Government Operations Committee on Nov. 26th, 2013

[Bill Matthews]

Mr. Chair, it's a bit of both.

You have cases like Shared Services Canada.

Of their lapse, a good portion of that was planned. They had a reduction that they had to make.

There are other cases where programs are very much demand-based. Agriculture is an example where we're offering insurance programs, and the department does a forecast of what they think the take-up of their program will be, but sometimes it's not as high as expected.

I mentioned Natural Resources Canada is another example, and Veterans Affairs. Veterans Affairs is very much driven by how many applicants they have for their programs. So those are a bit different. They are very much demand-based.

Then you do have the odd project where there are simply delays. Bridges are complicated and sometimes there are delays in spending, so the forecasted spending has been greater than the actual spending.

As you mentioned, there is a theme here of under-spending, which is good. Overspending is a bigger problem. I'm pleased to say there are no cases of departments exceeding their vote. But you really have to get down department by department to understand why they didn't spend their money because there's not one reason government-side.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

The supplementary estimates (B) show VIA Rail is requesting $97.9 million for bridge rehabilitation, signalling systems and track improvements to enhance the safety, efficiency and effectiveness of operations. In the French version of supplementary estimates (B), it's on page 1-7.

Can you tell me whether that amount was allocated after the accident in Ottawa between a bus and a train in which a number of people lost their lives? Or was the amount allocated before the incident and adjusted afterwards because it was an emergency situation?

[Bill Matthews]

Thank you for the question.

For the benefit of the other members, I believe it's on page 1-7 in the English version.

What was the French page?

Page 1-7 in the French as well.

What I will say is two things.

The operating requirements in vote 60, so $54.7 million, flow directly from budget 2013. So that was already in the works.

I'll turn to Marcia to talk about the capital requirements.

[Marcia Santiago]

A portion of the capital requirements was also part of budget 2013 and another part of it, $43 million, is reprofiled from previous years related to delays from other capital projects.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

My next question concerns the natural disaster that occurred in Alberta and the Lac-Mégantic tragedy. You said several million dollars were committed to Alberta. I can't recall the exact number. Can you tell me what the amount was for Lac-Mégantic?

[Bill Matthews]

In the case of Lac-Mégantic, I would point out two things.

In July, the government announced $60 million to be spent. The provincial government put up an equal amount. The $60 million in federal money from July was $25 million for response and recovery, search and rescue, things like that, and then there was an additional $35 million that was provided that is targeted for the Economic Development Agency, Quebec, that is around economic revitalization of the region. That's the other $35 million. That gets you to $60 million.

And on November 21, more funding was announced,

$95 million to help pay for the cleanup, the environmental cleanup itself, which is an ongoing effort. I believe they've estimated that about 40% of that cleanup is done. I believe both the federal and provincial governments are cost-sharing that cleanup. The actual railway company itself only had about $25 million in liability insurance to put towards that cleanup, so the federal government and provincial government are taking on additional amounts.

That $95 million is not in supplementary estimates (B). It was just announced in November, so you will see it in future supplementary estimates.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you.

Mr. Komarnicki, you have five minutes.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Thank you, Mr. Matthews.

I have a few questions, particularly relating to the Treasury Board vote 30b relating to $955 million for “Paylist Requirements”, and that's in relation to “allocations to eligible departments and agencies for the payment of accumulated severance pay benefits”.

I know in the private sector severance obligations arise when someone's dismissed for a cause, but I gather the collective bargaining agreements provided for severance in cases of retirement and/or, I suppose, resignations, so it's something quite different from what we see in the private sector.

You would agree with that?

[Bill Matthews]

I would agree with that. I can't say it's completely unique to the public sector, but it is certainly not normal in the private sector, I would agree.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

So this $955-million allocation, is that the obligations you anticipate in one fiscal year for all departments across the government, or is it a go-forward figure as well?

[Bill Matthews]

It's two things. It's only for the fiscal year, and so it's an estimated payout.

If you permit, Mr. Chair, there is some history here.

The collective agreements—and I'll generalize—had a clause that basically said for every year you work, you accumulate a week of severance, and that severance would be applied whether you were retiring, departing voluntarily, going to the private sector, and when you left you would effectively get those funds.

As the collective agreements have expired, we've been negotiating away the accumulation of severance, but it was important to the government to honour what had been earned to date. You can't backtrack on what had already been earned. For those collective agreements that have negotiated out the severance, employees were given a choice. They could take their money now or they could wait until they retire or they could do a mix. The $955 million is what we're estimating will actually flow out the door this year based on employees cashing out.

To date, we have now negotiated away severance in all of the collective agreements in the core public service. So the negotiation piece is done, but there will still be cash flowing out for a number of years as we go forward.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Do you anticipate the $955 million to be a constant kind of thing going forward? Or would it be increasing? Decreasing?

[Bill Matthews]

No, it will be decreasing. Now that the agreements are all done, we've probably hit the peak, so I expect it will decrease. But there are some people who have elected to not cash out until they retire. To date, about 70% of people are cashing out as soon as they can. The balance are electing to wait. So there will be money that flows over time, too.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

In terms of negotiating out that provision, the collective agreement, in terms of what you've already done, what's the amount of savings you might anticipate for year one, let's say, the year in question here, 2013-14?

[Bill Matthews]

The savings are difficult to estimate simply because employees could choose to actually hang onto their money until they retire, and then there's an interest obligation, I believe, on top of that. But, basically, employees were getting one week of pay for every year they worked. To negotiate that away, it's hard to put your finger on. But the unions knew they were giving up something, so they pushed for an increase in pay to get rid of that. So I can't speak to exact dollars.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

You can certainly say, for year one by having negotiated a certain percentage of contracts this would be the savings for that direct line item for this year.

[Bill Matthews]

No, it's difficult to say because, think about it this way, if you're a brand new public servant, you're at an entry-level position, and you earn a week's worth of severance, and then 20 years later you rise up to a level that's much more senior, you're cashing out at a much more senior level when you actually cash out. You're not cashing out at the rate you actually earned the severance, so it is very difficult to say what the savings are.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Let me put it another way, if you were to negotiate out the severance except for, let's say, just-cause dismissals, but not in case of retirement or in the case of resignations, if you were able to negotiate those out, what might be the anticipated savings in dollars, generally going forward, knowing how many collective bargaining agreements you have and how many employees it would affect going forward? Of course you would start at zero on day one, but going forward over the next three or five years, there must be an anticipated savings that you have in mind.

[Bill Matthews]

There are definitely savings. I'm reluctant to put a dollar amount on it because it's complicated and I don't want to oversimplify it. But if you think about the wage bill for the Government of Canada, on average employees earned about a week a year of severance, but there was a maximum. The wage bill for the government on an annual basis is about $30 billion, so if you took one over 52, that gives you a number. But again, you have to factor in how employees get promoted and there is a maximum that employees reach where they no longer accumulate. So it depends on whether you're dealing with someone who is a long-time public servant or a new one. It is very difficult to actually put a dollar figure on savings.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you, Mr. Komarnicki.

I will now turn the floor over to Mr. Byrne for five minutes.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you very much, Mr. Chair.

I want to go back to the line of discussion regarding lapsed funds, and what the PBO is suggesting is sort of a systemic or patterned process of lapsing funds. You mentioned that there are some things that are one-off, that are incidental and occasional, but there also seems to be some evidence that the practice is occurring in mature statutory programs as well, such as the guaranteed income supplement in OAS.

I've noticed lately that the estimates have predictably predicted a certain amount of expenditure for old age security and GIS. That's a pretty mature program in the sense that it's not very difficult, or it should't be very difficult, to anticipate uptake based on simple demographic trends. A couple of years ago we had basically lapsed about 5% of the GIS and probably 4% for the OAS. Historically, I've looked at the numbers and we've actually budgeted more over the last 10 years and required funds to be lapsed over seven of those 10 years,

The money may not be a whole lot of money when you think of it as 4% or 5%, but these are not small-ticket items, this is $27 billion a year for old age security and about $8 billion or $9 billion for GIS. Has the Treasury Board looked at that which I am now preaching to you and suggested that it's a problem? Or do you not identify that as a problem?

[Bill Matthews]

These are statutory programs, as the member mentioned. They are old age security and GIS. The amount you would see in the federal budget and then in estimates is for information purposes only, so it's not lapsing, as in unspent. There is a number that is estimated and I would say my colleagues in Finance are a little on the conservative side in that they typically will forecast a little extra. That is a trend with statutory spending. But I wouldn't view this in the same light I would view lapsed funding, where a department has authority to spend, has control over the program, and then is unable to deliver for various reasons.

Statutory spending is applicant-based. You're quite right the demographics are the demographics, but I wouldn't characterize statutory spending as being the same issue simply because it's an estimate that's provided based on the best information they have at the time. It's not like there was money left on the table. That is an entitlement program and they do their best estimate. Through the supplementary estimates process, if Finance looks at their estimates and they realize that it's in need of an update they will update the information for parliamentarians.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Would the Treasury Board monitor this and provide advice or even direction if a department is consistently doing this and it does seem outside of the norm?

[Bill Matthews]

Treasury Board looks at all spending, and we will look at voting more carefully than we looked at statutory, but when we provide our expenditure forecasting to Finance, it includes both, but we wouldn't necessarily tell Finance they need to adjust their estimates. It's a collective effort.

For most of the statutory programs, Finance actually tells us what the number is, and we are simply takers. If we do notice something, we would point it out.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I think the concern amongst Canadians and certainly among some parliamentarians is there is a political veneer to this, or a political lens in that we are now captured by a game of how big the deficit is going to be, and can we shrink the deficit. And if we actually lower the deficit beyond what were the original expectations, then it shows the government to be good fiscal managers.

I think that's really one of the concerns I might have. There may be an effort to inflate statutory spending, which is big-ticket spending, and then simply not use the funds, and then show the projected deficit wasn't as high as what it was first anticipated to be.

I'm not suggesting you comment on that, but what you're telling us is you don't actually police that behaviour. Treasury Board doesn't necessarily police that kind of behaviour.