Evidence of meeting #98 for Transport, Infrastructure and Communities in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was projects.
A recording is available from Parliament.
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Negash can probably speak to that in more detail. He was the point person in coordinating them.
Negash Haile Research assistant, Office of the Parliamentary Budget Officer
We contacted 32 departments, sub-agencies, and the crown corporations, and we provided them with a spreadsheet for them to fill out. They filled out that information to the best of their ability and provided that information back to us.
Liberal
Vance Badawey Liberal Niagara Centre, ON
I have a quick question with respect to the responses you got, as mentioned earlier. Is that normal going back years? Is that normal with respect to the reporting nature of the departments?
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Negash has been with our office for a shorter period of time than me—an office I have been at, for better or for worse, since it was created in 2008—and I would characterize it as not being normal for us to submit an information request for data that departments and agencies are supposed to be tracking and have available, and for us, to give them five weeks to respond with pre-existing data that, for the most part, is non-confidential in nature, and not normal for many departments and agencies, some of which have several thousand employees, not to be able to respond in a timely way.
Liberal
Vance Badawey Liberal Niagara Centre, ON
On the comments earlier about a sustainable funding envelope, with a lot of the funds now being diverted to the gas tax fund, do you find that more advantageous and more sustainable for municipalities to take advantage of it within their three, five, or 10 year plans versus the way it's been distributed both by the last government as well as the current government?
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Again, it's not for us to opine upon the instrument choice, but a point that we made in the past, which echoes a point that you've made, is that you are looking at longer term assets. While it's nice for the federal government—and here I'll paraphrase one of the provincial governments with whom we consulted—to show up at the door with a big bag of money, as the person who has to take the big bag of money, let contracts, identify projects, and actually spend the money, what I want to know is that you're going to be there 12 months from now with the same big bag of money, and 12 months after that, and 12 months after that.
You're not simply planting a flower garden; you're building infrastructure that's supposed to last. It will take multiple years to build, and then it's supposed to operate for an ongoing period of time.
Liberal
Vance Badawey Liberal Niagara Centre, ON
So the establishment of the gas tax in the first place—and I think, Madam Chair, you were part of that establishment, if I recall—is to advantage the concept. It is advantageous for infrastructure pointing long into the future versus the current.
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Speaking from a capital budgeting, purely accounting perspective, absolutely. When you're drawing together your capital budget with respect to your various infrastructure assets that you're going to hold over a longer term period of time, you need some degree of certainty with respect to the cash flows that are coming in to plan properly.
Liberal
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
I think that providing the provinces and municipalities with certainty with respect to funding flows and being able to plan around that is essential—again recognizing that 90% of the $80-plus billion that is spent every year on public infrastructure assets is not spent by the federal government, but by provinces and municipalities.
Kelly McCauley Edmonton West, CPC
Gentlemen, welcome. It's wonderful to have the PBO with us.
There's been a lot of criticism of the government about not providing a plan, a strategic plan. We've heard that from, I think, the C.D. Howe Institute, the PBO, and the Senate as well.
I'm wondering what the government has provided you longer term over the next, say, five or 10 years. Have they provided numbers for intended spending or what they have committed?
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
About a month ago, as part of our issues note on budget 2018, we identified what I'll call an information gap with respect to the 12-year plan. We did follow up with the Department of Finance to ask for details with respect to the timing of the flows of close to $60-odd billion out of the $187-billion plan.
The Department of Finance provided us with assurances that we should be receiving something—potentially coincidentally—before we appeared before the House of Commons finance committee.
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
We do have aggregate totals, but in terms of being able to break that down across the categories of the funding sources.... Thinking of the $187 billion plan as part of the pre-2016 programs—
Edmonton West, CPC
What I'm getting at is there's a lot of lapsed funding. On page 324 of the budget, it shows the five-year, six-year program for operating expenses. Over that period it's showing an 11% drop in GDP on operating expenses, where this infrastructure money will come from.
On page 13 of the budget, it talks about some drops that the government accredits to changes in departmental outlooks. Is it possible that any of this is from infrastructure money that has been planned but will actually just disappear and not get spent?
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
In terms of revisions to the forecast around infrastructure money, based upon the experience from 2002 up to today, one would anticipate that it's probably the easiest bet in town that there will be future lapses in infrastructure money.
At the same time, based upon our own analysis of direct program expenses and the operating line, we do have the view that most of the compression with respect to operating expenses over the next five years will have to do with the valuation around changing interest rates, and the changing valuation around employee pension benefits and other related benefits.
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Right.
But keep in mind, of course, it is a forecast, and forecasts are inevitably wrong.
Edmonton West, CPC
Right.
The Senate national finance committee said there's no national, strategic plan for the infrastructure spending, and their comment is that the only metrics that Infrastructure Canada uses to measure the success of projects is how much we're actually spending.
Do you agree with that assessment from the Senate that the current infrastructure spending is more focused on just saying that we spent this, rather than that we spent this on items of value to Canadians and to taxpayers, or for increased productivity?
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Again, as part of our testimony to the Senate national finance committee, and actually to this committee as well last year, we noted the need to match up the dollars with results. That's something the government did very cleanly and clearly as part of budget 2016, which is part of the motivation around actually tracking the economic stimulus impacts.
In budget 2016, the government brought out phase one, showed how much it was and that it would be rolled out over this period of time, and noted the shorter term economic benefits. They also indicated that there would be longer term benefits around productivity. With respect to the identification of those productivity benefits, or the linkage around specific projects related to phase two, we haven't seen any of that yet, but it's certainly something that we're looking for.
Edmonton West, CPC
Have they committed to providing that?
One of the reasons I ask is that we looked at the infrastructure spending on Alberta and thought that we'd done all these projects. Look at the projects: ashtrays at bus stations; new glass on bus stations; new collection bins for buses. It's not the actual infrastructure that's being expanded to improve productivity or improve people's lives. Again, it's more a case of, “Hey, look, we did a thousand projects. Aren't we great?” But it's not actual stuff improving Canadians' lives.
Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
Again, for us, and looking at this report in particular, phase one was focused around short-term economic stimulus while phase two was focused on the longer term productivity impacts. As part of phase two, as more details are provided and agreements are signed with provincial governments, it's certainly something that we're going to be looking at. I think, more importantly, potentially, from the perspective of parliamentarians, before that money is actually appropriated, obviously one would want details with respect to how it's going to be spent and what anticipated results are going to be achieved.
Edmonton West, CPC
Just quickly, how much risk do we face from inflation? We hear of lapsed funding, and I understand it's difficult to get the projects done. If we're lapsing at two or five years down the road, how much of this fabled $180 billion will actually get whittled down through the cumulative effect of compounded interest?
