased and streamlined funding for libraries would send an important signal, not only to government, but also to Canadians about what is required to develop our capacities individually and collectively.

Thank you, Mr. Chairman. I would be pleased to answer any questions you may have.

The Chair: Thank you, Ms. Whitmell, and of course thanks to all the panellists.

Now we'll proceed to the question and answer session. We'll have a five-minute round, beginning with Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you, Mr. Chairman.

Thank you all for being here. I have a number of questions for the different presenters, and I'm going to take these in the same order in which you presented.

I'll start with the Canadian Museums Association. I am curious as to your relationship to private sources of funds. Do you have a network of people who support museums, or are you mostly funded by different levels of government? If so, what's the proportion of your funding from governments generally?

Mr. John G. McAvity (Executive Director, Canadian Museums Association): Thank you, Mr. Epp.

There are about 2,500 museums of various types across Canada. So literally there is at least one museum in each one of your own ridings, if not more. A total of about 57 million visitors attend those institutions on an annual basis, so the economic impact is quite self-evident, as well as the impact on tourism and the social fabric.

In terms of donations, museums look to a number of donors throughout communities. All of the member museums in our organization are registered charities; they are able to give tax receipts. In fact the amount of dependence on the goodwill of individuals has not only increased, it has close to tripled in the last 15 years.

The museums also depend heavily on volunteers. For every full-time employee in a museum there are five volunteers giving of their time and expertise in significant ways, in very meaningful activities that contribute to the operation. In addition, just about all of the institutions have what we call friends organizations where people voluntarily pay a membership fee and receive a newsletter, becoming part of the organization.

Needless to say, we've become much more entrepreneurial, much more dependent on citizens at large for their contributions and their donations due to the cutbacks our sector has received from various levels of government. As well, we've become quite a lot more aggressive in the area of earned revenue with store operations, gift shop operations, and so on.

I hope I've answered your question. The main point I want to make is that our institutions do depend for their funding on a wide array of private citizens' contributions.

Mr. Ken Epp: Okay, thank you. Unfortunately, because of the time allotted I can't ask you to....

The Chair: You can take another few minutes, Mr. Epp.

Mr. Ken Epp: Okay. On page 4 of your presentation it says that “...of the roughly $600 million invested annually by the federal government, only about 3% is available in direct funding through grants and contributions. The balance is eaten up by departmental operations and capital expenses.” I find that astounding. The federal government has already committed $600 million a year toward museums across the country, and only 3% is available for funding?

Mr. John McAvity: These are figures we've obtained from the department itself.

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Let me give you an example of the amount of federal money flowing to non-federal museums. First of all, you are all familiar with some wonderful buildings nearby that are all federal institutions. They are supported very generously by the federal government. But funds going out to non-federal museums are very limited. The museums assistance program is really the one funding program available. Its funds are about 50% of what they had been ten years ago. They are at $9.3 million per year—that's all.

In fairness, though, the federal government does find other creative ways to send out a little bit of extra money through programs such as Young Canada Works, a Department of Canadian Heritage program to employ young people in museums. We're partners with Heritage Canada Foundation in delivering that program. Its total allocation, however, is only $3 million. In terms of direct funds, it is in the vicinity of less than $15 million that goes from the federal government to non-federal institutions.

Mr. Ken Epp: Okay, thank you very much.

To the Community Foundations of Canada: I am confused. Are you an association of charitable organizations, or are you not? I am, again, astounded when I read in your statement that you hold $1.4 billion in investments. Exactly how are these investments managed, and what are the funds used for when these investments earn a return?

Ms. Monica Patten: Thank you.

The Community Foundations of Canada is an association to which local community foundations belong. We are the membership organization. Local community foundations, of which there are 113 across the country, collect the financial gifts from donors in their local communities—and those donors are usually individuals, although sometimes they are corporate donors as well. The gifts that are collected, the donations that are received, remain in that local community and are pooled for investment purposes in that local community. So the number I have given you is the tally when we look at what is being held by community foundations across the country.

The local foundation invests those gifts. And the beauty of a community foundation is that this capital is held permanently. The earliest community foundation, the first community foundation in this country—the Winnipeg Foundation—started exactly 80 years ago and is now $120 million or so under investment. That capital has not gone away, but the earnings on that capital are offered back to the community on a regular basis—sometimes once a year, sometimes more than once a year—in the form of grants to charitable organizations.

So community foundations raise and invest money for permanent funds. They use the earnings from their investments to return to the community in the form of granting to charitable organizations. Obviously we only make grants to charitable organizations.

Mr. Ken Epp: Then I have a question with respect to your request to change the regulation requiring you to disburse, as I understand it, 4.5% of the market value of your holdings to charity every year. Is this a reflection of the fact that some of your members may now be getting a smaller return, so this forces you to use your capital?

Ms. Monica Patten: Absolutely.

Mr. Ken Epp: That's the reason for it.

Ms. Monica Patten: That's right. Some of them are in a negative position as we speak, some are holding their own, and some, of course, are not. But that is the reason and has probably been the case before.

Part of our challenge is not knowing that. We don't know what has happened since 1980, because there's been no research, no analysis done. We know in some years it was better. Obviously in good years community foundations gave away much more than 4.5%, but this year they're really challenged.

Mr. Ken Epp: Okay.

The other question I have for you is your request that you be able to give grants to organizations without charitable status. I'm sure you're limiting that to not-for-profit organizations, because otherwise you would run the risk of becoming a money-laundering outfit, and you wouldn't want that.

Ms. Monica Patten: Absolutely. We would certainly be asking in our request that there be some way in which community foundations can make grants or financial contributions to locally based community organizations, not-for-profits, that don't have charitable status for a variety of reasons. Quite often this lack is out of their own choosing. They have chosen not to seek charitable status because of the administrative aspects around it, but they are in fact the bread and butter of community life. For instance, Block Parents and other kinds of associations that may not have charitable status may not want it. Is there a way they can receive some of the community-based funding that is available for that community?

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Mr. Ken Epp: Would it be possible for your organization to become a conduit to provide charitable tax receipts to people who want to donate? For example, if there's an organization here that's a not-for-profit and I as an individual would like to support them, but they can't give me a receipt, then I could give it to you and then you would transfer it onward. Would that be legal and moral?

Ms. Monica Patten: I think that is part of the challenge. I don't know the CCRA regulations well enough to be able to comment on that particular example you've just offered, but we are not a charitable organization ourselves.

Mr. Ken Epp: No, I know that.

Ms. Monica Patten: We cannot give money to other non-charitable organizations. I know you're asking a question around donors, because obviously we can issue a receipt. There are some ways. They have been used very sparingly because we realize that is not the intent of what a community foundation does. There are some ways in which we can in fact make funds available to non-registered organizations if we take them on as our own liability, as our own responsibility. But that is not the spirit or the intent of the CCRA regulations.

The Chair: Thanks, Mr. Epp.

Madame Gagnon.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): My name is Christiane Gagnon and I am my party's critic on heritage issues.

I have a rather technical question for the Canadian Museums Association concerning tax incentives for artistic donations. You state that you would like to see more tax incentives in place and that you are currently satisfied with what the government is providing. I would appreciate a little more information on the broader tax incentives you will like to see introduced.

Secondly, you talked about harmonizing national and regional objectives. The various regions, notably the Quebec region, often boast their own unique features. In your opinion, would it not be difficult to commit to harmonizing national objectives? For example, would Canada's and Quebec's national objectives not be different, if not contradictory?

I would also like to know how many museums in Quebec belong to your association. Thank you.

[English]

Mr. John McAvity: Perhaps I can respond first to your questions about tax issues.

Last year we came before this committee, and in fact in previous years, asking for some specific issues. I'm very pleased to say that the government has acted on one of those key areas, an issue actually brought to my attention by John Porter, the director of the Musée du Québec. It concerns tax incentives for donations of artists' estates. It is a fairly narrow technical issue, but it has been resolved to our satisfaction and we're very pleased about that.

There are a number of other tax issues, some of which have been brought up by other panellists today, that we're fully supportive of, including the continued encouragement of donations of shares of publicly traded companies. We also have been interested in having a financial incentive for volunteers. Many of our people are volunteers in institutions. Specifically, rather than open the floodgates on an area that I suppose could be abused, what we have recommended in the past is that legitimate out-of-pocket expenses of volunteers could be recognized. So those are some of the areas.

In terms of the question of having a more harmonized museum policy in this country, as you've noted in the brief we have called upon a coordinated effort with provinces and other levels of government. However, one of the hallmarks of the funding of museums and art galleries in this country has been the so-called arm's length principle. That is very well exemplified with the Canada Council, which really separates artistic excellence in decisions of programming nature from political objectives. We stand very much behind the arm's-length principle. The museum assistance program is also evaluated on the basis of peer juries. So the decisions that are essentially recommended are based on the community input and decisions coming together. We would want to see that continue in any future activity, really as a fundamental basis for which qualitative decisions are made on social and cultural matters.

• 1625

The Chair: Are there any further questions?

[Translation]

Ms. Christiane Gagnon: My question is for the Heritage Canada Foundation. You maintain the provinces have a role to play in heritage conservation, specifically in the area of heritage designation and classification. What powers would the provinces have within the national trust that you are recommending be established?

Mr. Brian Anthony: As a matter of fact, each level of government has certain responsibilities in terms of preserving built heritage and has the means with which to carry them out. Recently, we were encouraged by the actions of the Government of Ontario which unveiled in its current budget an initiative aimed at giving Ontario municipalities the authority to grant tax incentives for buildings that have received heritage designation under law.

Cities across Canada, notably Victoria and Quebec City, encourage the preservation of heritage buildings in the community. Other provinces as well promote heritage conservation. However, what's needed is a national system involving each level of government - federal, provincial and municipal - a system that would allow these governments to work together to find solutions to this broader issue.

Ms. Christiane Gagnon: As the Member for the riding of Québec, I realize that demand is high and that our heritage building stock is vast.

Mr. Brian Anthony: That is quite true.

Ms. Christiane Gagnon: Thank you.

[English]

The Chair: Thank you, Madame Gagnon.

Ms. Leung.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair.

I want to thank you all for your fine presentations.

I have a question for Dr. Strangway, my friend from Vancouver. We're all very pleased; CFI has done a wonderful job for R and D, especially to help stop some of the brain drain and to have some brain gain for Canada.

You mentioned the 40-60 proportion for the partnership. I understand 40% is from CFI. The 60%, I assume, has to come from the province or other sources. I do understand that sometimes 60% is too demanding for some of the provinces, especially if they don't have financial sources. I understand some other provinces have a proportion of 50-50. I want to raise the question because people do complain to me, and you know specifically because we have discussed it. Do you see any way to work out a better proportion so that some of the research institutes are not facing difficulties?

Dr. David Strangway: The issue is of course a very intriguing one. When the CFI was set up at the very beginning, it was set up explicitly with the 40-60 ratio. There has been no decision or suggestion that that ratio should be changed. Basically we are not asked to look at distribution by particular institutions or particular areas. We are asked to look at the criteria with respect to the quality of the proposal and the benefits as seen to Canada.

So far, in all of the projects that we have done, that we have supported, there is a great deal of credibility that goes with those decisions. The processes are considered to be of full integrity, and the institutions very much like the processes we use. They may not like a decision that says no, obviously, but they prefer this model to any other.

• 1630

Now, that puts the institutions that are successful in our competitions in a position, as you say, of wondering where they can go to find the 60%. So far, essentially every institution has been able to find the 60%. They have in most cases had an envelope, or at least an individual approach, whereby the provincial government has put in a further 40%. Then they have to find the remaining 20% from you, the private sector, or from the voluntary sector. I'm sure some of them have gone to the community foundations, for example, for some of that support.

There's not a lot of pressure on us to change that. One exception to this is with respect to the Atlantic in particular. What has happened there is that the federal government created the Atlantic Innovation Fund. That is a very interesting envelope, which gives those institutions the capacity to go to a separate process, but making use of the criteria we use.

So we haven't found that there are imbalances across activities, and we have found that where there are perceived imbalances, these are being dealt with by other mechanisms, in effect.

The other point I should add is that we have now received a further $400 million within the numbers I was talking about, which is the contribution to operating support. That money does not have to be matched. So what the institutions are really getting from us is 40% of the capital, plus another 30% that is the operating envelope we will provide to the institutions. If you put that into the equation, in fact the institutions have to raise less than half the total amount. But that becomes the case only by combining the operating money to support technicians and the activity, or the instrumentation.

Will this have to be changed in the future? Who knows? But at the present time, each of the provincial governments very much wants its institutions to be fully competitive. If you look at the leveraging from their perspective, there is a 40% contribution plus 20% from other sources. So for putting 40% on the table, they are in fact getting the needs of those institutions met.

Let me just emphasize, we do not have a set of criteria that says “We want so many proposals in this field, or this subject, or this area”. We ask every institution to tell us what their plans are, what their priorities are. We respond to their plans and priorities. That puts them in a very good position when approaching the other possible sources of funds to make sure they are matching their priorities, not ones dictated by the CFI.

So I don't see any need for changes, and it seems to be working. Will it continue to work forever? Well, we will monitor and keep track of that. But I don't think there's a need to change it. Obviously it's much easier for them if somebody could give them another 20% and they didn't have to find it, but we think it's a nice way to bring the institutions together with their provincial governments, their municipal governments in some cases, and with the private sector and the voluntary sector.

Ms. Sophia Leung: Thank you, Dr. Strangway.

I have a small question for Monica Patten. You mentioned you have a discussion with the CCRA. Would you be more specific and expand this point? What are you expecting in terms of administrative relief and grants?

Ms. Monica Patten: Let me try to clarify that.

It is my understanding that it is possible to get some relief from the disbursement quota, which is what I was referring to when I spoke of administrative relief. That can be done through a formal request to CCRA on an individual basis in a particular year. It's not for an ongoing or a permanent change. But in a circumstance like the one many foundations are finding themselves in, it is possible to have that conversation and that formal discussion with CCRA. That's what I was referring to.

Ms. Sophia Leung: Do they ever receive such grants?

• 1635

Ms. Monica Patten: My understanding is that they have, and they have looked favourably upon those requests in the past, but I can't comment on the current status.

Ms. Sophia Leung: Thank you, Chair.

The Chair: Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman.

Dr. Strangway, congratulations also to you, Madame Charette, and all your colleagues for some excellent work in an important area. I read through your brief and listened, and I didn't hear any requests for money. Then it suddenly occurred to me that through government appropriations the amount appropriated is pushing $3 billion.

Dr. David Strangway: It's $3.15 billion to be precise, and it's in the bank and growing interest.

Mr. Roy Cullen: Yes. Now I notice you have about $900 million working. Is one of the challenges you face to get the money working wisely but quickly? How do you manage that?

Dr. David Strangway: It's a concern that in principle we have had. But I have to tell you, what we are seeing is that the quality of the proposals coming in to us is increasingly improving. Will this roll over in due course? I don't know. But my perception is that the quality of the requests and proposals is getting significantly better as people begin to realize that it allows them to dream in a way they never were able to dream before. So far there is no sign that we are saturating the market, if that's what you're getting at.

We're in business now, as you know, until 2010. I think the next thing that will happen is that a piece of equipment that was bought, let's say last year, in five years will become obsolete, and they will need something new in order to be fully competitive. If you're looking at say, the high-performance computing area, five years from now we will see, not a reapplication, but the requests being significantly different, because today's high-performance computing is going to be very different from what it will be five years from now. I think that will be the take up in the longer run.

We see no signs of it, but believe me, we and the board are concerned essentially about whether these are really good, high-quality, excellent proposals, and that's the measure that comes up again and again. I think if we had a sense that the standards were beginning to go down, we would maybe slow the rate or something of that sort. But there's no sign of that today.

Mr. Roy Cullen: Thank you.

Our government has created a number of bodies: the CFI; the Canadian Institutes for Health Research, which was the old Medical Research Council; some of the Canada research chairs, the NSERC; and the SSHRC. Let me be the devil's advocate. Some might say there could be synergies, economies or efficiencies, achieved if some of these organizations were consolidated or collapsed into a smaller number. Maybe you could describe how they relate to each other and whether there is any duplication or overlap, or if any opportunities would exist if there were that kind of consolidation.

Dr. David Strangway: Let me start by describing what I see as the four needs with respect to Canada being fully competitive in the research world.

First, the CFI is, of course, facilities, equipment, and tools. That's what the CFI was set up to do. We're doing a lot to assist young people who are coming into the system to get the tools early in their careers so they can deliver quickly.

The second component is the salaries of the individuals who are going to be performing the research. That's what the Canada research chairs is all about. We work very closely with the research chairs, so those are not separate. The steering committee for the research chairs includes the three granting councils.

The third platform is what I would call the direct cost of research. I think it's important to understand the three granting councils—the social sciences council, the Institutes of Health Research, and the Natural Sciences and Engineering Research Council—don't pay the direct costs of research; they contribute to them. The institutions have to find the rest of the direct costs of research.

One of the questions I think you as a finance committee have to be thinking about is whether this new generation of really exciting young people coming into the system will have the adequate grant support they need to cover the direct costs of research. They're not covered today, and it gets tougher and tougher.

• 1640

The fourth element is the indirect costs, because you have to create an environment in which these people can function, so the universities, colleges, and hospitals are able to provide the tools, in terms of the environment. It's not just the piece of equipment, but somebody has to be the technician who runs those labs and so on.

I see those four as the key elements. In that context, then, we play one role, the chairs play another role, and the three granting councils play the third role. The fourth role has not yet been addressed, and I think has to be.

Are there potential synergies? There may be, but from what I know from our experience and watching the others, I think we run very lean...well, I used to say “lean and mean” shops, but somebody said don't talk about “mean”, because you're in the granting business. But I think we do run very lean shops and we spend quite a bit of time talking to each other in various panels and committees to try to be sure we keep the synergies going.

There's some advantage to being able, as an institution, to work with different agencies, because you can get a little bit of leverage one way or the other. So I don't think there's an awful lot to be gained, because the costs of the operations of these things are very small relative to the total amount of funding being disbursed.

Mr. Roy Cullen: Thank you.

Do I have time for a quick question on museums?

The Chair: Your time is up, but if you wanted to, you can.

Mr. Roy Cullen: It's just a quick one. I was saying something to my colleague coming in here about the timing of the museums association coming in today, given all the controversy over this Canada-Arab art exhibit at the Museum of Civilization. I don't imagine you want to get into the pros and cons of that, but if one goes back a few months, we had the controversy at the War Museum about the Holocaust exhibit, if I recall. Is this just a function of museums that we're going to be getting into this kind of controversy from time to time? I suspect it shakes the confidence of Canadians in our museum system. Can these issues be managed better, or is it just a feature of museums that we're always going to have these kinds of conflicts that flare up in the public domain?

Mr. John McAvity: I don't think it is fair to say there's a controversy with the Museum of Civilization, for example, over what it's done. In fact, what it had been proposing is a very admirable project; it's a project that has simply been postponed.

Mr. Roy Cullen: Perhaps you didn't hear the Prime Minister in question period today.

Mr. John McAvity: I'm sorry, I didn't catch question period today, and I'm not aware whether it was brought up at that level.

But what the museums are doing is very much what we said in our introduction, which is that museums are there to be bridges to understanding. The Museum of Civilization as well as the Museum of Anthropology in British Columbia have major exhibitions and programs to explore Arab-Canadian, Canadian-Arab relations and contributions and to explore the Muslim religion.

I think if you look in a general way, museums are there to expose, to educate, to tear down barriers. That's what we're all about.

Once in a while we do get into really controversial subjects. We've had them in Toronto at the Royal Ontario Museum. The case of the Holocaust here at the War Museum wasn't an exhibition; it was a notion for future planning. We're in the business of social values and meaning. I think it's imperative though, that we realize the museums are not taking one side or another. They are educational institutions opening their doors for a better Canada and a better world.

The Chair: You do have something in common with question period, then.

Mr. John McAvity: Yes.

[Translation]

The Chair: Ms. Gagnon.

Ms. Christiane Gagnon: Yesterday, I rose under the provisions of Standing Order 31 to ask the Prime Minister to put his money where his mouth is and dissociate himself somewhat from the decision reached by the Museum of Civilization. We found this decision to be regrettable in light of the recent attacks in New York and the ties with the Muslim and Arab communities. Going ahead with the exhibit would have sent a clear message to members of the public and heightened their awareness of Middle Eastern issues.

Today, Mr. Chrétien announced that he could not accept the decision of the Museum of Civilization. Regardless of the outcome, if my statement under Standing Order 31 in some way prompted the Prime Minister to dissociate himself as well from the museum's unfortunate decision, is there any way to get the Museum of Civilization to reverse its decision on this matter? Is there any specific action that you can take?

• 1645

In my estimation, there is much to be gained from an exhibit of this nature. According to the newspaper reports that I have read, Arab artists involved in the exhibit disagree with the decision. They are disappointed because they felt it was a way for them to get Canadians to understand their situation.

[English]

The Chair: Madam Gagnon, I thought you were just making a comment on what Mr. Cullen....

[Translation]

Ms. Christiane Gagnon: Yes, but maybe...

[English]

The Chair: I wasn't going to give you the floor if you were going to get into such a lengthy speech.

Mr. Macklin.

Mr. Paul Harold Macklin (Northumberland, Lib.): Thank you, Mr. Chair. I have a question that I'd like to direct to Monica Patten.

I am certainly well aware of the foundations and the good work that they do within our communities. In light of your recommendation or suggestion for consideration about the floating rate for smaller community foundations, I wonder if you could give us some ideas as to what you might find acceptable in that regard, without taking us to zero.

Ms. Monica Patten: I'm probably going to hedge and avoid that question, because I can't actually give you a number that I think would be of any value to you. But I do want to say that I think we actually need to do some research before we begin to look at the numbers. We have no idea of the last 21 years or whenever we introduced this. The intent behind the dispersant quota was to make sure that donors' money actually went back for charitable purposes, and we are absolutely committed to doing that.

The issue is more severe with small foundations in their growing phase, so I would see that some kind of floating rate might move through the system, or through foundations in this case, as they build their endowment funds. We would never start at the square root of nothing here, because that's not what donors want. So I would hesitate to give you a number without having done the research, without having asked, what does it look like over the period of 20 years, what have the fluctuations looked like, and how can we accommodate the community foundation commitment as they are growing?

Mr. Paul Harold Macklin: Might you be able to do some of that research and forward it to the committee in time for this pre-budget consultation to conclude?

Ms. Monica Patten: We can't do that research unless we can get information from the Department of Finance, because they have the numbers.

We have in fact—I need to be totally clear about that—had a meeting quite recently with some senior officials at the Department of Finance, and there was an informal commitment around our table that they would take a look at the possibility of some research. We clearly offered to participate in that. I don't think that's going to move quickly. That would be my guess.

Mr. Paul Harold Macklin: Thank you.

Dr. Strangway, this summer I crossed the country with a task force, and some of the comments we've been getting back from those at universities we've attended have suggested that when we're putting out our research money, in fact we are forgetting about the so-called bricks and mortar infrastructure and have been concentrating more on the instruments and tools, as I think you described them. Do you see that as a problem as well, and should we be looking at other means of supporting the university structure in that regard, in terms of bricks and mortar?

Dr. David Strangway: You ask a question on which, as a former university president, I could wax for hours, but let me try to summarize it very quickly.

The Chair: Do you have a minute?

Dr. David Strangway: I have a minute. Thank you, Maurizio.

Let me point out this for you: At the university I used to be president of, we had 20 acres of roof, and roofs lasted, on average, in the Vancouver climate, about 20 years. So that means if you're looking after your roofs, you're replacing an acre of roof every year. But if the roof doesn't leak, you don't replace it because you don't have the money. So suddenly, 20 years on, you have 20 acres of roof, all of which is leaking. That's the deferred maintenance problem.

The Chair: The university fund.

Dr. David Strangway: That's right—it should have been, right?

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): That was a condo, was it?

Mr. David Strangway: Right. No, this was not a leaky condo. This was a lot of temporary buildings, and so on.

I'm sorry, I thought you said was it a condom. I hope that doesn't get into the transcript. And I was thinking, that might have solved the problem.

That's an example of the deferred maintenance problem, and I think every institution in Canada has had this deferred problem to catch up with.

• 1650

The CFI has been doing some buildings, but only those leading to a frontier kind of research in which the building is the necessary missing condition. So we may be helping slightly with the deferred maintenance problem, but we're really not dealing with it, nor do we have any mandate to do so.

The Chair: Thank you, Mr. Macklin.

Dr. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): This is also for Dr. Strangway.

Because you didn't have an actual “ask” for the committee, and as you can see, the committee is still stunned—

Dr. David Strangway: You would have been stunned if I'd asked.

Ms. Carolyn Bennett: One of the proposals that has come to the committee is for the new Canadian academies, and we were wondering what you thought of that. Their proposal is for $3 million a year in, as one of them said, a steady IV drip. You have an endowment in which you work off the interest. Do you have any view as to which is a preferable way to fund an ongoing commitment to research and innovation?

Secondly, you know that within our caucus your organization is a little controversial, being seen to favour the larger track-record universities. I guess there is some debate as to how you start up new research and innovation of new researchers and fantastic new people if they actually have to be with one of these track-record institutions in order to get any money.

My third question I think you did answer in terms of the indirect cost of research. Certainly the CEOs of all the hospitals in Toronto are very worried that getting a research chair is sort of a mixed blessing, because they then don't have the money within their existing budget to fund the technicians or the ongoing overhead of that chair. Do you have any ideas as to what we could do about that? Or could the actual research chair be loosened up a little bit to be able to spend some money on overhead?

Dr. David Strangway: First of all, to work backwards, the chairs program was really explicitly aimed at trying to make sure that we were attracting and retaining the very best in Canada, and to divert that out of the salaries and the immediate support would be a difficult issue. The issue has to be addressed through the indirect cost question, and I think that's an issue that's really up for serious consideration.

If you look at other jurisdictions, of course, particularly the one south of the border, that makes an enormous difference to the ability of the institutions to create the environment in which these people can flourish. So I think you have to address it through that mechanism.

In terms of the controversy about, in a way, the established or the big versus small, or the regional, or however you want to position it, it's actually not as extreme as people point out. We're finding that in many of the smaller institutions there are some very interesting and outstanding proposals. We made reference to some of these in our materials. Some of them compete very successfully.

I remind you that our mandate was explicit that we were not to push for one particular set of institutions versus another, and as I look around the country, the places that I find just as exciting as the big universities are many of the smaller institutions.

I like to point out the University of Winnipeg, for example. The University of Winnipeg has been very smart in what it does. They have a project that has to do with remote sensing and forestry, but they realize that the same techniques that you can put in an aircraft and use to map forests and different quality of forests can be used for the study of art. So they have taken these two pieces of technology and use it, on the one hand, to study forests and their condition, and at the same time, they work with the people in the art community and use it for the analysis and study of artworks. You find these kinds of examples coast to coast.

If you look at the distribution of the funds, in fact it's pretty significantly supporting the smaller institutions. So while we understand—

• 1655

Ms. Carolyn Bennett: Can you help me with Ryerson, which is now evolving into a university? Formerly it was applied, but it is now trying to begin research. How do we help Ryerson?

Dr. David Strangway: I think we have helped Ryerson quite a bit. We have some really neat projects we funded at Ryerson that had to do with large databases and information bases and geographic information systems, which they'll be able to put into looking at the economic distribution of all kinds of patterns in different parts of the city and so on. And they have a significant number of research chairs. They'd like to get more, obviously. They'd all like to get more. But they can take significant advantage of the chairs they do have. They can take significant advantage of linking that to proposals they make to the CFI.

Ryerson is one of the ones I would consider from my perspective is actually doing pretty well. Obviously they would like to have a bigger designated share, but they have some very interesting people doing really interesting stuff at Ryerson. You've probably seen some of it; it's pretty neat. And we're pretty pleased that Ryerson, in our view, is fully competitive. They're not the size of the University of Toronto, so it's on a relative scale, but on a relative scale I think they do just as well. So I'm very pleased with that.

In terms of the national academy concept, if you've read the proposal, you'll find my name scattered in there somewhere or other. I'm pretty supportive of the idea. The big question is whether you do it with an endowment. Your question is should it be done with an endowment or an annual increment.

Obviously, if you had your druthers, you'd do it with an endowment, but to support a $3 million a year operation, typical endowments.... My experience of running an endowment fund for many years was that on average over thirty years we averaged CPI plus 6%, roughly speaking.

If you look at the institutions south of the border and their big endowments, they typically spend about 5% of the envelope. So it's not a very hard piece of arithmetic to go from 5% to generate $3 million a year to how many millions in endowment you'd have to put in.

Obviously the endowment would be the way to go. These are not easy times, but if you're inclined that way, I'd certainly support you.

The Chair: Mr. Nystrom.

Mr. Lorne Nystrom: I welcome everybody here this afternoon. I wanted to ask you a general question on whether or not anything in terms of recommendation changes after September 11.

I think it's very important to invest in museums, in the arts and culture and libraries and the like. The government is now in a financial squeeze and may well be in a deficit position when we find out in a few days or a few weeks about all the extra money that will be going into security and intelligence, and the fight against terrorism. The slowdown of the economy in terms of our health care system and housing problems.... We've had 30,000 people lose their jobs in the last three or four months. A bunch were anounced today with Air Canada, and there's Bombardier and so on.

Do you have any advice to us as to how priorities may have changed? You represent all kinds of people who are very interested in what you're doing, but they're also taxpayers and interested in other aspects of our society as well. It's just a very general question, but a lot of people have said to me in the last while that this country and the world have changed and maybe have changed forever. Do you see that from where you sit?

The Chair: Mr. Anthony.

Mr. Brian Anthony: It's something that I think each of us has pondered in the last couple of weeks. We appreciate that the federal government is dealing with a variety of factors, including a downturn in the economy—a year ago things were looking very rosy—and now some of the essential things we will have to do in light of the events in the United States two weeks ago.

But those of us who have worked in the cultural sector for, in my case, over a quarter of a century have seen fortunes good and bad come and go. It seems like only yesterday that we were appearing before the standing committee and similar questions were being put to us because of the program review exercise and the downsizing in government expenditures.

John, you will recall that fondly.

• 1700

I would think that the events of two weeks ago stand out as not part of the va-et-vient of good and bad fortune coming and going, but still, keeping that in mind, I think, if anything, the events in the United States should underscore the importance of working to strengthen what is important to us, what is worth defending.

The museums, the arts, cultural industries, heritage buildings, the landmarks that symbolize our past successes, and in some cases follies, over the years are the kinds of things that have meaning, and these are the kinds of things that, in times of war.... I have to say that the attrition rate I mentioned earlier is an attrition rate that you normally associate with natural disasters and war. It is in times of war that warring states go after the landmarks, the museums, the libraries, the opera houses, the cathedrals. They do that for a strategic purpose because these provide high ground where you can put snipers and forward observers for military purposes, artillery and air strikes. But they also do it for a civilian purpose, because if you destroy those landmarks, if you destroy the things that museums and libraries and opera houses and churches have to offer, you destroy the people's will.

So I would say that this is a time, keeping in mind all the other factors that this committee and the federal government have to balance in putting together a budget, to renew our commitment to the things that we represent here and not to flinch and not to falter. If we do, then the terrorists will have won.

I was born—if I can put this in a personal perspective—in the middle of a V-2 raid on London. I don't recall that. I survived that and many more. One of the things that kept Londoners going during the Second World War, my parents will tell me, was the fact that the movie theatres, the dance halls, the museums, and the galleries were kept open. One of the stark reminders of the invincible spirit of London was the fact that St. Paul's Cathedral, surrounded by flames and the fury of the blitz, stood and still stands. That was why they chose that as the sight for the memorial in London, two weeks ago, for the fallen in the New York and Washington bombings.

As I say, I think this is the time to remember what it is we stand for as a society and to renew our commitment to those things that remind us of what that society represents.

The Chair: Thank you.

Ms. Guarnieri.

Ms. Albina Guarnieri: Thank you, Mr. Chair.

Well, we revel in your survival.

My question is for Ms. Monica Patten. In your brief you outline a number of measures that would undoubtedly benefit your organization and your donors. However, it would seem that the regulations are there to limit the government's investment through tax measures. Do you have an estimate of the cost to the treasury of the measures you're proposing?

Ms. Monica Patten: Are you speaking specifically about the permanent or the ongoing capital gains?

Ms. Albina Guarnieri: Yes.

Ms. Monica Patten: No, I don't have an estimate on that. I believe those numbers are probably available. I can only speak for the kinds of new funds, new dollars, that have been raised by Community Foundations, but I don't have the overall sector-wide revenue that has been obtained as a result of that, nor what the impact has been on government. But I believe Finance has been doing some work on that. There are a couple of task forces that are working in this federal voluntary sector, federal government, Government of Canada initiative, and they are doing some analysis in that area as well.

Ms. Albina Guarnieri: You're aware that one concern that has existed for some time is that very wealthy citizens could avoid paying tax at all by simply donating an amount of stock equal to their income, where there are no limits in place. If I understood you correctly, your suggestion of eliminating even a reduced capital gains tax seems to move closer to that situation. Can you explain how you would justify such a move from a tax fairness perspective? We understand, of course, how it would help your organization, but how would you qualify it as fair relative to the benefits that, for instance, a regular worker would get from giving after-tax cash to, let's say, the United Way?

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Ms. Monica Patten: First of all, let me say that it is not only donors of great wealth who have contributed and participated and benefited from this tax incentive. And they are publicly traded shares, I think we all know that. By giving to United Way.... And United Way has benefited from these contributions as well. They're part of the whole sector experience in this. These are for donors, for individuals who clearly want to have a tax benefit, but they also want to participate in the life of their community, and one way they can do that is through their charitable giving.

So I think we would say that to see this as only a way for donors to benefit from tax incentives would probably be a very narrow way to view it. This is an opportunity for donors to do both, actually, to have some tax benefit and to make a contribution to their community. And it is very clear that they are not only donors of great wealth. I could give you numerous stories of donors who we would call of modest means who have participated in this just in the community foundation world.

Ms. Albina Guarnieri: Thank you, Mr. Chair.

The Chair: Thank you, Ms. Guarnieri.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): I want to thank each of our presenters today for their interventions. My first question is to the association for museums. I have an article here from The Economist magazine, April 21st edition. The article is on marketing museums. The opening paragraph is:

Museums have never had it so good. New ones are being built all over the place, and existing ones are expanding. Fundraising campaigns have never been so successful, and visitor numbers have never been higher. Last year, for the first time ever, American museums attracted more than a billion visitors.

It goes further to describe the trend, not just in the U.S. but around the world, in terms of the success in, if you will—I don't want to say anything that sounds tawdry, or something that you may find distasteful—the commercialization of and marketing of some of these assets. To what extent have Canadian museums been successful in this regard in recognizing that it's easier for a museum in Toronto or Ottawa or Montreal to do this than it might be in a smaller centre? To what extent have Canadian museums been successful in this regard?

Mr. John McAvity: First of all, I believe that article was really dealing mostly with American and some European institutions. Frankly, there's a big gulf between the different types of institutions that we have. There are very few institutions that are very large and very sophisticated and have the power to attract a great deal of private benefit and have commercial operations.

For example, the Guggenheim institution, which is based in New York, has now opened satellite operations in Bilbao, Spain, and one in Australia. As well, there are a number of other sites, such as Venice, Italy, that are all under development. So there is this gulf. The vast majority of the Canadian institutions, however, are very dependent on public funds. Some, as I said earlier, have been able to lessen that dependence, in part through the lack of government support and the necessity of having to go out and get new donors, attract new support. That's good.

However, what we're very concerned about is the very small amount of money that the federal government does provide for the support of museums. In fact, it provides zero operating support for museums. The only funding that is available is up to about $9 million. That is for project assistance, for exhibitions, or for specific projects that have a beginning and an end. That's all the support that really is available.

In fact, if I could finish there, that $9 million has lost its actual impact. Initially, when that program was set up it was $7 million in 1972. So if you consider just the inflationary impact, the equivalent that program should be today is $30 million. That's a dollar per Canadian. We're nowhere near that level.

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Mr. Scott Brison: Thank you very much.

Dr. Strangway, some of the concerns relative to CFI that have been raised with me from institutions and university presidents have included the following.

First, there's a feeling from smaller universities that there is, if you will, an anti-small-university bias in CFI granting, and CFI doesn't necessarily recognize the value of undergraduate programs, not just in terms of research, but in terms of the degree to which undergraduate programs create a sense of interest in sciences that leads to successful graduate students, important research, and the like.

Another concern is that in universities like mine in the province of Nova Scotia, and in provinces that may be less well off than others, the sharing, the split, or the need for matching funds from the province can actually discriminate against institutions. There are concerns about that.

The third concern is that the AIF is not really operational or fully operational at this point. Concerns have been raised with me that although the funds are there, there is really no mechanism yet for delivering the funds to Atlantic Canadian universities in an effective way.

Dr. David Strangway: Again, on the last question first, the proposals to the Atlantic Innovation Fund are due, I believe, this week. In fact, I'm not even sure it isn't today or tomorrow. They responded very fast, Scott.

The chairman of the AIF fund is Art May. As some of you will know, he was formerly president of Memorial University of Newfoundland, and before that he was in a variety of interesting positions, including the president of the Natural Sciences and Engineering Research Council.

So I must say, we have considerable sense that with somebody like that in the chair, they will be very thoughtful, and will recognize that the decisions of the AIF mustn't be driven by political considerations—which is what the concern is—but by the quality of the proposals the institutions in Nova Scotia and other parts of the Atlantic submit, part of which is through us and part of which is through them.

We are working with the AIF in terms of whether we can assist them with the evaluation processes, and so on, because one of the things we have gained a great deal of credibility for is our evaluation processes. It remains to be seen how it turns out, of course, but when I was in Nova Scotia a few days ago, it was very clear that some of the investigators felt relieved that they finally had the opportunity to get their proposals in, and they're all working hard on them.

I can't tell you how it will turn out. There may be a significant political overprint on the AIF fund, but I hope there will be a minimum political overprint, because that's really the credibility we bring to the table.

Mr. Scott Brison: I didn't even raise that concern, but you raised it for me. That's good.

Dr. David Strangway: Yes. I raise it because there's an asymmetry in the processes. The process CFI follows doesn't have a political dimension to it, and it was structured so there would be no political dimension to it. The process of the AIF does have a final decision with respect to the political overprint.

Mr. Scott Brison: Why would there be that difference?

Dr. David Strangway: You would have to ask the people who put it together in Nova Scotia. I don't know the answer to that question. I understand that if somebody is responsible for large sums of money, you want that kind of oversight. I'm not totally negative on the question; I'm only saying there's an asymmetry in the two processes.

In terms of the smaller universities, my sense is that, by and large, there have been fairly significant matching funds made available, so far. A lot of it in the Atlantic has come through ACOA. ACOA hasn't done everything, but you may remember that in the Nova Scotia budget that came down a few months ago, they set aside a substantial amount of money for matching CFI projects. We believe that in the end they will find the matching funds.

I guess the question is that if they make the criteria too different from our criteria, whether it will have a steering effect. I don't think that's a real issue yet, and so far we don't have any evidence that either they already have matching funds, or the envelope with which to apply is in hand.

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We're not as worried as some are, but I guess if I were the university president wondering whether I were going to get it or not, I'd be worried. But let me tell you, the presidents of the small Atlantic universities are probably the most effective lobbyists in the nation. If there is any window of opportunity, they will find it, and that includes your institution.

In terms of the undergraduate activity, that's a very interesting question. With the smaller universities, particularly the ones south of the border that don't have a research focus, it is true that their graduates very often go on to research careers. In fact, typically double the number, on a percentage basis, from those institutions go on to research careers. In that aspect, NSERC, for example, has a very specific program to assist them with bringing in summer students who can work on the campus in research projects, and so on, and try to reinforce them.

My sense is that they do a pretty good job of that, and the facilities we are providing there will also help them significantly. So I don't think the issue is as severe as it has been pointed out, and if I were a university president still at a small university, I'd be saying the same thing.

Mr. Scott Brison: Sure.

The Chair: Thank you very much, Mr. Brison.

On behalf of the committee, I'd like to express to you our sincerest gratitude for once again helping us out this year, as we address the challenges of pre-budget consultation. You know these are challenging times for us, as we deal with the whole national security issue, above and beyond other requests the many organizations have made.

As always, I'm sure we will make the right decision on the trade-offs, and provide the Minister of Finance with the types of recommendations that reflect the needs and aspirations of Canadians.

Thank you very much.

We will now move in camera.

[Proceedings continue in camera]