Government Operations Committee on Feb. 25th, 2014

[The Chair, NDP, Pierre-Luc Dusseault]

Good morning everyone.

I welcome you to the 12th hearing of the Standing Committee on Government Operations and Estimates. As planned, we are going to be studying the supplementary estimates (C).

This morning we welcome representatives from the Treasury Board Secretariat: Mr. Bill Matthews, Mr. Darryl Sprecher, Ms. Marcia Santiago, Ms. Christine Walker and Ms. Grace Chennette. Thank you for being here.

You have 10 minutes to make your presentation. Afterwards, members of the committee will ask questions.

Without further ado, I now give the floor to Ms. Matthews.

[Bill Matthews, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat]

Thank you, Mr. Chair.

I am pleased to be here to discuss the supplementary estimates (C) for 2013-2014. I am accompanied by a few colleagues, Darryl Sprecher, Marcia Santiago and also

Christine Walker, who is the chief financial officer for the Treasury Board Secretariat, and Grace Chennette, who is the deputy chief financial officer.

Before replying to your questions, I would like to briefly show you 11 slides that give you an overview of the supplementary estimates (C).

I will start you all on slide 3. In order to respect the 10 minutes, we'll go fairly quickly. You should all have a slide presentation with you. I hope you do. What we will walk through today is the organization of the supplementary estimates just as a reminder for most of you, but we will talk about the structure of the document itself. I will go through most of these in more detail.

We have a specific slide on the major items, which would be the largest voted items, and we will walk you through those. Changes to individual votes we will go through as well. New votes and statutory authorities, there are a couple of things in here that are new. I would highlight for you right now that for Citizenship and Immigration there is a new authority related to debt writeoff as well as one related to a drawdown authority on passports, which is a fairly technical adjustment. I'm happy to speak to that if it's of interest.

Then the largest parts we'll go through are the actual summary tables of supplementary estimates (C). The horizontal items I will speak to specifically. Then the bulk of the supplementary estimates (C) document is details by organization, and we will get into that, depending upon your questions.

I would like to remind committee members in addition to supplementary estimates (C), there is significant additional information available online. Those are things like statutory forecasts and estimates broken down by strategic outcome and program, just by way of example.

Slide 4 is a bit of a refresher in terms of what we're looking at here. In voted items we have 35 organizations represented here, voted and statutory. Just as a reminder, voted items are what actually gets rolled into the appropriation bill. The supplementary estimates (C) document is provided to help you with your study of that appropriation act.

Statutory items, we have $373 million, which is actually a decrease. That is greater than our voted items, so net, there's a negative here. But the appropriation act you will see is only on the voted items, so you will see $358.3 million there.

Budgetary versus non-budgetary, we're looking here at all budgetary items. This is just a reminder that budgetary items are those that affect the bottom line of the government from a surplus-deficit perspective. Non-budgetary items would be things like loans, where if they were repaid there would be no impact on the bottom line of the government. But in terms of what's in supplementary estimates (C), it's all budgetary items today.

Slide 5 is just to give you a sense of comparison to previous years, and what we're looking at this year. This is our third and final supplementary estimates for the year. We are sticking to our regular pattern whereby supplementary estimates (B) is the largest and supplementary estimates (C) is the smallest. That hasn't changed this year.

Voted items in 2013-14 are lower than they were in 2012-13 by $3.8 billion, and $5.1 billion lower than 2011-12, so that is a trend you are seeing in reducing voted items.

The decrease in voted items is being offset by increases in statutory items. This is not a new story for us here. The increase in statutory funding is based largely around the Canada health transfer as well as increases related to our aging population, so old age security and the guaranteed income supplement. That's not a new story here for you.

The split between voted and statutory is largely consistent with previous years. You are looking at about 36% voted versus the balance being statutory. That's a bit lower than in previous years, but that is caused by that trend in decrease of voted expenditures.

On slide 6, for those of you who are more visually oriented, we have a split here for you, 2013-14 compared to the fiscal year 2012-13, a split between operating and capital, public debt, and transfer payments.

You are seeing that transfer payments are taking up a bigger portion again this year of $162.2 billion versus $158.7 billion. It's always our biggest, but it's growing. Again, that's because of the Canada health transfer and those old age security and GIS payments I mentioned. Operating and capital is slightly down, as is spending on public debt.

Slide 7 is focused on horizontal initiatives. These are initiatives where more than one department is actually receiving money throughout the year. Some of these things you have seen in previous supplementary estimates. I will walk you through these items because they are some of our more significant ones.

The first one on this list is the road map for Canada's official languages, so we have several departments receiving money: Atlantic Canada Opportunities Agency, Canada Council for the Arts, Heritage, Citizenship, Health, Justice, and Public Works. There are three pillars for this funding: education, immigration, and communities. There's money representing all three pillars in this horizontal item.

The second item on this list is funding for the Centres of Excellence for Commercialization and Research. This relates to three organizations: CIHR, NSERC, and SSHRC. There is $9.9 million and it relates to the fifth round of competition for this funding. Funding here is going to three organizations: Canadian Digital Media Network, Ocean Networks Canada, and GreenCentre Canada. Those are the three organizations receiving funding as a result of this competition.

The third item on this list is related to Finance, Public Safety, and Public Works. This is funding around government advertising at $8.5 million related to measures announced in the 2012 budget initially, including transparency and accountability for charities, pooled registration pension plans, and the hiring credit for small business. These are all CRA items in there.

Sorry, I skipped one, back up. Finance, Public Safety, and Public Works advertising includes three things: economic action plan, public safety relating to the anti-cyberbullying campaign, and Public Works and Government Services Canada relating to a pilot project to purchase a web buy for online advertising.

The one I skipped to is the Canada Revenue Agency, which is around funding for the implementation of various tax measures in budget 2012. I apologize for that confusion.

Next up on the list, we have the Department of Fisheries. This is funding to strengthen the prevention and preparedness regime around oil spills. It is for $6.9 million. You would have seen some money in this item for fisheries in supplementary estimates (B) as well.

Next on the list is funds for CBSA and Foreign Affairs. This is funding to address increased demands on both the temporary residents and citizenship programs, funding that was announced in budget 2013. If you went back to budget 2013, you would see that there was $42 million for the temporary resident piece over two years, and $44 million related to the citizenship piece over two years as well.

Lastly on this list, funding for Public Works and Government Services Canada and Treasury Board Secretariat around modernizing the disability and sick leave management in the federal public service.

I had mentioned before that I would walk you through the major voted items that we have in supplementary estimates (C), and I'll just run through this list for you on slide 8.

For Shared Services Canada, the workplace technology device software includes $102.3 million. That's worth spending a few seconds here simply because as you go through each department's supplementary estimates, you'll see that there are reductions in the funding because of this initiative. This money is being funded basically by reducing other departmental reference levels, so it's not actually new money going into the system. This is money that used to be spent by departments, and is now being spent by Shared Services Canada around workplace technology device software. That's $102.3 million.

For Treasury Board Secretariat, compensation adjustments include $73.3 million. Members may be familiar with the operating budget freeze that will be reintroduced starting in 2014-15. It is not in effect for 2012-13. There was a one-year hiatus from the operating budget freeze. When there is no operating budget freeze in place, as collective agreements are signed, we will determine how much each department's share of the increase in compensation is based on the collective agreements, and we will increase departmental reference levels based on those collective agreements. This $73.3 million relates to nine ratified agreements during the year. I'm happy to speak to those agreements if that's of interest.

For Public Works and Government Services Canada, office space and fit-up includes $63.8 million. This relates to three new buildings that they're fitting up in Miramichi, New Brunswick; Ottawa; and D'Estimauville, Quebec.

For Indian Affairs and Northern Development, we have $36.1 million related to resource devolution agreements in the Northwest Territories.

For Citizenship and Immigration Canada, we have $35.5 million on the Canada-Quebec Accord on immigration. That is purely a formula based on the number of non-Francophone-speaking immigrants who go to the province of Quebec, as well as the federal spending, less public debt. There's an escalator clause for that agreement and it's based on the number of immigrants, as well as the spending of the Government of Canada, so that's an adjustment because of that.

Lastly, we have National Defence, the Aurora modernization and life extension project, which relates to extending the life of those aircraft. It's largely structural adjustments in this case, so you're looking at wings and horizontal stabilizers, if I recall correctly, to increase the lifespan of those airplanes.

Slide 9 relates to statutory forecasts. Again, this is information that is not included in the appropriation acts, but it is provided for information, so I thought we would spend a few minutes discussing the adjustments in the statutory forecasts.

First of all, Finance has $92.3 million related to money for provinces who have reduced or eliminated taxes on capital. This is an adjustment to the formula for Manitoba, B.C., and Ontario, so it's a catch-up adjustment.

Lastly, you have a budget 2013 item for Environment, the Nature Conservancy of Canada, $20 million. That's because the requirement there is for matching funds, so this is based on the amount of funds that the organization has been able to raise, and a matching amount comes in from the Government of Canada.

On the decrease side, we have two items. We have the Canada Revenue Agency disbursements to provinces under the Softwood Lumber Products Export Charge Act. That is based largely on duties paid. It really relates to the price of softwood in the U.S. Because of price changes in the U.S., lumber has gone up. We're decreasing the amount we have to pay here, so that's a downward adjustment.

The second item here relates to interest charges of $241 million; $182 million of that relates to the interest on unmatured debt. We're seeing lower interest rates, and the balance relates to a change in the interest costs related to an actuarial evaluation of one of the pension plans. So that's the combined amount there.

We have members from the Treasury Board Secretariat here, the chief financial officer and the deputy chief financial officer, so there is a slide 10 related to the Treasury Board Secretariat specifically. There is funding in the supplementary estimates (C) for modernization of a disability and sick leave management regime of $1.9 million. That's partially offset by the workplace technology device software item I mentioned of $0.5 million. Then you have vote 15 for compensation adjustments, which I spoke to on an earlier slide. That's the TBS story, but Christine and Grace would be happy to take questions on TBS specifically.

Lastly, on slide 11, just to wrap up, we have $358.3 million in budgetary voted expenditures, which ties back to your appropriation act, which you will find in supplementary estimates (C). Thirty-five departments and agencies are in this group. You will see the appropriation bill formally tabled over the coming weeks.

Before concluding, I would like to highlight for you any errors we found in the document since it was tabled, and there is one. It relates to statutory spending, so our total if you go to the early pages of the summary for statutory is about $0.3 million too low, so we will be issuing an erratum online to correct the statutory item. It is for information purposes only. It's not affecting the appropriation bill or the voted amounts, but I did want to highlight for members that we are going to be making that correction online in the next day or so. I do apologize for that mistake.

I think I've managed to squeeze this in under 10 minutes, Mr. Chair, and I will turn it back to you.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you for this summary, Mr. Matthews.

Without further ado, we will now go to questions from members of the committee. Mr. Martin, you have the floor.

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you, Mr. Chair, and thank you, Mr. Matthews, for being with us here once again and for sharing with us an almost overwhelming amount of information in a short period of time.

I have some specific questions, but I'd like to start with a more general question. When you strip it down to what you're really doing here, the Treasury Board Secretariat is asking Parliament permission to spend another $300-and-some-odd million. Help us to understand, we're in a deficit situation, we have to borrow that money, so from whom are we going to borrow that money and at what terms? I know this is more of a Finance question, but you've been very good in helping us to understand the estimates process over the years, and teaching us those general things. For the benefit of the layperson watching these committee meetings, where are we going to get that money, and at what kind of interest rate?

[Bill Matthews]

Thank you, Mr. Chair.

I will start by talking about the link between estimates and budget, because as the member mentioned, this is a Finance-type question.

When Finance does the budget, they are aware that there will be additional spending requirements beyond main estimates, so don't view this as a surprise in terms of additional requirements. These are things that were largely forecast in previous budgets, but departments are effectively now ready to start spending the money. Finance's borrowing plans would be more based on planned spending. Supplementary estimates mean that the department has now properly designed its program and is ready to spend.

[Pat Martin, NDP, Winnipeg Centre, MB]

I'm more interested in who we borrow it from and at what interest rate these days.

[Bill Matthews]

The Department of Finance does issue a debt management report on its website. There is a mix of long-term and short-term borrowing. If you looked in the public accounts, I believe the increasing trend is for borrowing domestically, but there is some foreign debt as well. Interest rates have been going down over the last few years, and that's why you will see, I think in each of the last three years, a downward adjustment in finances forecasted—

[Pat Martin, NDP, Winnipeg Centre, MB]

I noticed that as one of the reported items here, interest costs are down $241 million.

[Bill Matthews]

That's typically because the long-term interest rate is going down, so regardless of—

[Pat Martin, NDP, Winnipeg Centre, MB]

Who's holding most of our debt these days? It used to be that most of it was held domestically. Is that still the trend or is most of it held offshore?

[Bill Matthews]

That is still the trend. There is still some foreign debt.

Maybe while we're answering other questions, I can actually dig that out for you and give you a response in a few seconds.

[Pat Martin, NDP, Winnipeg Centre, MB]

Sure.

My second question then is going from the macro to the very micro. It kind of strikes me as odd that the President of the Treasury Board has occupied himself with checking sick slips from doctor's notes and trying to make the case that there's some kind of widespread abuse of the sick leave provisions amongst the public service. Can you point out to me what the empirical evidence is that would lead the Treasury Board President to say such things? What is the basis for this new undertaking to go after the sick leave benefits in the public sector?

[Bill Matthews]

I'll say a couple of things on the sick leave issue. The statistics on sick leave usage, both paid and unpaid, have been on the Treasury Board Secretariat website, I believe, since May of last year. I'm sure members are aware that the Parliamentary Budget Officer recently did a report on sick leave in the public service that had essentially the same information: 18 days of sick leave on average per employee.

[Pat Martin, NDP, Winnipeg Centre, MB]

But that's paid and unpaid. Why are we concerned with the unpaid?

[Bill Matthews]

Both are important actually, because if you look at our sick leave regime and we compare ourselves to other employers, the federal government is one of the few large employers that doesn't have a short-term disability regime. So when we look at our employee base, many of our public servants don't have enough sick leave to carry them through to long-term disability. That's the case for modernizing our disability management regime to bring in a short-term disability program, because when you have employees—

[Pat Martin, NDP, Winnipeg Centre, MB]

But Mr. Matthews, that's not without costs too. You have to buy that insurance from somebody, and insurance companies never lose, so arguably you're going to be paying more for that short-term disability leave than you would be by bridging it with salary.

[Bill Matthews]

With regard to the actual sick leave regime and the modernization of that, there have been no savings articulated for that yet. It's too early. It has to be negotiated. There also has to be consultation with industry. There are only two pieces here.

[Pat Martin, NDP, Winnipeg Centre, MB]

Then why are we spending a couple million dollars in anticipation of what may or may not happen at the bargaining table in future collective bargaining?

[Bill Matthews]

Well there are two pieces to that. The Public Works piece is all around consulting with industry, because if there is to be a request for proposals put on the street, as you mentioned, industry will be out there. There is work to be done there.

The Treasury Board Secretariat is doing some work on its own. I can let Christine speak to where the Treasury Board Secretariat resources will go.

[Christine Walker, Assistant Secretary and Chief Financial Officer, Corporate Services, Treasury Board Secretariat]

Treasury Board Secretariat, as the employer of the public service, is responsible for the overall project leadership for the modernization of the sick leave and disability management program, the design work on the new plans, as well as any policy development. It also will support the negotiations with the bargaining agents, as already mentioned by Mr. Matthews.

[Bill Matthews]

Maybe I could finish with one quick comment. In terms of the average statistics we have on our public service, our long-term disability kicks in after 13 weeks. So under the current system, to make it through to long-term disability you need enough sick leave to get you there.

[Pat Martin, NDP, Winnipeg Centre, MB]

When does EI kick in?

[Bill Matthews]

EI would kick in earlier than that, but again, there's still a cost to that.

[Pat Martin, NDP, Winnipeg Centre, MB]

Isn't that a bridging tool?

[Bill Matthews]

It's a bridging tool to a certain extent, but it's not one that is widely utilized. When we surveyed other employers, we're basically one of the few left that doesn't have a short term disability regime.