Thank you, Mr. Chair.
Good morning, Mr. Chair, Vice-chairs and members of the committee.
Thank you for inviting me and my colleagues to speak to you today about estimating the funding impacts on the federal corrections system from changes to crime legislation, notably PBO work with respect to the TSA, the Truth in Sentencing Act, or in French la Loi sur I'adéquation de la peine et du crime, la LAPC.
I will structure my opening remarks in four parts: key messages, the PBO approach, a framework for analysis, and questions for the Minister of Public Safety that committee members may wish to ask.
I have a few messages.
The first message is that significant amendments to the Criminal Code that impact Canada's correctional system, such as TSA, the Truth in Sentencing Act, carry significant fiscal costs. PBO's estimate of the cost for TSA at the federal level is about $1 billion a year over the next five years, assuming status quo occupancy ratios: approximately $620 million a year for additional operating and maintenance and capital expenditures, and $360 million per year or $1.8 billion over five years for new construction.
The second point is that parliamentarians have not been provided with sufficient fiscal transparency to carry out their fiduciary responsibilities with respect to changes in crime legislation. In the case of the TSA, parliamentarians were advised by the government during review of the draft legislation that estimated costs were a cabinet confidence. Estimated costs were revealed by the government only after the draft legislation became law, and the estimate did not include disclosure with respect to methodology and key assumptions.
Parliamentarians do not know whether the fiscal planning framework fully reflects the cost pressures generated by changes in crime legislation. Neither Budget 2010 nor the fall economic and fiscal update highlighted the fiscal impacts. The 2010-11 report on plans and priorities of Correctional Service Canada indicated double-digit growth in its reference level over the next three years and the additional requirements of 4,000 more employees, but only referenced the Truth in Sentencing Act as a risk of funding pressure to be managed.
Point number three is that changes to the Criminal Code such as those in the Truth in Sentencing Act will have significant operational and cost impacts on correctional institutions and services in provincial and territorial jurisdictions. The federal government may wish to inform other jurisdictions of the estimated fiscal impacts.
The PBO approach to estimating funding requirements and impacts is to build costing methodologies and models. In the case of the TSA, we examined changes to stays, flows, headcounts and costs (operations and maintenance, life cycle capital costs and new construction costs). Like the Department of Finance, the PBO focuses on static costing—we extend current realities like occupancy ratios and do not examine potential behaviour type changes.
PBO uses peer review and assistance. In the case of the TSA, the panel consisted of nine experts from the corrections system, facility management and financial and statistical modeling.
For the TSA, PBO built and utilized two models. A simple financial model is used to respond to the question: “what if the Act was in place in 2007-2008?” Using existing data, we know that about 8,600 inmates were admitted with an average stay of 560 days in custody. We estimate that the TSA would add about 30%, or 160 days to the average stay. This translates into an increase of 3,800 average headcounts (a number similar to the estimate provided by the Commissioner of Correctional Services Canada). Using public numbers to calculate operating and maintenance and capital per inmate and construction costs per cell, we can quickly come to fiscal impacts of about 1 billion dollars per year (operating and construction) over the next five years, assuming a continuation of existing occupancy rates.
PBO also built a three-phase probabilistic simulation flow model to estimate the financial impact from increased sentence length and number of people incarcerated that detailed inmate profile and operational implications. This model highlighted similar financial implications as well as a requirement to build as many as 13 new buildings with traditional cell capacities.
PBO has a small team. We need to pick our priorities carefully so that our work can be relevant and authoritative; PBO cannot be the first data point on costing all new legislation from the federal government. In response to a request from a member of Parliament, PBO focused on TSA because there was systemic risk, as Parliament was not provided financial analysis, and there was material risk, as significant changes to crime legislation can have significant fiscal impact. While the PBO is prepared to provide original methodologies and estimates, it is better placed, given the size of the office, to examine methodologies and to provide tests of reasonableness and risk assessment around government estimates. In analyzing the impact of new crime legislation, parliamentarians may find it helpful to utilize a simple framework for analysis, as follows.
One, parliamentarians may wish to know the estimated impact of any crime bill on the daily head count in correctional facilities. This head count is proportional to the inflow and outflow rates of inmates in and out of facilities and the amount of time they spend within.
Two, parliamentarians may wish to know the estimated impact of any crime bill on ongoing per-inmate costs. These costs vary by inmate status—for example, incarcerated, day parole, etc.—and by security classification, such as, for example, low, medium, high, and women. Using public documents over preceding years, the average cost of an inmate is about $160,000 per year, but these costs vary significantly from about $40,000 for an inmate on parole to about $220,000 per year for a man in maximum security.
Three, parliamentarians may wish to know the estimated impact of any crime bill on the increased requirement to build new cells. These costs vary by a number of factors: prevailing market construction costs, security type, land, site development, procurement costs, etc. CSC Commissioner Don Head has indicated in Senate testimony that the cost of constructing new accommodations amounts to $200,000 for a low-security cell, $400,000 for a medium-security cell, and $600,000 for a maximum-security cell.
Four, parliamentarians may wish to know the impact of any crime bill on the affected population: remanded versus sentenced, low versus high security profile, specific age groups, regional occupancy situation, federal versus provincial/territorial situation, and also the impact on administrative caseload. All of these can have an impact on financial cost and create risk relative to correctional objectives.
Concerning some questions for the Minister of Public Safety in closing, I wish to reiterate that for parliamentarians to carry out their fiduciary responsibilities with respect to the approval of financial authorities, it is essential that government provide adequate and timely financial information and analysis on the fiscal impacts of new legislation before the legislation becomes law. For all new crime legislation, parliamentarians may wish to ask the Minister of Public Safety what the impact will be on daily head counts, on ongoing per-inmate costs, on requirements to build new cells, and on the affected population, and also, if required, on provincial and territorial costs.
Thank you for the opportunity to serve this committee. We would be honoured to address your questions. Thank you, Mr. Chair.
