Evidence of meeting #56 for Public Safety and National Security in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was costs.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kevin Page  Parliamentary Budget Officer, Library of Parliament
Sahir Khan  Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Ashutosh Rajekar  Financial Advisor, Office of the Parliamentary Budget Officer, Library of Parliament
Don Head  Commissioner, Correctional Service of Canada

8:50 a.m.

Conservative

The Chair Conservative Kevin Sorenson

Good morning, everyone. This is meeting number 56 of the Standing Committee on Public Safety and National Security, of Thursday, February 17, 2011.

Today we are commencing a study of the expansion of penitentiaries. We will hear from the Minister of Public Safety and from Correctional Services of Canada a little later on this morning, but in our first hour we will hear from the Library of Parliament.

We welcome Kevin Page, the Parliamentary Budget Officer. He is accompanied by his officials, including Mostafa Askari, assistant parliamentary budget officer for economic and fiscal analysis; Sahir Khan, assistant parliamentary budget officer for expenditure and revenue analysis; also, I believe Ashutosh Rajekar, financial advisor, will be here as well.

Our committee wants to thank you for appearing before us today. I understand that the Parliamentary Budget Officer has some opening statements. Then we will proceed into a round or two rounds of questioning.

Mr. Page, welcome. The floor is yours.

8:50 a.m.

Kevin Page Parliamentary Budget Officer, Library of Parliament

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.

9 a.m.

Conservative

The Chair Conservative Kevin Sorenson

We'll now proceed to the first round of questioning.

Mr. Holland, please; you have seven minutes.

9 a.m.

Liberal

Mark Holland Liberal Ajax—Pickering, ON

Thank you, Mr. Chair.

Mr. Page, to you and your office I have to say a tremendous thank you. I don't think we would have a debate in this country over the legislation that's in front of us, were it not for your work in creating a debate around the costs.

I'm particularly concerned about this. I'm going to go over this just to illustrate the point.

On February 15, 2010, the public safety minister said, referring to Bill C-25, with its two-for-one remand credit:

We're not exactly sure how much it will cost us. There are some low estimates, and some that would see more spent—not more than $90 million.

Now, as you know, some two days later, on February 17, news stories broke that your office would be undertaking a study, at my request, of Bill C-25, and overnight the minister said, well, it's not really $90 million; it's $2 billion. Then, of course, your report some eight months later came out and said it's not $2 billion, but $5 billion federally and maybe $5 billion to $8 billion provincially.

We have 24 bills in front of us right now, and I can go through all the numbers, but I think that would take too much of my seven minutes. How imperative do you think it is for Parliament, in weighing its decisions, to have the costing information on each of those bills and particularly to see the background information to assess the veracity of it, particularly given the experience with Bill C-25?

9 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

The short answer to the question is that it's always imperative for parliamentarians to have access to financial information and analysis before they approve new financial authorities. Specifically, in cases where we know the costs are going to be material, parliamentarians need to see it when they're looking at new legislation, and I think it also needs to be highlighted in budgets or fiscal updates as we adjust the fiscal framework for these higher fiscal costs.

9 a.m.

Liberal

Mark Holland Liberal Ajax—Pickering, ON

To get to those costs, my understanding was it took about eight months and about one-third of your office resources to go after that. If there had been cooperation when you requested documents, if the government had responded when you requested information that it had available, and if you didn't have to build statistical models to re-create it, how long do you think that would have taken, and how much less work would it have been?

9 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

If we have access to departmental methodologies, assumptions, and data that's not cabinet confidence or personal in nature, I think it would cut the cost down. It would be a fraction of the cost. It would certainly take less than half as much time.

When we don't have access to these methodologies or even to departmental expertise, we have to go elsewhere. In this case, we went elsewhere. We went to the provinces, or we went to people who are experts in facility management or experts in building these types of operational models.

9 a.m.

Liberal

Mark Holland Liberal Ajax—Pickering, ON

The Minister of Public Safety has repeatedly attacked your figures publicly and in the House, but I have not seen him forward any substantive information to challenge those numbers.

Has there ever been a discussion in which the minister has said “Here's our data set and here's why we disagree with you; this is the information and assumptions we're using, and here's where you made your mistakes”? Have they ever done anything like that?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

No, sir, we have not seen any paper that actually lays out their methodology and assumptions. Again, differences in assumptions can mean very different rates in these costing numbers. We highlighted with great effort in our paper the list of assumptions we're making.

For example, assuming static status--for instance, the continuation of current occupancy ratios in prisons when we do our costing, or no behavioural impacts with respect to other aspects of the system--can have a big impact on the ranges of cost. But we have not seen that type of information.

9:05 a.m.

Liberal

Mark Holland Liberal Ajax—Pickering, ON

Has there ever been an instance in which either the minister or someone in the department pointed to one of your assumptions and said that you were way off base because of x, y, z? Have they ever pointed to anything specific in their criticism, or has all the criticism you've heard just sort of been at 30,000 feet--we don't like your numbers, but we're not going to tell you why?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

We've seen public statements with respect to, as you've said, gross numbers--$2 billion over five years--and public statements from the minister and the Commissioner of Correctional Services Canada with respect to the additional number of head counts, which actually aren't that far off from what we're suggesting. Again, we've not seen any analysis underneath it.

We've also heard public statements with respect to policy on what we would call “occupancy ratios”. We assumed in our calculations a continuation of roughly a 90% occupancy ratio, which we've seen in federal-provincial facilities over the past ten years. If the government is willing to tolerate or adjust and go to a much higher double-bunking or triple-bunking, which does exist in some cases in the provinces for different security situations, that has an impact on the cost. It's more operational and less construction.

9:05 a.m.

Liberal

Mark Holland Liberal Ajax—Pickering, ON

Is it fair to say that now, after many months have passed since you tabled the report on Bill C-25, you stand by the numbers you presented at that point in time, and Parliament should still consider the numbers you presented to be, to the best of your office's ability, accurate?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

I think the report that Ashutosh Rajekar, Ramnarayanan Mathilakath, and Sahir Khan have prepared is still our best effort at what we can do with respect to that specific legislation, in terms of both building models and peer-reviewing these models.

Again, what's really important are those assumptions. If we had more transparency, if methodologies were not a cabinet confidence, if assumptions were not a cabinet confidence, then we could reconcile our numbers. We would still be lacking the overall paper, but we could provide better reconciliations for you--for example, why the budget office has this number and why Correctional Services Canada is saying a different number.

9:05 a.m.

Liberal

Mark Holland Liberal Ajax—Pickering, ON

I understand there's a range, because the government is stonewalling you and trying to block you from getting information just as it's trying to block both Parliament and Canadians. Would it be fair to say that the range you provided, which is $5 billion for the federal government, $5 billion to $8 billion for the provinces, and a cumulative figure of $10 billion to $13 billion, would make it almost impossible to believe the number the minister is purporting of $2 billion in total? Do you see any way that number could be remotely feasible?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Again, in the context of a number that could be as low as $2 billion over the next five years, I think it would be based on an assumption that occupancy ratios would be allowed to rise dramatically from where they are right now. We would be putting multiple people into these cells.

I think our analysis would suggest that Correctional Services Canada, as we move through the meetings, will be under significant operational fiscal pressure.

9:05 a.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you, Mr. Page.

We'll now move to Madam Mourani. Madam Mourani, go ahead for seven minutes, please.

9:05 a.m.

Bloc

Maria Mourani Bloc Ahuntsic, QC

Thank you, Mr. Chair.

Thank you to all our witnesses today. Mr. Page, I have a few questions for you.

You say that the estimated cost—you are not quite sure of the exact figure, and I understand full well that you are dealing with approximate data—is 1 billion dollars per year over five years. Does that 1-billion-dollar figure per year represent the cost of all bills? Did I understand correctly?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

We mentioned the 1-billion-dollar per year amount, but in this context, there is an operating cost and a construction cost. And when you calculate the amounts over five years, that comes out to over 5 billion dollars, including 3 billion dollars over five years in operating costs and close to 2 billion dollars in new construction over the same period.

9:05 a.m.

Bloc

Maria Mourani Bloc Ahuntsic, QC

Very well.

Yes, go ahead, Mr. Khan.

February 17th, 2011 / 9:10 a.m.

Sahir Khan Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament

I simply want to add that these costs are simply those related to Bill C-25. The 3 to 5 billion dollars in costs only cover Bill C-25.

9:10 a.m.

Bloc

Maria Mourani Bloc Ahuntsic, QC

Therefore, you say that it will cost 1 billion dollars a year. Correct?

9:10 a.m.

Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament

Sahir Khan

We are talking about 1 billion dollars per year.

9:10 a.m.

Bloc

Maria Mourani Bloc Ahuntsic, QC

What is the CSC's current budget?

9:10 a.m.

Ashutosh Rajekar Financial Advisor, Office of the Parliamentary Budget Officer, Library of Parliament

This year, it has a budget of close to 2.4 billion dollars.

9:10 a.m.

Bloc

Maria Mourani Bloc Ahuntsic, QC

Is the budget approximately the same from year to year?