Evidence of meeting #28 for Government Operations and Estimates in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was information.
A recording is available from Parliament.
Liberal
The Chair Liberal John McKay
I'd like to call the 28th meeting of the Standing Committee on Government Operations and Estimates to order.
We have as our guest this morning Mr. Kevin Page, the Parliamentary Budget Officer. I'll leave Mr. Page to introduce his colleagues.
We've asked Mr. Page to comment on three items. We're going to give him 15 minutes to comment, then we'll open up the questioning to members of the committee.
Welcome, Mr. Page. Once again, it's good to see you. The floor is yours.
Kevin Page Parliamentary Budget Officer, Library of Parliament
Thank you, sir.
I'd like to introduce my colleagues at the table. Dr. Mostafa Askari is the assistant parliamentary budget officer for economic and fiscal analysis. Mr. Sahir Khan is the assistant parliamentary budget officer for expenditure and revenue analysis. And two of our senior officers at the Parliamentary Budget Office are the principal authors of the reports we're talking about today. Peter Weltman, who works for Sahir Khan, is the principal author of the infrastructure study. Ashutosh Rajekar is the principal author of our study on sentencing reform.
Good morning, Mr. Chair, vice-chairs, and members of the committee. Thank you for inviting me and my colleagues to speak to you today regarding three issues: the budget 2010 departmental operating budget freeze; the PBO report on the Truth in Sentencing Act released in June 2010 by my office; and an update on the PBO report on the infrastructure stimulus fund.
In my presentation to this committee on April 12, 2010, regarding the budget 2010 freeze on governmental operations, I offered three key messages, which I believe are still relevant in the context of the committee study.
First, the fiscal context is challenging. Notwithstanding Canada's relatively strong fiscal performance when compared to some other countries, parliamentarians are facing two large fiscal waves. First will come large federal budgetary deficits caused by the economic downturn and the implementation of a deficit-finance stimulus package. This short-term wave will be followed soon after by growing costs for baby-boom retirees who will draw elderly benefits and health care services and by weaker budgetary revenues due to declining growth in labour supply.
Two, there is no fiscal consolidation without pain. To avoid large unsustainable budget deficits over the long term, parliamentarians may need to choose between higher taxes, changes to statutory transfer programs and less spending on direct program expenditures.
Three, there is both a strategic opportunity and need to strengthen the estimates review process. Recent improvements in expenditure management information and the implementation of strategic reviews help set the stage for new levels of fiscal transparency and involvement in a decision-support capacity of the Government Operations and Estimates Committee and indeed all standing committees that support the review of departmental activities.
With respect to the Correctional Service of Canada and the operating budget freeze, in budget 2010 the Government of Canada established a new fiscal anchor that targets the rate of growth in operating expenditures. As part of this new regime, departments will be required to reallocate internally to meet the 1.5% increase in annual wages for the public service in 2010-2011. In addition, for 2011-2012 and 2012-2013, operating budgets of departments will be frozen at 2010-2011 levels.
While the overall operating budgets of departments and agencies are expected to be generally flat in 2010-2011 compared to those of the previous year, there will be specific departments that will grow or shrink more than others. For instance, against the backdrop of stable operating spending, the Correctional Service of Canada is forecast to have average spending growth of 12.8% over the next two years. As noted in CSC's report on plans and priorities, this is linked primarily to increasing staff and capital spending in the custody program activity. All included, there will be over 4,100 new FTEs, full-time employees, over the next two years, which represents a 25% increase.
There are some considerations for parliamentarians with respect to the first item. In the view of the Parliamentary Budget Office, the budget 2010 operational restraint measures are not fully defined. From a fiscal vantage point, committee members need to know the risks related to achieving the proposed fiscal targets. Are the savings realizable or cashable? Are they dependent on reasonable levels of demand for programs or services? Are there potential downstream fiscal pressures resulting from cost deferrals related to an operational freeze? If new policies require a significant increase in expenditures in one department, will other departments need to compensate with a corresponding reduction in their reference levels?
From a service delivery vantage point, committee members need to know the risks and impacts related to service levels for Canadians from a speed-of-service, quality, or cost perspective. Are there risks and impacts to the longer-term service capacity of government related to changes in employment, processes, or capital levels? In our view, Parliament needs information and analysis in a structured and timely fashion in order to examine the risks and impact of restraint measures.
Our second item, the PBO report on the Truth in Sentencing Act, was in response to a request from the member of Parliament for Ajax—Pickering to determine the funding requirement and financial impact of the Truth in Sentencing Act on the correctional system across Canada. The PBO report does not make any comment on the policy merits of the legislation.
Briefly, the Truth in Sentencing Act amended the Criminal Code to limit the credit a judge may allow for any time spent in pre-sentence custody in order to reduce the punishment to be served at sentencing, commonly called credit for time served. In general, a judge may now allow a maximum credit of one day for each spent in pre-sentence custody. However, if and only if the circumstances justify it, a judge may allow a maximum credit of one and one-half days for each day spent in pre-sentence custody.
I have four key issues to highlight. One, the Truth in Sentencing Act will have a significant impact on the correctional system across Canada. Two, parliamentarians should be concerned about whether the fiscal framework and the budget fully reflect cost pressures arising out of this bill or legislation. Three, parliamentarians should be concerned about the lack of transparency to Parliament in the costing of the Truth in Sentencing Act by the Government of Canada. Four, parliamentarians should be concerned about the operational and cost impact on provincial and territorial jurisdictions.
Over the course of this project, PBO encountered a number of challenges. Other than the initial communication between PBO and the Correctional Service of Canada, which is available on PBO's website, the PBO was unable to secure a single meeting with CSC officials in spite of repeated requests. Moreover, the PBO was unable to verify the government's own estimates, assumptions, or methodology for the various figures presented publicly. Much of the data used for the PBO report was sourced from the annual surveys by the Canadian Centre for Justice Statistics, Statistics Canada, and provincial and territorial correctional departments themselves.
Put simply, the bill directly results in longer stays for sentenced inmates and increases the inflow of sentenced inmates into the correctional system. This in turn results in increased daily head counts resulting from an increase in the average time spent by inmates in sentenced custody. The increase in daily head counts results in a significant impact on operating and maintenance costs, annual life cycle capital costs, and the cost of constructing or expanding correctional facilities.
PBO has used two approaches to estimate the impact of Bill C-25, one being a simple financial model and the second being a probabilistic simulation model. The PBO's efforts also involved an independent peer review panel comprising domain experts across corrections, justice, facility and capital management, and statistics and financial modelling.
Using statistical data for fiscal year 2007-08 as the sample case, the PBO estimated the impact on the federal corrections system had Bill C-25 been enacted in fiscal year 2007-08.
About 8,600 inmates were admitted to federally sentenced custody and spent an average of about 560 days in custody (1.5 years) prior to being sent on parole, community supervision, statutory release, etc. These inmates had already spent on average about 160 days in remanded custody prior to entering federal sentenced custody.
Bill C-25, if enacted in fiscal year 2007-08, would have added about 160 days to the average stay, increasing it to about 720 days (close to 2 years); and this would have resulted in an average increase of about 3,800 inmates.
Based on CSC's estimates reports to Parliament, the average annual operation and maintenance (O&M) cost per inmate in federal custody amounted to $147,000.
Therefore, Bill C-25 would have resulted in an extra $620 million per year in O&M and capital expenditure assuming a status-quo occupancy ratio of 90%.
Given that CSC had only about 14,800 cells to house federal inmates, assuming the same status-quo occupancy ratio of 90% would have resulted in the expenditure of $1.8 billion over five years on the construction of new facilities or expansion of existing facilities, or about $360 million per year.
This would have resulted in an increase of $620 million plus $360 million amounting to almost $1 billion in expenditures.
If CSC chose not to expand existing facilities or construct new facilities, this would still require an additional expenditure of $620 million for O&M.
The projected total funding requirements for CSC, federal level, from the second financial model are presented in table 3 in the annex to this statement. It includes the increased funding requirement to implement the Truth in Sentencing Act.
CSC's latest reports on plans and priorities show the department's annual reference level at about $2.5 billion for 2010-11, $2.9 billion for 2011-12, and $3.1 billion for 2012-13. When compared to PBO's projections for the same fiscal years, it appears that there's a gap of about $1 billion annually as to what the PBO projects to be the requirement, and what is shown as CSC's annual reference level.
However, if only the O&M components--operations and maintenance--of PBO's projections are compared with CSC's annual reference level, then they appear to fall in the same ballpark. This could be interpreted to mean that CSC would possibly choose to house--double-bunk--multiple inmates within the same cell and not invest in any new facility constructions or expansions.
Thus, should the Government of Canada choose not to build or expand correctional facilities, the increased funding requirement, based on O&M and recapitalization for the increased inmate population, will nevertheless have to be incurred. It must, however, be noted that the increased annual reference level for CSC does not clarify as to whether or not results of any of the new and/or proposed justice legislation, including Bill C-25, are included.
Here are some considerations for parliamentarians.
When parliamentarians debated and subsequently voted on Bill C-25, the financial impact was not made available to senators and members of Parliament. Parliamentarians may wish to request the cost estimate for the Truth in Sentencing Act, including key assumptions, sensitivity analysis, capital budgeting model, methodology, and data sources.
Parliamentarians may wish to request the same type of financial information and analysis as part of their deliberations and debate on subsequent pieces of legislation, which would support the scrutiny of the government's estimates, as well as provide a better understanding of the impacts and risks on the fiscal framework.
With respect to PBO's update on the infrastructure stimulus fund, the third and final item, PBO has provided a performance update in accordance with the third round of claim and progress reports received under the infrastructure stimulus fund as of March 31, 2010. The third round included 3,486 claims for 2,902 different projects representing 74% of all infrastructure stimulus fund projects.
PBO analysis has identified a noticeable delay in project start and end dates against the original projections. This trend highlights potential risks to the infrastructure stimulus fund program outcomes, including projects not being completed at the March 31, 2011 deadline, and a potential lapse of program spending authorities.
PBO developed a high-level forecasting model to predict potential outcomes of the infrastructure stimulus funding program. In the best-case scenario, all projects are expected to be completed by the program deadline. A mid-case baseline scenario results in 936 projects not being completed by deadline, with a potential federal lapse of $293 million. In the worst-case scenario, 1,814 projects would not be completed, and the potential federal lapse would amount to $500 million.
Members of my staff met with Infrastructure Canada officials, who expressed their disagreement with some of the methodology used to forecast these lapsed figures. I welcome these interventions. I believe it creates an environment for debate and discussion.
In the fall of 2010, upon the release of the fourth round of CPR by Infrastructure Canada, PBO will provide a subsequent performance update that will include an update of the forecasted lapse analysis. PBO will also publish findings with our survey of infrastructure stimulus funding project recipients undertaken over the summer.
Here are some considerations for parliamentarians on the third item.
The claims data sets PBO has received from Infrastructure Canada include data inconsistencies that affect the relevance and accuracy of PBO performance analysis. Coupled with the fact that a significant number of projects have not yet submitted progress reports, it is impossible to draw authoritative conclusions about the program performance at this time.
Parliamentary monitoring and program performance would be better served by a more consistent reporting regime with appropriate incentives to ensure timely and accurate progress reporting.
Thank you for time and patience as I work through these three complex issues. I would be pleased to answer questions from committee members.
Liberal
The Chair Liberal John McKay
Thank you, Mr. Page.
The first question goes to Madam Coady. You may take eight minutes, please.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Thank you very much.
Thank you and welcome to all of you for being here and for the outstanding work you do in helping parliamentarians be prepared. We certainly appreciate your efforts.
My first question goes to some of the frustration and what I would call a lack of respect for Parliament associated with not giving you the information. I noted, both in your report itself and as well in your commentary this morning, that you talk about not having the information you require to make the data available—not even being able to get a meeting, per se, with Corrections Canada. Would you care to elaborate on that and the impact that it had on your study and the impact it has on Parliament?
Parliamentary Budget Officer, Library of Parliament
The impact it has for our study is that it prolongs the amount of time required for us to prepare the analysis for parliamentarians. I think the impact it has for Parliament is that Parliament doesn't have the benefit of having financial information when they're debating policies.
It is true that we requested meetings with CSC officials. It's also true that our meetings were cancelled on the day of those meetings. As a result, what we were forced to do—and were able to do—was work with many of our colleagues in the correctional services facility at the provincial level, where we did get a lot of help. We got a lot of help from Statistics Canada as well in doing our study. We also had a very strong peer review panel, which helped make up some of the difference.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
It certainly is a challenge for us as parliamentarians, and I think it shows a lack of respect.
Mr. Chair, I'd like to ask that under the study we're doing now we request the cost estimate for the Truth In Sentencing Act, including the key assumptions, the sensitivity analysis, and the budgeting models that were used. If we could have that for this committee, I think it would be helpful. I'd like to ask for that from the department.
Thank you.
I'd like to also talk a bit about the impact on the report on planning and priorities. I see and I'm assuming that clearly not enough has been budgeted; that there is a challenge with the accuracy of the government's numbers. You talk about the spending growth and what, in your analysis, you thought was going to be required and, not even having the information you required, about being able to make some estimates that a tremendous amount of money will be required. We know that the average spending growth in this department is going to be about 12.8%.
Can you give us an overview of what you think are going to be the numbers the growth in this department will require? And comment about whether or not you think the estimates for the department are clearly adequate and whether or not they're accurate.
Parliamentary Budget Officer, Library of Parliament
One of the shortcomings, we feel, of the 2010-11 report on plans and priorities for Correctional Services Canada is just a lack of information as to what is included in the estimates for the department. There's very little mention of Bill C-25 in the 2010-11 report, so we have no information as to whether or not they've provided some provision for the impact of that bill, the Truth In Sentencing Act, in the estimates.
Having said that, there still is massive growth, as you've noted—an almost 13% annual increase. In 2011-12 and 2012-13 we're talking about a 23% increase in financial resources, and for those same two years a 25% increase in human resources, and—if you break it up with some of the components over the three years—as a planned spending for custody a 47% increase.
So we see a lot of money being set aside; however, when we do our estimates—and we've taken account of the fact that we're talking, as a result of the act, about an additional 3,800 head counts in the system—using data from Correctional Services Canada, we still feel that even with the significant growth of roughly 25% over the next two years, it's significantly short by roughly a billion dollars a year, which would effectively add almost another 25% growth to the overall reference level.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Thank you very much.
It concerns me when I hear that there's very little mention of Bill C-25and that you're concerned about those numbers. Certainly we'd like to have accurate numbers and have those things considered.
Did you consider as well in your analysis some of the load impact upon the courts? I'm thinking here of the demand on the justice system to now move very expeditiously and the costs we may have to incur because people will no longer want to be remanded waiting for sentencing but will want to have their court case moved up. Did you consider that load factor?
Parliamentary Budget Officer, Library of Parliament
When we do our calculations and our costing, we basically do these calculations very much as the Department of Finance will do them: on a status quo basis. We do not assume additional load or behavioural impacts beyond what we would normally see in the system.
Having said that, in our report we have a number of pages that highlight the complexity of the system, how the system may provide different behavioural-type changes as a result of the law. But we make no cost assumption for it.
What we do highlight in the report, though, is that there will be significant cost to the provincial-territorial correctional system, and we provide some estimates overall on a fiscal requirements basis of the overall increase over the next five years.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Could you elaborate on those impacts to the provinces, please? I'm more looking at the operational cost impact in the provinces and territories. You mention this throughout your report as being a serious concern of yours, and I'd like to have a little more of your analysis.
Parliamentary Budget Officer, Library of Parliament
As part of our report.... I think we have it in the annex, but on page 12 of our report, in section 3.4, we provide figure 3-C. I apologize for all the information. We have annual expenditures in 2009-10 for the total system—this includes federal and provincial-territorial—amounting to about $4.396 billion. That's for 2009-10. The split is roughly 49% for provincial-territorial and roughly 51% at the federal level.
When we project forward, looking at the total funding requirement based on a more detailed, peer-reviewed model, up to 2015-16 we see the total fiscal requirement for the whole sector—provincial, territorial, and federal—growing to $9.457 billion. And we see some changes to the shares: the provincial-territorial share will rise from 49%, as I said earlier, to 56%—so provincial-territorial expenditures will go from $2.150 billion to $5.289 billion—whereas the federal share will actually fall from 51% in 2009-10 to 44% in 2015-16.
There's a fair bit of elaboration in the report as to the relative parameters of our system, and I think you will see in some of the background data that the provinces and the territories carry a heavy part of the load of our correctional system in Canada.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
That's a staggering comment, especially when you factor in—and as you noted, you don't factor in—the cost of land, the preparation of land, and those types of things. You have to add that on top. Then, if we have to move more expeditiously in court, there's a cost to that as well.
So we didn't get really accurate figures in the budget, and we didn't get enough information really for you to even delve further. I think those are two faults that we could see here.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
For my final question, I want to move to the infrastructure projects. I know you're going to give us an update, but in your opinion, how many of the infrastructure—
Liberal
The Chair Liberal John McKay
You're going to have to hold that question, because you have hit your eight minutes.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Oh, I thought you said I had one more question. I'm sorry.
Bloc
Diane Bourgeois Bloc Terrebonne—Blainville, QC
Thank you, Mr. Chair.
Good morning to you, Mr. Page, and to your staff. It is always a pleasure to have you here. When you came to see us last April, you lamented that you were not able to have all the necessary information in order to help parliamentarians to get their work done. Based on your speech from today, I see that the situation has not changed. Is that correct?
Bloc
Diane Bourgeois Bloc Terrebonne—Blainville, QC
It is true.
Last April, you came to meet with us so that our committee would ask the Treasury Board to submit the fiscal framework projected and approved, as well as a list of requests.
But that list could not be produced, Mr. Chair, since the Rahim Jaffer affair had to be handled. So I would like to introduce a motion today in both official languages that outlines Mr. Page's request of last April, which is still current and appropriate.
If you wish, I can read it slowly or we can let you, Mr. Chair, read it, or our clerk could read it. It is the motion we wanted to introduce last April 12 to help Mr. Page to do his work and then to tell us what is happening.
Liberal
Bloc
Diane Bourgeois Bloc Terrebonne—Blainville, QC
No, I am moving the motion right here, right now. It is written in both official languages. I am moving the motion because it is crucial that Mr. Page can do his work and provide us with the appropriate information.
Liberal
The Chair Liberal John McKay
I'm assuming you don't wish to detract from questioning time, so is it your intention at this time to move the motion but not have it debated?
Bloc
Diane Bourgeois Bloc Terrebonne—Blainville, QC
I want it to be adopted, Mr. Chair. Whether debated or not, it is crucial to adopt it so that we can get the information.
At the time, Mr. Page was asking for all the information that he was not able to provide us with. It is exactly the same information because he works with forecasts.
Liberal
The Chair Liberal John McKay
I understand the intention of your motion. I'm just trying to schedule discussion of the motion. My suggestion would be that we discuss the motion at the end of the meeting. Do you think that would be appropriate?