Proceedings of the Standing Senate Committee on
National Finance
Issue 28 - Evidence - March 1, 2011
OTTAWA, Tuesday, March 1, 2011
The Standing Senate Committee on National Finance met this day at 9:33 a.m. to examine the expenditures set out in Supplementary Estimates (C) for the fiscal year ending March 31, 2011.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Honourable senators, I call to order this meeting of the Standing Senate Committee on National Finance.
[Translation]
This morning, we continue our study of the 2010-2011 Supplementary Estimates (C) that were referred to our committee.
[English]
This is the third and final set of supplementary estimates this fiscal year. In previous meetings, we heard from Treasury Board of Canada Secretariat officials, who provided us with an overview of these estimates. We also heard from officials from Canada Border Services Agency and Infrastructure Canada, who provided more specific details concerning their respective estimates.
In this final meeting on these supplementary estimates, we will hear from two other departments. In the first half of our meeting, we will focus on Veterans Affairs Canada, and in the second half of the meeting, we will turn our attention to Human Resources and Skills Development Canada.
In this first session, we are pleased to welcome, on behalf of Veterans Affairs Canada, Mr. Keith Hillier, Assistant Deputy Minister, Service Delivery; and Mr. André Joannette, Director General, Finance. Colleagues, we have one hour for our witnesses in this particular session. Your continued cooperation and understanding in regard to succinct questions will be appreciated. Likewise, I will ask witnesses to give us quick, sharp answers. Regardless, we are here to hear from you.
You have the floor and we look forward to your remarks, Mr. Joannette.
[Translation]
André Joannette, Director General, Finance, Veterans Affairs Canada: Mr. Chair, I am pleased to be here with you today to present the Supplementary Estimates (C) of Veterans Affairs Canada for the fiscal year 2010-2011.
On slide number 2, you will see that the department is requesting a budget adjustment of approximately $490 million, which will increase the total budget of the department to a little over $3.6 billion. The adjustment represents an increase of 5.5 per cent.
The Chair: An increase from what?
Mr. Joannette: It is an increase in the original budget that had been approved for the department. The department's budgetary adjustments are a consequence of decisions made by Treasury Board with regard to the allocation of new spending authorities.
Generally speaking, those decisions deal with the submissions to Treasury Board that were tabled following the Supplementary Estimates (B). In particular, we would like to draw your attention to four submissions. The first deals with the quasi-statutory program. Each year, the department prepares a report on its costs and the changing needs of its client. This is a forecast for the next five years. Each year's report is compared with the forecast from previous years. We analyze the variances and, if they are justified, we submit a request to Treasury Board to have our spending authorities adjusted.
In the current context, we have requested adjustments of approximately $179 million. These adjustments represent payments to veterans and their families; there are no requests for administrative support for the program.
Our second submission concerns the Community War Memorial Program. In the Speech from the Throne on March 3, 2010, the government committed to spending $5 million over five years on community projects related to the construction of new memorials or the expansion of existing monuments. This year, the request amounts to $250,000, with the remainder of the $5 million to be spent in subsequent years.
The third submission deals with our legacy of care. Here again, the government committed to providing specialized care to those veterans who are in greatest need and who have serious injuries. The $1.6 million funding, or spending authority, was used to hire 20 case managers.
Finally, there is the Agent Orange submission. Basically, that submission concerns a request to extend the original program that ended in October 2010. We have requested a program extension in order to receive other applications until June 30, 2011. A number of adjustments were made to the selection criteria, which Mr. Hillier will talk to you about later.
[English]
While I talked about four key submissions and their titles, they affect the different program lines. Slide 4 attempts to explain which programs are affected and the extent of those expenditures. You will see that your ex gratia payments, which are for Agent Orange decisions on spending authorities, have been affected by $11.3 million. Funding for the provision of vocational and medical rehabilitation — support to the New Veterans Charter — has increased by $9.2 million. There were enhancements to the case management, which is the Legacy of Care I just talked about, which increased our reference levels by $1.6 million. Disability awards and allowances increased the most, by $155 million or $156 million.
We have also increased our forecasts for VIP, the Veterans Independence Program. Earnings loss and supplemental retirement benefits were increased by $4.8 million. There is also the new program, the Community War Memorial Program, which I mentioned as well.
In all of those, we are talking about increases, but we did have decreases to our budgets as well. They were less significant; they were $2.2 million. Those are the result of cost constraint measures taken in the 2010 Budget, which related to not receiving funding for collective agreement increases from the central agencies. That amounted to approximately $1.9 million. Also, the minister's office budget was reduced by about $300,000, which is highlighted on the last slide.
With that, I would like to give it back to you and we can open the floor to questions. Either myself or Mr. Hillier will be happy to answer them for you.
The Chair: Thank you. I have some points for explanation before I go to my list of questioners: Regarding the increased funding for disability awards and allowances, is that because more people than you anticipated are asking, or have the rules changed and therefore more people are eligible?
Mr. Joannette: It is a combination of three things. We have more uptake in the program; more new veterans are coming in and applying. We also have an element of new conditions — veterans who came in in the past but are coming in for a second award. The third element driving the cost is reassessments. That is where they received an award for a condition and they are coming in for a reassessment of that condition to increase the award. Those three things are driving the cost.
There has been no expansion to the program driving this.
Keith Hillier, Assistant Deputy Minister, Service Delivery, Veterans Affairs Canada: To add to that, the other part of this — and this ties in with a question that came up when officials from the Department of Finance were here — is about the backlog and the question about when veterans will get paid. I would like to set the record straight and provides some facts on that into the record.
The Chair: That would be helpful.
Mr. Hillier: First, the backlog that is sometimes referred to was prevalent about a year ago. That would be in January 2010. The determination was that we had a service standard that a veteran would get a decision letter in about 24 weeks from making a completed application. We were not achieving that. A lot of effort went into things, and that backlog was eliminated by April 1, 2010.
The 24 weeks is not satisfactory. Therefore, the minister announced that we would be moving toward a new service standard of 16 weeks, starting April 1, 2011. I want to highlight that we are on track to achieve that. As of the end of January, 68 per cent of the applications that were coming in were receiving a decision within 16 weeks.
This ties in also with some of the financial issues that Mr. Joannette has highlighted. As of April 1, 2010, the work in progress — that is, people waiting for decisions — was 9,843 cases. At the end of February, just yesterday, that number has been reduced to 6,200. That is just in the last 11 months.
That is the downward trend we are working on. That has had an impact because we are getting the money into the hands of veterans faster by getting the decisions made faster.
The Chair: Are you doing that by hiring more people or by improving the productivity of those who are there?
Mr. Hillier: There are a number of things. The productivity is up by about 19 per cent. We have hired additional people and revised our business processes. We have informed veterans; we have had two articles in the departmental newspaper, Salute!, giving veterans more information about the type of information we need to be able to move forward with an application. We have made some minor investments in technology as well, although more needs to be done.
No one silver bullet created this. It was a combination of more people, better business practices and some investment in technology.
The Chair: Mr. Joannette, we were talking about the increased funding for disability awards and allowances of $155 million in the Supplementary Estimates (C), which seems like quite a bit. You explained the increase, but are we talking only about new veterans who are eligible for awards and allowances under the New Veterans Charter, or are we talking about older veterans as well within that rubric?
Mr. Joannette: In this line object, we are talking only about the New Veterans Charter and Canadian Forces members accessing these new programs.
The Chair: Yes, and newly retired Canadian Forces members, but those eligible under the New Veterans Charter, which has been in place now since 2006?
Mr. Joannette: Yes.
Senator Murray: The information is probably here somewhere, but I just cannot find it. You are coming with Supplementary Estimates (C). Did you come to the well at Supplementary Estimates (A) and (B)? If so, for how much?
Mr. Joannette: We did come in for Supplementary Estimates (A); it was a minor amount. I do not know the amount; I would have to give you that later.
Senator Oliver: About $100 million.
Mr. Joannette: I will get those numbers to you, if you want.
Senator Murray: What about Supplementary Estimates (B)?
Mr. Joannette: I think we had nothing in Supplementary Estimates (B).
Normally, this amount occurs in the Supplementary Estimates (B). This year, for timing purposes, it occurred in Supplementary Estimates (C).
Senator Murray: I understand. Thank you.
The Chair: In your presentation, you indicated that this request in Supplementary Estimates (C) is 5.54 per cent above what you had already asked for this year. What is the total amount this year? Is there an increase or a decrease over the total amount for last year, including supplementary estimates?
Mr. Joannette: We started off the year with 5.4 per cent and we are now at 5.6 per cent, so that is it. We ended last year with a total budget that was less than what we started out with this year. In comparison, for actual expenditures this year to last year, there will be an increase, but not as much as the 5.5 per cent.
The Chair: Something less than 5.5 per cent?
Mr. Joannette: Yes, if you compare actuals or total budget from one year to the other.
The Chair: I am looking for the Main Estimates plus all the requests under Supplementary Estimates (A), (B) and (C) for each year — the total amount requested. If you could give us the precise figure, we will circulate that to everyone and see how you are doing year over year.
Senator Callbeck: Welcome. You left a lot of snow down in Prince Edward Island.
I want to ask about VIP. I see here that you are asking for increased funding, which is good because, as you know, this covers the housekeeping and ground maintenance. I receive many phone calls about this issue.
Back in 2005, the Prime Minister, in writing, promised that spouses or survivors of veterans of the Korean War and the Second World War would get VIP. As we know, that has not happened. What we have now is a situation where all spouses are not treated the same way. This is why I get so many phone calls asking why Ms. Smith can get it and Ms. Jones cannot. I think it is very unfair the way it is. I am wondering about the costs to include all of these spouses. Has the department done any work on that? If so, what is the figure?
Mr. Hillier: First, I cannot comment on the government policy or what may have been alleged the Prime Minister may or may not have said. However, I can tell you a bit about the program, and I can talk a bit about the costing.
The government introduced legislation I believe about two budgets ago; I stand to be corrected. The widows in question cannot obtain the veterans independence services such as grounds keeping and housekeeping by virtue of the fact that their partners were previously receiving the benefits before their death. The Government of Canada introduced legislation that brought in a group of the neediest widows, if you look at widows in Canadian society. These are widows of veterans who were at the lower end of the income spectrum and may have had some other disabilities. Basically, the criteria were that if they qualified at certain income levels and thresholds at Revenue Canada, they would be entitled to the Veterans Independence Program.
I do not recall the cost off the top of my head, but I can refer to testimony given by the former minister, Greg Thompson, at the house standing committee. Certainly, given the number of widows in Canada, it would be a substantial figure, far in excess of $1 billion. No recent costing has been done, but I know that Minister Thompson, for the record, did give an order-of-magnitude figure that was in the billions to provide this to the widow of every Canadian veteran who served.
Senator Callbeck: Can you get the figure?
Mr. Hillier: Yes. We can go back and look at the figure that Minister Thompson quoted. It was not a flip figure that he gave off the top of his head; some analysis had been done. We could provide that figure to the committee because it is on the record.
Senator Callbeck: Would he have been the minister back on June 8, 2006?
Mr. Hillier: Yes.
Senator Callbeck: I have here that when the Minister of Veterans Affairs appeared before the committee in the other place, he stated that it could cost $500 million to expand the program to everyone.
Mr. Hillier: I would have to double-check that, senator. I am sorry, yes. Now that you mention it, yes, I believe it was of that order of magnitude. I am not trying to be coy here, but it depends on how many you say, if you look at income cut-offs or what have you. However, it was a large figure, and we can confirm what was on the record.
Senator Callbeck: I must tell you, too, that I put this on the Senate Order Paper. I eventually got an answer on March 11, 2010. When I asked about the estimate, I was told that Veterans Affairs Canada developed an estimate of the cost of expanding the Veterans Independence Program to all survivors and primary caregivers and that this estimate is protected information under section 21 of the Access to Information Act and cannot be disclosed.
Mr. Hillier: I am not aware of that, senator. I will certainly take your question. The amount escapes me, but I do know that an amount was put on the record by the minister in direct response to a question at the House of Commons Standing Committee on Veterans Affairs, and I can provide you with that.
Senator Callbeck: That is the figure there, $500 million, which was given in the other place.
As I said, this program as it is administered now is very unfair. I would really like to see the government correct it. The Prime Minister made the commitment in 2005, and so I would like to see that implemented.
The Chair: To clarify this area of questioning, as I understand it, if a veteran was entitled to the Veterans Independence Program for the removal of snow and that kind of thing — this is a senior veteran who cannot do that for himself or herself — and that veteran dies, his spouse is entitled to continue to receive that. However, if that veteran was independent enough to say, ``I will do this myself,'' and was therefore not receiving VIP, when he dies his spouse cannot then apply for it; she is ineligible.
Mr. Hillier: That is correct, with the exception that I noted with respect to certain low-income spouses who would be able to apply and get it. I believe the honourable senator's point is that there is a gulf between all the survivors or the spouses of all veterans and the small number who are in most need who actually get it. I believe that is the gulf to which you refer.
Senator Callbeck: Yes.
The Chair: As a supplementary, what is the low-income threshold?
Mr. Hillier: I do not have that off the top of my head. We will provide that. I believe the figure is indexed, and I do not want to provide the incorrect figure. We will provide you the exact criteria for that.
Going back to the senator's question, yes, now that she has raised it, the $500 million is an annual cost, but as we cost programs they are normally on a five-year basis, so it would be $2.5 billion over the five-year fiscal framework.
The Chair: Thank you. Senator Gerstein, from Toronto, is the deputy chair of this committee and our next questioner.
Senator Gerstein: Thank you, witnesses, for appearing before us.
My questions relate more to a clarification. On September 19, 2010, Veterans Affairs Minister Blackburn and Defence Minister MacKay made announcements with regard to investment and financial support for injured veterans, enhanced monthly income for veterans who cannot return to work, and an increased minimum annual income for veterans released at low salary levels. As I understood it, these were to benefit about 4,000 veterans over the course of the next five years, and the cost was estimated at $200 million. A few days later, on September 28, they both again jointly announced a program that would improve quality of life for seriously injured personnel and their families. Because these were both joint announcements, it is unclear to me how much of this goes into Veterans Affairs and how much of it is going into the Department of National Defence, DND.
Mr. Hillier: In any of the programs related to Veterans Affairs, such as the issue of the Permanent Impairment Allowance, this is a direct cash infusion into the budget of Veterans Affairs Canada.
Senator Gerstein: Is that true even though it might be announced by both?
Mr. Hillier: Yes. It would go into our budget, without question.
With regard to Legacy of Care, the addition of additional case managers, this is an actual increase in the budget of Veterans Affairs Canada, notwithstanding that both ministers made the announcement. As I recall, though I do not have the exact details in front of me, there were some other benefits for DND. If it is a responsibility of the Canadian Forces, it would go into their budget; if it a responsibility for the delivery of the service or the program or the activity of Veterans Affairs, it would go into our budget. In both cases I can confirm it was additional cash that went into the budget of Veterans Affairs Canada.
Senator Gerstein: Are both of the specific ones I raised the question on put into your budget?
Mr. Hillier: Yes, that is correct.
Senator Gerstein: To what extent are these expenditures reflected in Supplementary Estimates (C), or are they prior to that?
Mr. Joannette: The Legacy of Care is reflected in Supplementary Estimates (C) because it starts this year, and we have $1.6 million. The New Veterans Charter amendments are scheduled to start next year and are dependent on the budget. That is not included in this year's Supplementary Estimates (C).
Mr. Hillier: Bill C-55 is winding its way through the house and will hopefully be passed and move forward to the Senate, but until it is proclaimed into law it will not actually be added to our budget; however, we have forecasted the costs as you have articulated. It will come into our budget as soon as the proposed legislation has been proclaimed into law.
Senator Gerstein: If I may pursue this, a couple of weeks ago Minister MacKay announced the construction of five new integrated personnel support centres at military bases across the country. This now brings the total to 24, I believe. I gather that they act as portals for the members of the forces to apply to your department; is that correct? That is one of their functions. Are any of the costs for the construction of these new centres coming out of your budget, or would that be a DND issue?
Mr. Hillier: If I may, I will give a resumé of how an integrated personnel support centre works, just to give context to my response.
There are 24 integrated support centres, with the five that are at bases and wings. This is one-stop shopping for Canadian Forces members. A Canadian Forces member can go in and speak with someone on what I would call Canadian Forces human resources matters and then go to the next desk and speak to someone from Veterans Affairs. It could be someone considering leaving the Canadian Forces, or someone who would like more information, or someone who has been injured and would like to apply to Veterans Affairs Canada for a disability award.
The whole concept is that the soldier goes to one place, and to the greatest extent possible their questions can be answered in that integrated support centre. We are located on or near Canadian force bases across the country. We do get a significant amount of traffic through them.
With regard to the infrastructure for those, DND or the Canadian Forces actually establishes the buildings or the sites, and, with very few exceptions, they allow us into the premises. There is no additional cost to us for infrastructure. We share the infrastructure that they create.
For example, when we look at setting up one of these we sit down and talk with our colleagues and say what we think the volume may be and that therefore they will need three people and we will need two. That goes into the accommodations planning, which is funded by the Canadian Forces.
Senator Gerstein: Thank you very much.
The Chair: Is medical attention, such as psychiatric assessments or for post-traumatic stress disorder, given at these integrated support centres?
Mr. Hillier: I do not want to speak too much on behalf of the Canadian Forces. They do provide direct care, but normally not at one of these centres. They are not normally staffed with doctors, specialists or psychiatrists. This is to give you a sense that we have case managers who work with individuals who may need some specialized services. We would work with them to obtain those services, but the direct service, the medical intervention, would not be done at that site. They are not walk-in clinics, if I could put it that way.
The Chair: They are really to advise Armed Forces personnel about programs that exist?
Mr. Hillier: Yes, programs and services. Not just to advise them, but to help them access them as well.
The Chair: They help them access them somewhere else.
Senator Ringuette: The issue of funding for medical rehabilitation or for severely injured veterans would, from my perspective, include post-traumatic stress disorder.
Mr. Hillier: Yes, it would. When someone is accepted into a program of rehabilitation, the rehabilitation could be related to physical injury, mental injuries, or a combination.
Senator Ringuette: Are we treating all new veterans who are assumed to have post-traumatic stress disorder? Are we treating all of them or just a portion? If it is just a portion of them, why would that be?
Mr. Hillier: I would start by saying that we case manage. We become involved with anyone who comes to us and claims they have post-traumatic stress syndrome, or any other illness, physical or mental. There is no exclusion, in that sense.
It is the responsibility of the veteran to have a medical diagnosis. For example, for a veteran to come in and say, ``I have post-traumatic stress disorder,'' or ``I have a bad back,'' there has to be a diagnosis behind that.
Once there is a diagnosis, there are really two things: First of all, with regard to a disability award, veterans may be entitled to a disability award as a result of the injury in the service of Canada. On the other hand, they do not need to have received a disability award to get into a rehabilitation program.
Prior to April 1, 2006, the gateway to veterans programs was that you had to prove that you had a disability. You had to get a disability pension, in other words. With the changing legislation, it was really more of a needs basis. We have Canadian Forces veterans coming forward, some of whom have served in the Balkans, who have never received a pension or an award. They are coming with a variety of illnesses. We would look at their service, would approve them for the rehabilitation program, and then a case manager would be assigned to work with them. Part of that would be getting a diagnosis as to whether it is post-traumatic stress disorder, or it could be depression, issues of pain — a variety of things. The veteran may have issues of pain management.
As the minister just announced recently, the approval processing time for rehabilitation — to know whether you can enter the rehabilitation program — has been reduced from four weeks to two. That starts the process of working with a case manager.
Senator Ringuette: You are saying that if veterans ask for the service, they will get a response.
Mr. Hillier: Yes, they will.
Senator Ringuette: No one is left behind.
Mr. Hillier: No one is left behind. In addition to veterans coming forward, we have been doing a lot of outreach. I personally have gone to a number of the bases, and we are running information sessions jointly with the Canadian Forces to increase the awareness of Canadian Forces members of the services that are available from Veterans Affairs Canada, in the event that they should need our services.
We have been to Gagetown, Petawawa and Winnipeg. I will be in Ottawa and Kingston next week, just to increase the awareness. There may be people out there who unfortunately are suffering, people who served Canada 10 or 15 years ago, who may not realize there are programs and services and that they can come to Veterans Affairs Canada. We will work with them to help with their rehabilitation needs.
Senator Ringuette: Correct me if I am wrong, but I am assuming that a soldier pays CPP, the Canada Pension Plan.
Mr. Hillier: The soldiers pay into a number of programs. I stand to be corrected, because it is in the area of Canadian Forces, but they pay into a supplementary insurance plan, a pension plan similar to all public servants. I am not sure about the CPP. I suspect they do, because I believe they are eligible at age 65, not unlike us as public servants. That is my understanding.
Senator Ringuette: Within the CPP global program, there is a CPP disability program. If a soldier is recognized to be disabled by your program, would he or she also be recognized as disabled under the CPP disability program?
Mr. Hillier: I cannot speak to that. I would suggest that, given the nature of their operations, they are probably not covered for CPP disability. They are covered for a supplementary insurance plan called SISIP, which you have probably heard mentioned. It is a supplementary, so that when a soldier is injured, and many of them are still in the military, they would be involved in a supplementary injury program from the Canadian Forces.
With regard to Veterans Affairs Canada programs, the programs we have, such as rehabilitation programs and earnings loss, are available only when someone is no longer a member of the Canadian Forces. As long as individuals are members of the Canadian Forces, notwithstanding that they may be injured, they still continue to be members of the Canadian Forces. They receive their medical treatments and benefits from the Canadian Forces, and their rehabilitation needs are dealt with through a separate program of the Canadian Forces called SISIP, which is a supplementary insurance plan for those members.
The only involvement we have with the Canadian Forces members when they are still serving is the fact that people are entitled to receive a disability award. We would work with them on a disability award and, depending on the extent of their disability, they would be entitled to some treatment benefits from us or some other services related to that particular injury. We have a limited involvement until such time as a person takes off the uniform.
Senator Ringuette: My line of questioning in regard to the CPP disability is that there is also a formal process to do the evaluation of the case. You are looking at trying to be more efficient and reduce the waiting time. If your requirement in regard to your disability awards and allowance is similar to the one that is currently under the CPP disabilities, I think that may be a place where there should be some efficiency in regard to two different programs with a lot of similarities and applying to one person.
Mr. Hillier: As I said, I would defer to the Canadian Forces on questions vis-à-vis eligibility for benefits.
With regards to CPP disability in its broadest sense, all Canadians who pay into it are entitled to CPP disability. Certainly there are some real differences when it comes to disability adjudication for Canada's veterans. First, it has to be related to the service of their country. That must be looked at for veterans. Also, some of the injuries we see in Canada's veterans are unique to military service. For example, potential exposures are more likely in a military environment than in the civilian environment. However, I note your points.
Senator Ringuette: In regard to helping veterans and reducing red tape, I would like the department to look at both these programs for veterans or soldiers applying, because I do not see why they would not be able to qualify to apply to CPP disability as well.
Mr. Hillier: I do not have the answer to that question.
The Chair: Any information you can provide to us later on will be helpful, and we will circulate it to all senators here.
Senator Runciman: I remember reading about this a while ago when there was discussion about the old Pension Act and the New Veterans Charter. Do there continue to be differences on the question of two classes? If there are differences, what are they?
Mr. Hillier: As a starting point, we need to understand that when the New Veterans Charter was brought in in 2006, it was a fundamental shift in philosophy of how we help Canada's veterans. Prior to April 1, 2006, before the New Veterans Charter, a veteran was basically entitled to a pension.
It was an entitlements-based system as opposed to a needs-based one. We did not have the earnings loss or rehabilitation programs; we did not have job retraining, et cetera. It was basically that if you were injured, you received a pension and medical services related to that pension. As Senator Callbeck has noted, the Veterans Independence Program then could be carried forward to a surviving partner.
The New Veterans Charter has a completely different philosophy. It is a needs-based philosophy, which is about reintegrating people who have been injured in the service of Canada into society. It is a philosophy based on research of many academics, input from veterans' organizations and veterans.
We need to help people reintegrate into society because sometimes the transformation can be very difficult. Sometimes people thought they were going to be a soldier for the next 20 years, and then something bad happens, so it is needs-based. It is a fact that those who have the greatest need will receive the greatest intervention from the department in case management, earnings loss and, in terms of Bill C-55, permanent impairment allowance, job retraining, et cetera.
To compare one to the other is a bit of an apples and oranges comparison because the goals of the two programs are different.
Senator Runciman: Under VIP, you say needs-based versus entitlement. An individual who was under the old act still had to go through a health assessment, but that person could have a net value of $20 million and still qualify for housekeeping and so forth. That is the difference.
Mr. Hillier: Without getting into specific numbers, this is where there is some misinformation or unclear information in the system, and this is what we are trying to do in our visits at the Canadian Forces bases. We put up a comparison under the old and new systems, and we take people at various points in their career to show what the comparison is.
There is a myth or misinformation that says we will give you a disability award and say have a good life. However, it is not that we will give you a disability award of X dollars — maybe it is the $40,000 or $100,000 — and say have a good life. Yes, we will give you that, but if you are injured and unable to work and you go into rehabilitation, we will pay you 75 per cent of your earnings during the period of time that you are going through your rehabilitation program, which could include job retraining.
It is not just the lump sum — it is the lump sum plus the earnings loss. Sadly, because of the extent of some injuries, some people will not be able to reintegrate back into society and have a job where they can work a 40-hour work week, and in those cases we have a supplementary benefit program that will continue to age 65. In the event that the Canadian Forces veteran is so injured that he or she is not able to participate in rehabilitation, that could be transferred to his or her partner.
To look at the financial benefits, you can take the lump sum, take the earnings loss — which the minister has announced will be increased through Bill C-55 to a certain amount — take the permanent impairment allowance and, for those who sadly cannot be reintegrated, take a supplementary earnings program to the age of 65. That is why I am saying it is a bit of an apples to oranges comparison unless you look at all the components there.
Senator Runciman: I appreciate that explanation. I come from Brockville, Ontario, home of the Brockville Rifles. How does all of this impact militia? I am talking about part-timers. The Brockville Rifles have sent a significant number of folks to Afghanistan. Fortunately, none have been injured. How do these programs and benefits affect individuals like that who serve their country on a part-time basis? What benefits do they receive?
Mr. Hillier: There are various classes of militia. There are people who train on weekends, and that is an important facet. The benefits do depend on your class, but let us talk about Afghanistan because you get into difference classes.
Let us talk about people who serve shoulder to shoulder with regular force members. They are entitled to the same services and benefits as regular force members, if they have served in a theatre. They are called a Class C or something like that, but they are actually entitled to the same benefits and services.
Part of the challenge is reaching out to these people. I have visited many Canadian Forces bases and wings, and one of the concerns I hear from base commanders is the reservists and how we do not lose the connection with them. Regular forces members go back to their regiments and have the support of the group. Reservists, on the other hand, maybe from the Brockville Rifles, whose normal jobs are postman or nurse or teacher, go back into a civilian environment, and the people around them do not understand what it was like to have been in Afghanistan or wherever they might have served Canada.
We have a number of outreach programs in Ontario, for example, working with some of the reserve leadership to identify and get the information out there but also saying to them that if they see some behaviour, for example if an active member of the regiment was deployed to Afghanistan, comes back and all of a sudden is not showing up for parades any more, does that mean he has issues that he is having trouble dealing with, or is it a situation where he has said he has done that and does not want to go there anymore.
We have a number of ways to try to reach out to the reservists to make sure they are aware that we are there for them.
Senator Marshall: Earlier you were talking about your processing times. I believe the ombudsman commented on that also and said if the applications were normal or within a certain category it seemed they got processed fairly quickly, but if there was anything unusual it would take longer.
You said your target was 24 weeks and now it has been reduced to 16 weeks. That still seems like a long time. Why does it take so long to process the applications?
Mr. Hillier: That is a good question. Let me tell you what we are doing in that regard.
One of the difficulties we have is getting the information. We work in a completely paper-based system, which means people actually going and trying to find records that someone was in a certain place at a certain time.
I want to be clear to senators that we are not saying 16 weeks is good enough; 16 weeks is the ceiling, not the floor, so we are working towards that.
To move forward, we need to make better use of technology. We are working with our colleagues at the Canadian Forces to have a more electronic data interchange with their new system called the Canadian Forces Health Information System, which was installed in 2009.
We have tested this; it is not leading-edge technology but technology we have actually tested. We will be moving to digital imaging. We will start to phase that in in just a couple of months. When we need to get records from the national archives, rather than photocopying them and creating paper files, we will send them to Matane, Quebec, where they will be digitally imaged, and they will run on our network. We have run all the testing. This will reduce the turnaround time because we will not have to move paper. Once we create the digital image, it will run on our network and anyone on our system can see it.
We are also simplifying the medical questionnaires. Some of the doctors are asked to provide diagnoses. Filling out paperwork is probably not the favourite thing doctors like to do, so we are simplifying the questionnaires, and we have plans to put them online at a future date.
Senator Marshall: Do you have a new target? You started out at 24 weeks, and then down to 16 weeks, and you are saying that two thirds are now meeting the 16 weeks. Have you projected into the future and said, ``We are at 16 weeks now, and we would like to be at 8 weeks by the end of this calendar year?'' Do you have targets established for the future?
Mr. Hillier: I will not announce any targets. I will leave that to the minister. Certain investments and decisions have not been made on technology, and there is a direct relationship between the investment in technology, the speed at which that investment is made and the target. The service standard as of April 1, 2011, is 16 weeks. I can tell you we are working hard to beat that, and as the assistant deputy minister responsible, my goal is to be able to change the discussion of wait times from weeks to days.
Senator Marshall: You said that two thirds are now meeting the 16 weeks, but there are 6,200 cases in progress as of February 28.
Do you track them? Can you tell us here and now how old the oldest of the 6,200 cases is?
Mr. Hillier: I do not have that data with me.
Senator Marshall: Do you track the age of the individual cases? Can you say so many cases are six months old?
Mr. Hillier: We do segmentation, so I can say that we have this many that are less than 16 weeks. We have this many between 16 and 18 weeks and this many between 18 and 20 weeks. We do segmentation. However, I want to caution everyone that there will be some that do not get through in 16 weeks. There always will be.
Senator Marshall: I realize that, but 68 per cent are meeting 16 weeks. That is not really a good target. It seems like it is still taking quite a significant amount of time, and only two thirds are meeting the new target.
Mr. Hillier: Yes.
Senator Marshall: When we talked about the $155 million, and I am referring now to the additional funding under Supplementary Estimates (C), you had broken it down into three categories. You said it is a combination of more people, new conditions and reassessments. Can you tell us how many more fall into the more people category? How much of the $155 million is more people, and how many more are you talking about?
Mr. Joannette: I do not have that figure, but I could get it to you.
Senator Marshall: Could you get that for us? Could you also get some information on the ages of the 6,200 cases we talked about earlier?
Mr. Hillier: The 6,200 cases are work in progress. I want to stress that these are not files waiting for someone to get to. Across Canada we have around 60 people working as pension officers and pension clerks, and we have around 60 adjudicators in Charlottetown. These cases are not waiting to be looked at.
Senator Marshall: That is what I understood.
Senator Murray: I have a question that is not directly related to Supplementary Estimates (C). However, for the record, and in ballpark numbers, could you tell me how many employees there are at Veterans Affairs Canada? How many of those are at Prince Edward Island at your headquarters, how many in Ottawa and how many elsewhere?
Mr. Joannette: That information is readily available. I do not have it here.
Mr. Hillier: I can give you some orders of magnitude — a ballpark.
There are approximately 4,000 employees. As you can appreciate, it changes on a daily basis with terms and casuals. In the range of close to 3,000 of those would be located at Ste. Anne's Hospital in Montreal. When I talk about Charlottetown, I talk about the department, the Veterans Review and Appeal Board and also the district office for Prince Edward Island, and that would probably be close to 1,300 — in the range of 1,250 to 1,300. The rest would be distributed across Canada.
The Ottawa office, not the district office located at Billings Bridge but the office —
Senator Murray: Excuse me, Mr. Hillier, is it 4,000 total, you said?
Mr. Hillier: Roughly; 4,100.
Senator Murray: Is it 3,000 at Ste. Anne's Hospital?
Mr. Hillier: No, sorry, 1,000. I reversed the figures; I am sorry. I had the 3,000 and I was counting back, senator.
Senator Murray: One thousand at Ste. Anne's Hospital, 1,300 at Charlottetown and the rest elsewhere. How many in Ottawa?
Mr. Hillier: In Ottawa there would be about 100 to 110. These would be people involved in a variety of things, such as the copying of the documents for the pension process, or the foreign operation, minister's mail, what have you. It does not include the staff at Billings Bridge who provide services to the residents of the national capital.
Senator Murray: It was back in the 1970s, was it not, that Veterans Affairs moved? You are too young to know.
Mr. Hillier: The cornerstone of the building was unveiled by the late Pierre Elliott Trudeau in 1983. The actual transfer started in about 1976, when they started moving people.
Senator Murray: What is on my mind is this: Obviously there would have been expenses associated with the move. We know about that. Do you know whether, in terms of the operations of the department, having the headquarters in Charlottetown incurs a substantial expense that would not otherwise be incurred if it was, like most other departments, in Ottawa? Do we pay a premium for that?
Mr. Hillier: I would say no, senator, but I do not have any empirical data. Perhaps I could share the benefit of having been a public servant for many years and having worked in the National Capital Region for 11 years on two different assignments. There is no doubt that costs are incurred. I am here today, and if the headquarters of Veterans Affairs Canada were in Ottawa, I would not have had the cost of an airline ticket to get here.
I want to put a couple of things in context. First, to minimize our travel costs, we have been big users of video conferencing. I have been with the department for 15 years, and it would be nice if other departments around town here used video conferencing to the same extent.
The difference is that in Prince Edward Island we have a stable workforce. We can attract highly qualified, pre- trained individuals. I have worked in this city and in Charlottetown, and Prince Edward Island does not have the amount of swirl that gets into additional training costs and turnover, et cetera, that exists here. In certain occupations in this city, you hire someone today and someone else will hire that person away from you tomorrow. There is a lack of productivity inherent in that.
There are some additional travel costs, and we try to minimize those, and in our training as well. We do not put gangs of people on airplanes and send them to Ottawa for training. We bring the trainers to Prince Edward Island.
My intuitive reaction, senator, is that I think Canadian taxpayers have been well served by the investment made in Prince Edward Island.
Senator Murray: This is a much larger question, and I will not go into it now, but I have often wondered whether it is a model that should be considered or whether it is a model to be avoided. Perhaps Treasury Board, and maybe this committee at some future date, might like to look into that.
The Chair: Senator Ringuette has a quick question. If we do not have time for an answer, we will get you to answer it for us in writing. We are out of time now.
Senator Ringuette: Where are we at with the Agent Orange file?
Mr. Hillier: I will refer to some notes here. Back in December, in Fredericton, the minister announced the extension of the Agent Orange program. The minister was successful in securing an additional $24 million, some of which is reflected in the numbers you have seen for this year.
Essentially, two criteria were changed for the program. First — and this one is key — you did not have to be alive at the date of the announcement in order to qualify for the program. That is, widows can now apply. That was significant. I am sure that being from New Brunswick, you know about that.
Senator Ringuette: Exactly.
Mr. Hillier: Second was to change the date for getting a diagnosis. Under the old rules, you had to have had a diagnosis in process on February 6, 2006. If you did not have a diagnosis in process, you were not eligible. That has now been changed. That is no longer a requirement. We will be accepting diagnoses up to June 30 of this year. The program itself, in terms of payments, has been extended to December 31.
I can give you an update on what has happened since the minister's announcement. As of February 18, we have contacted, either by phone or in writing, 1,298 individuals to determine whether or not we need their consent to review their file. We actually have received a number of new applications. The bottom line is that, as of February 18, we have processed 214 eligible Agent Orange participants and have sent them cheques.
Senator Ringuette: This is a question that begs to be asked: How does one provide or request from the widow a diagnosis of a dead person?
Mr. Hillier: The criterion for the program is based on the international medical society's definition of various conditions that are related. You are quite right that you cannot do a diagnosis. However, you can go back to the medical history of the person who has passed away and look at the medical certificate for the cause of death by the attending physician, or you can look at the medical history of the individual. It is a matter of getting access to the medical information to determine the cause of death or any other symptoms that the person may have been suffering prior to death.
Senator Ringuette: How many requests are under that?
The Chair: You are using up the time, and we have all of our people here.
Senator Ringuette: Yes.
The Chair: I am sorry, but we have gone over time. This is a very important subject for us. Perhaps we can have you back to explain how these new rules are working. The previous rules clearly were causing some considerable concern to many people, particularly survivors of people who had been exposed. The number of years of exposure has not changed, just the spraying in those two years?
Mr. Hillier: There are two criteria: Basically widows can now apply; and you did not have to have a diagnosis in progress.
The Chair: They did not have to be surviving at the time the Conservative government was formed.
Mr. Hillier: I would be happy to come back and have a discussion on Agent Orange or any other subject.
The Chair: Thank you very much, Mr. Joannette and Mr. Hillier.
Honourable senators, we will continue with our second session this morning dealing with Supplementary Estimates (C). For this session, we will turn our attention to Human Resources and Skills Development Canada.
We are pleased to welcome a panel from the department, including Mr. Alfred Tsang, Chief Financial Officer; Mr. Jacques Paquette, Senior Assistant Deputy Minister, Income Security and Social Development Branch; Ms. Kathryn McDade, Assistant Deputy Minister, Learning Branch; and Mr. Martin Green, Director General, Workplace Partnerships.
Thank you all very much for being here. My apologies for getting under way a bit late, but we will make up for it by going a bit late.
Mr. Tsang, you have introductory remarks, and then we will get into a question and comment session following that.
Alfred Tsang, Chief Financial Officer, Human Resources and Skills Development Canada: Thank you very much, Mr. Chair and senators. I am happy to appear before you as chief financial officer for Human Resources and Skills Development Canada. For the sake of simplicity, I will use the acronym HRSD throughout this presentation.
You have already introduced my colleagues, so I will not repeat that.
[Translation]
As you know, the Supplementary Estimates (C) are the third and final Supplementary Estimates in the current fiscal year. Several items are included in our department's Supplementary Estimates (C), including adjustments to statutory items to provide Parliament with an update on changes to expenditure forecasts.
Statutory items are those that Parliament has approved through other legislation setting out both the purpose of the expenditures and the terms and conditions under which they may be made. Statutory spending is provided in the Supplementary Estimates for information only.
[English]
Aside from the adjustments to the statutory items, HRSD is asking for an additional $88.6 million in spending authorities. This is mostly related to a request for the writeoff of debts owed to the Crown for unrecoverable Canada Student Loans. Canada Student Loans are Crown assets. The process for writing off unrecoverable loans under this regime includes approval from Treasury Board to recognize and reduce HRSD assets.
[Translation]
Before explaining the technical reason for our request to write off some Canada Student Loans, I would like to provide a bit of context. Borrowers fulfil their obligations for the vast majority of student loans.
[English]
Some borrowers have difficulties with repayment, and we have measures to support them through the repayment process. Some loans nevertheless go into default. In those instances, we work with our partners at the Canada Revenue Agency to recover the funds owed to the Crown.
The Canada Student Financial Assistance Act establishes a limitation period of six years between the time the borrower last acknowledged his or her Canada Student Loan and any legal activity the Crown can undertake to recover that debt. Once this period has expired, the Crown no longer has the authority to take action to collects on the debt. About 99 per cent of our writeoff request has been deemed unrecoverable for this reason.
The writeoff request included in the 2010-11 Supplementary Estimates (C) covers a three-year period.
Here are some updates to our forecast for statutory items, most notably for the net loans disbursed under the Canada Student Financial Assistance Act, with an increase of $311.2 million. Why the increase? It is largely because of an unanticipated increase in demand for these loans — the forecast for loans to be disbursed in 2010-11 is being increased from $2 billion to $2.3 billion.
The number of students who received student loans rose by 10 per cent in 2009-10 compared to the previous year, and we estimate that this year we will see an additional increase of 7 per cent.
[Translation]
Some of the savings incentive programs that our department administers have been more popular than we expected. This is the reason we have increased the forecast for those programs.
[English]
For example, we increased the forecast by $67.4 million for the Canada Disability Savings Grant and by $32 .8 million for the Canada Disability Savings Bond.
The number of major financial institutions offering the Registered Disability Savings Plan has likely contributed to a higher take-up rate than our previous forecast, resulting in an increase in grants and bond payout. Financial institutions promote the Registered Disability Savings Plan, increasing awareness, and individuals also have greater access to the program, given the number of financial institutions offering it.
Improvements in the general economic situation have resulted in increased contributions from subscribers to Registered Education Savings Plans. Consequently, Supplementary Estimates (C) is showing an increase of $60 million for the Canada Education Savings Grant.
Some statutory items have been reduced. For example, there have been forecasted downward adjustments of $356 million in Old Age Security, $211 million in Guaranteed Income Supplement and $36 million in Allowance benefit.
Old Age Security benefits are fully indexed quarterly to any rise in the cost of living. Legislation ensures that Old Age Security benefits will never decrease, even if the cost of living goes down.
In 2010-11, it is estimated that the federal government will pay over $36 billion in Old Age Security, Guaranteed Income Supplement, and Allowance benefits to eligible seniors. These adjustments can be explained by changes to the forecasted average monthly benefits rate, as well as changes in the number of beneficiaries for all components of the program — namely, the Old Age Security, the Guaranteed Income Supplement and the Allowance.
Mr. Chair, I hope this overview has given you a more precise idea of the content in the Supplementary Estimates (C) for HRSDC.
[Translation]
I hope this overview has given you a more precise idea of the content of the Supplementary Estimates (C) for our department.
[English]
My colleagues and I would now be happy to answer your questions.
Senator Eggleton: Thank you for your overview. Let me start with the Canada Student Loans issue about writeoffs. As you point out, it is only about 1 per cent. That sounds very small, and it does not sound like we should be concerned about it. However, I would like to know what the percentage would be if you took it on the low-income borrowers, people at the lowest end of income levels. What are some of the major reasons for these writeoffs? I understand that the average is quite small, $2,400. What is happening here? What is the explanation?
Kathryn McDade, Assistant Deputy Minister, Learning Branch, Human Resources and Skills Development Canada: I cannot provide you with figures on writeoff by income. However, going back to your comment that the writeoff that HRSDC is requesting represents only 1 per cent of the portfolio, that is probably not a useful number for understanding the level of bad debt in the program, which I suspect is your real interest.
As Mr. Tsang said in his introductory remarks, the vast majority of the loans that the Government of Canada disburses are in fact repaid and recovered in full. The amounts that are not amount to about 13 per cent; 87 per cent are recovered in full, and 13 per cent over the lifetime of the loan are not recovered. How that breaks down is that just over 11 per cent is written off. I will go back to that in a second. A much smaller number, about 1.6 per cent of all loans, are forgiven on the basis that the borrower is unable to pay and has been on a repayment assistance program for an extended period of time. A very small percentage, 0.1 per cent, are forgiven based on the death or permanent disability of the borrower.
Going back to the some 11 per cent bad debt expense, you asked about the reasons for the writeoff. As Mr. Tsang said in his opening remarks, the vast majority of that amount is written off because the statute of limitations has expired. The government no longer has the legal authority to pursue the borrower six years after the borrower last acknowledged his or her loan.
Senator Eggleton: What does ``last acknowledged'' mean? Does that mean the borrower graduated?
Ms. McDade: The borrower made a voluntary payment and acknowledged in writing that he or she understood the loan was owing. Largely, these are people who cannot be traced, who have not made voluntary payments, who have not submitted to our collection agency, which is the Canada Revenue Agency, and who have not submitted to financial counselling, for instance, with respect to their outstanding debt. That is the reason for the vast majority of the writeoffs.
That other 1 per cent is made up of students who have entered bankruptcy or students who are in extreme financial hardship and have offered to pay a portion of the loan, and a decision has been made to write off the remainder.
Senator Eggleton: Would all of these writeoffs, or most of them, be relevant to financial hardship as opposed to people skipping out of the country and whatnot?
Ms. McDade: If you look statistically at the reasons behind default, which is ultimately the leading indicator for writeoff, it is predominantly related to income and employment. They are almost exclusively low-income earners who are unable to make the payments. There is a small proportion — I do not have the number — who could make payment, but we are not able to trace them as they may not be living in Canada and so on.
Senator Eggleton: In terms of the trend, tuition fees have been increasing substantially over the last number of years. With the recession, the difficulties in getting additional income to help pay for education has also added burdens. Is there a trend in the defaults?
Ms. McDade: Despite the factors that you enumerated, the trend is actually quite positive. When the government began direct lending to students, when the government moved away from partnership with the financial institutions to offer these loans in 2000, the default rate was extremely high. It had been over 20 per cent through much of the 1990s.
In the early 2000s, after the direct lending regime came into place, it was at one point higher than 35 per cent. The default rate, which we measure on a three-year basis, is now 14 per cent. That 14 per cent measure means that we are looking at the proportion of loans that are in default three years after the loan entered repayment. Out of all the loans that entered repayment in 2007-08, for instance, three years out, 14 per cent of those were in default.
We are monitoring the default rate closely for exactly the reasons you indicated. The Chief Actuary will release his new estimate of default in the summer. There is a prospect that it could have inched up despite the fact that we have been on a downward trend for many years.
Senator Eggleton: Thank you for that. Let me ask you about the statement you made, Mr. Tsang, with respect to Old Age Security and Guaranteed Income Supplement. You are saying they have forecasted downward adjustments. We keep hearing about the aging population here, so one wonders how that is possible.
Jacques Paquette, Senior Assistant Deputy Minister, Income Security and Social Development Branch, Human Resources and Skills Development Canada: I can offer you three things. First, in the Main Estimates, we have the projections that are based on what the Chief Actuary is seeing with the best of his knowledge at that time. These are projections, so they are never perfect. In Supplementary Estimates (C), we see an adjustment to what we thought would be happening during the year.
When you look at these numbers, yes, there are some decreases because of all kinds of factors, but we are adjusting the projections. The numbers that mean something are when you look at the real numbers compared to a year ago. For example, if we look at Supplementary Estimates (C) last year and now, which is comparing the real numbers, we do see an increase in budget but also in beneficiaries. That is, there is an increase in people receiving OAS and GIS. In other words, the adjustments you see in Supplementary Estimates (C) —
Senator Eggleton: You overestimated what you needed?
Mr. Paquette: That is right. It is a review of the growth.
Senator Eggleton: Do you do that every year?
Mr. Paquette: As I said, the Chief Actuary has to take into account tonnes of factors. You can imagine that it is not a perfect science, but it is pretty close.
Senator Eggleton: Thank you.
Senator Gerstein: Thank you for being before us.
Senator Eggleton commented that he was not troubled by the fact that less than 1 per cent of loans are written off, as you are indicating here, but I am troubled by it because I am concerned that perhaps it is too low. I am hearing new numbers today that I had not heard before for what the actual bad debts are.
Could I refer you to page 6 of your remarks, Mr. Tsang, because I still do not have my hands around what student loans are all about. You indicate there that the forecast for loans to be disbursed this year is being increased from $2 billion to $2.3 billion. In the first paragraph on that page, you indicate that that will result in a net loan increase of $311 million. Do I take it you anticipate that $2.3 million will go out and $2 billion will be paid off? Is that what that says?
What is the present size of the student loan portfolio? Where do you get the money to finance the portfolio, and what determines it?
Ms. McDade: I will see how far I can get, and then my colleague may help me.
On the question of loans going out, loans coming in and the net disbursement, you are correct that we intend to disburse to students about $2.3 billion in the current year. We expect to have students repay us about $1.2 billion, for a net disbursement of just over $1 billion, $1.1 billion if we are rounding.
Senator Gerstein: What is the number where it says $311 million?
Ms. McDade: The $311 million follows on the comments Mr. Paquette made. That is the error in our original estimate. We originally in the Main Estimates forecast that we would be disbursing only $2 billion to students. In fact, we will disburse more than that, and we will take in marginally less than we had anticipated. We were off by about $311 million in our estimates.
Senator Gerstein: Would you take me to the next one? What is the size of the portfolio as it exists today, on March 1?
Ms. McDade: I cannot give you March 1; I will give you December 31. The size of the direct loan portfolio, the portfolio for which the government has been responsible since the year 2000, is about $13.5 billion; $13.4 billion is the exact number.
Senator Gerstein: Where do you get the money to fund your receivables?
Mr. Tsang: As I indicated in my opening remarks, this is a statutory program, so the authority has been approved by Parliament. Therefore, the fiscal framework is the source of funds for our disbursements.
Senator Gerstein: In the second-last paragraph on page 6 you indicate that you are anticipating an increase this year of 7 per cent versus 10 per cent last year. What might have brought that percentage down? Is it because of fewer applications? Have you changed your criteria? Are you making it more difficult for students to get loans? What is causing that change?
Ms. McDade: The previous annual increase was 10 per cent, so the increase from 2008-09 to 2009-10 in disbursements under the loan program was 10 per cent. We believed that that was driven in part by the recession, with more students staying in school and more students choosing to go to school rather than entering the labour market.
Given an increase of that magnitude, in the current year, from 2009-10 to 2010-11, we thought that we might not see any increase in disbursement or maybe a 1 per cent or 2 per cent increase. We are surprised by another significant increase in disbursements, an increase of 7 per cent year over year. That is why our estimate was off.
Essentially, we thought that all the students who were going to go into post-secondary education were in and that we would not see another significant bump up.
Our disbursements are driven not just by the straight numbers. They are driven by costs and the amount of resources that students have of their own to put toward their education. All those factors are in play. Post-secondary education costs are rising at a rate higher than inflation. In a post-recessionary environment, students are struggling to bring their own sources of income to the table, whether from their own employment or parents' income in the case of students who are dependent. Those are the drivers behind the increase. We will wait to see the most recent forecast from our Chief Actuary, but on a go-forward basis we do expect our disbursements to level off.
Senator Gerstein: Do your criteria change from year to year?
Ms. McDade: The government does periodically make adjustments in the program. In recent years, the program has become more generous, not less generous. In the 2008 Budget, the government announced an enhanced and consolidated grant program — non-repayable assistance largely for low- and middle-income students. That program was implemented in the fall of 2009, the 2009-10 school year. It is early to draw any conclusions about what we are seeing, but the availability of that assistance may be attracting students into post-secondary education as well who might not have attended otherwise.
The Chair: As a follow-up to Senator Gerstein's question, the way this is presented to us, you are writing off $150 million, and you are doing that through supplementary estimates, whereas the increase in the amount of money that you are putting out in student loans is done statutorily, and you can net out any payments in — the $1.2 billion you are anticipating in — but you cannot net out the writeoff. Is that correct, that the writeoff must be done through estimates? Am I reading this correctly?
Mr. Tsang: You are absolutely reading that correctly. In addition to that, authorities required for us to do that are different. We need parliamentary approval to write off that $149 million worth of bad debt, whereas the $311 million for incremental disbursements is statutory. This is presented for information of Parliament.
The Chair: I understand. The statute allows you to adjust for students repaying, but it does not allow you to adjust for writeoffs.
Mr. Tsang: You understand that perfectly.
The Chair: Interesting.
Senator Callbeck: I want to go back to the question that Senator Gerstein asked. The direct loan, the liability of the government, you said in December was $13.45 billion, and in the legislation, the ceiling is $15 billion.
Last September, I believe I read somewhere that the liability was expected to reach that $15 billion and there were 50,000 students who might not get any money under this program.
The government changed the regulation as to what it included in the liability. When the question was answered this morning, it was said that for the size of the direct loan, the government was responsible for 100 per cent. There were loans that the bank was involved with and the government as well, and they were taken out of this. Am I right on that? Can you describe how much exactly was taken out and why?
Ms. McDade: Your understanding is accurate. I will try to explain a little bit of the history of the different loan regimes because it is germane to your question.
The $13.45 billion figure that I quoted, the current portfolio as of December 31 of direct loans, is loans for students who are in study, students who are in repayment and students who have defaulted on their loans. That is our entire portfolio, or was in December.
You are right that there are other loan portfolios outstanding. From the time this program was introduced in 1964, all the way to 1995, we had a guaranteed loan regime. The financial institutions administered loans, but the government covered 100 per cent of the risk associated with default.
For the short period from 1995 to 2000, we had a risk-shared regime. Essentially, financial institutions were still administering the loans on our behalf, but the government had renegotiated the risk premium that we would pay to the institutions and had renegotiated the terms for us to take back loans in default.
This summer, as you indicated, there is a $15-billion limit in legislation on the total portfolio, the loans that are in study and in repayment.
The government looked at the current portfolio, which at that time included both direct loans and risk-shared loans. Just under $2 billion in risk-shared loans was being counted toward that aggregate portfolio. Those were loans that were owed to banks. The government did not have the same level of liability for those loans. Therefore, the regulation of August of last year that you referred to removed those risk-shared loans that were in place from 1995 to 2000 from the calculation of the portfolio. That is why the portfolio is not at $15 billion. It is at $13.45 billion.
Senator Callbeck: There was $2 billion taken out. By December, you say $13.45 billion. Where it will be at the end of March?
Ms. McDade: I cannot give you a precise estimate for the end of the year. I can tell you that, based on the estimates of the Chief Actuary, we will not reach the $15-billion limit until 2014-15. The portfolio goes up and down. It peaks during major disbursement, September and January, and it declines as students consolidate their loans later in the fall and major payments come in.
Last year, the actuary said that as best he could forecast we will reach $15 billion in 2014-15. We are anxious to see updated forecasts and are monitoring closely the level of the portfolio.
Senator Callbeck: If the government had not changed the regulations, we would have met that $15 billion.
Ms. McDade: If the $2 billion had not been removed from the portfolio, yes. At the present time, we would be exceeding the portfolio limit of $15 billion.
Senator Callbeck: Who does the yearly report on the student loan program?
Ms. McDade: There are two annual reports on the loan program. The minister tables an annual report in Parliament. She also tables the annual report of the Chief Actuary. The Chief Actuary, under the Office of the Superintendent of Financial Institutions, also makes an annual report that is tabled in Parliament.
Senator Callbeck: The 2008 report was not tabled until June 14, 2010. Why did it take so long?
Ms. McDade: You are correct on the dates. There are significant delays in retrieving data for a school year. The process by which we assess the needs of students is administered for us by provincial and territorial governments. It is only six months after the year, for example the 2009-10 year, has concluded that our partners are required to prepare the data. The rest of the time is spent in analyzing the data and preparing the report. The minister is required to table it in Parliament within a short period of having received it. I think it is 15 business days.
Senator Callbeck: You are saying that June 2010 is about par for the course. Is that not longer than other reports?
Ms. McDade: I did not mean to imply that we are not making every effort to report more promptly. I agree that was a long delay for that report, and we are making every effort to shorten the time for presentation to Parliament. However, there are some parameters that we will not be able to change around the data that we receive from our partners.
Senator Callbeck: When can we expect the 2009 report?
Ms. McDade: The 2009 report should be tabled shortly. It is in the process of being completed. I cannot give you a precise date.
Senator Marshall: You must have standard procedures for student loans that have to be followed when somebody falls into arrears. Have the auditors made any comments with regard to whether your procedures for collections are robust enough or whether you are following those procedures?
Ms. McDade: We rely on the Chief Actuary to benchmark us against the best practices in the industry for debt collection, and given that the Canada Revenue Agency shares a responsibility with us for debt collection, they also look to the view of the Chief Actuary.
We have seen a dramatic reduction in both the default rate and related to that the rate at which loans are written off. Currently, we are thought to be in good shape in terms of the collection processes that we pursue. The best approach to collection is not to have a loan go into default in the first place. The government introduced a new Repayment Assistance Plan in Budget 2008 that was implemented in the fall of 2009. We are only on our second year of administering that program. However, that program is intended to make it easier for students who are struggling with repayment to keep their loan in good standing, not go into default and not be sent for collection.
Senator Marshall: I have a question on the Canada Disability Savings Grant and the Canada Disability Savings Bond. With regards to the incremental funding under Supplementary Estimates (C), the Canada Disability Savings Grant was budgeted to be $10 million; however, the incremental funding is $67 million. The Canada Disability Savings Bond was budgeted to be $5.7 million; however, the incremental funding is $32.8. It seems like the estimates were way off. Is that something to do with the actuary? Could you explain why the initial budget was so low?
Mr. Paquette: That is a good question. We did not expect the program to be so popular so quickly. Our projections when the program was launched took into account that there would be an increase over several years. We were the first ones to be surprised by how much take-up we had for both the bonds and the grants. In fact, some of our three-year objectives were met in one year.
We are happy about this because that was the purpose. I am the last one to complain because our program is successful. However, there are some implications for the costs.
Senator Marshall: I was surprised, but you were surprised too.
The Chair: There are a lot of pleased people out there.
Senator Murray: Mr. Tsang, you say at page 3 of your statement that Supplementary Estimates (C) are the third and final supplementary estimates in the current fiscal year. I find that the short-term memory is the first to go, and I cannot recall whether you were here under Supplementary Estimates (A) and (B), and if so, for how much money.
Mr. Tsang: Those are for the record; however, we will be happy to look back at Supplementary Estimates (A) and (B) and get back to you.
The Chair: That will be fine. Please circulate the information to all senators.
Senator Murray: Did you make use of Treasury Board Vote 5 during the course of the fiscal year?
Mr. Tsang: We did not.
Senator Murray: Mr. Green, I do not want to neglect you. Some of us recall Mr. Green from previous lives.
I see that you are the director general for Workplace Partnerships. What programs come under your purview in that capacity? Are you here in respect of any particular item in these supplementary estimates?
Martin Green, Director General, Workplace Partnerships, Human Resources and Skills Development Canada: Under my purview are trades and apprenticeship. Therefore, I am here in respect to the Apprenticeship Incentive Grant and the Apprenticeship Completion Grant. I also have the Sector Council Program, which is not part of Supplementary Estimates (C).
Senator Ringuette: Yesterday, an amazing report was made public by a board of trustees; the headline was ``Seniors declaring bankruptcy at `alarming rate.'''
Of all the individual bankruptcies declared, seniors represented 12.5 per cent of that in 2008. However, it increased by 4 per cent in 2010; 16 per cent of individual bankruptcies in Canada are from seniors. That is my entry comment.
I have a 94-year-old mother who is very active. Every summer I go with her to visit all her friends in the different seniors' complexes. For the last two summers, I have been bombarded by this question: Why are they getting less from their Guaranteed Income Supplement?
I realize that the Old Age Security is indexed and cannot decrease even if the cost of living decreases, which we have not seen for quite a while. However, how come every time the Old Age Security is indexed, the Guaranteed Income Supplement for seniors is reduced?
From what I have seen for the last two summers — and this all happens on the first cheques that they get on the first of July — if they have an indexed Old Age Security of an additional $2 per month, $3 less comes in from the Guaranteed Income Supplement. Therefore, their net income has been reduced at a time when their cost of living is getting higher.
Explain that to me, because I would also like to say that I called the department twice and got two different answers.
Mr. Paquette: Maybe I will give you a third answer now.
OAS and GIS are indexed on a quarterly basis. As Mr. Tsang said, this is only one way, so if the Consumer Price Index goes down, it does not affect it. In 2008, that was the case when there was a big peak before the indexation; after that it went down, but we did not decrease the OAS and GIS.
I would say two things because I think different factors explain the situation you are describing, which is probably not exactly what you conclude. First, the OAS is indexed, so you get your cheque and so on.
To be eligible for the GIS, the income supplement, you need to be 65, and this is an income-tested benefit. Income- tested means that any income other than OAS that you receive — for example CPP, a withdrawal from an RSP, or a RIF, dividend, interest, whatever — is taken into account. This is the only thing that would imply a fluctuation in your GIS benefit.
I should add regarding GIS that when we say income tested, it is also based on family revenue. If you are a couple or if you are unattached, that would be your revenue. That is the only thing that would affect the benefit.
If your GIS benefits are decreasing, it has to be related to an increase of some income other than OAS, because that is not taken into account when calculating the benefits for a GIS beneficiary.
Senator Ringuette: Then I guess you need to review your information technology adjustment. For 99 per cent of the seniors I have been talking to in the last two years, CPP is indexed on a yearly basis. Their net income, including the Guaranteed Income Supplement, from these three programs has been reduced. It has. Do I need to bring to this committee some income statements from these senior citizens so that you will know there is something wrong?
If your third answer is right, then there is something wrong in regard to the information that is fed into the system, or the program has a default in it, because what I am telling you is the reality on the ground for these seniors.
Mr. Paquette: I have to be careful. Just to clarify, first of all, in 95 per cent of the cases, we are using the previous year's income, which is exactly the same, so there is no fluctuation; it is just to clarify the numbers.
I am not in a position and I do not want to be in a position to comment on individual cases, because I do not have access to personal information — and that is what we are talking about — for an individual person. That is why the person has to get in touch with Service Canada, who has access to all the files, and ask that specific question.
To be clear, it is an income-tested process. It means that the benefit will be adjusted downwards and the reduction is 50 cents of reduction for one dollar of income. Overall, if you have additional income, the net income will still be higher if we understand correctly what we are talking about, which is the relationship between other income and how the GIS is adjusted.
My recommendation to whoever wants to have clarity about a specific case — because 1.6 million people receive GIS and every case might be different — is that the person should contact specifically Service Canada and asks a specific question about his file. That is where the information will be provided. If there are some adjustments, they would be made.
I was saying that the program is working well, and there might be a need for further information to clarify some situations. That is what I understand.
The Chair: I have to go on to the next senator, but you have heard the position of Senator Ringuette. If there is anything you can do in writing to help us further, that would be fine.
Senator Oliver: You told us about the direct loan portfolio, the $13.5 billion. You also told us that in 2009 the government came out with a program for non-repayable grants. Are those grants included in the overall direct loan portfolio of $13.5 billion? If so, how much of that is grants that are non-repayable? Then I would like to know the average current student debt load and what percentage over and above that was a grant that was not repayable.
Ms. McDade: Starting with your first point, the $13.5-billion loan portfolio does not include non-repayable assistance. It includes none of the Canada Student Grants that are currently disbursed to students.
For the current school year, 2010-11, we intend to disburse about $578 million in non-repayable assistance.
Senator Oliver: What was it last year?
Ms. McDade: It was just over $500 million. I am sorry I cannot give you an exact figure.
Senator Oliver: This is means-tested?
Ms. McDade: In part. We have a range of grants. Most of the grants we disburse are for low- and middle-income students. They are tested against financial income and family size.
There are also two different types of grants available for persons with disabilities. Those are based on disability- related education expenses and may be used to cover specific equipment and services that a disabled person needs to attend post-secondary education. I hope that answers your question around grants.
Senator Oliver: It does.
Ms. McDade: You also asked about debt loads. The most recent figures I have are for 2009-10. The average student loan dispersed in 2009-10 was $5,200. That represents a decline from the previous year. Our thinking is that it is because of the introduction of the non-repayable assistance, or the enhancement of the non-repayable assistance, that the average loan students were taking declined.
Senator Oliver: You also told us that the government made them more generous.
Ms. McDade: That is right; the government made them more generous — more disbursement of non-repayable assistance. Our thinking is that that offset some of the loan amount students otherwise would be taking, that is, on average.
Senator Oliver: The average per year is around $5,000?
Ms. McDade: Just over $5,000.
Senator Oliver: On graduation, what is the average debt load?
Ms. McDade: I should clarify that I am giving you the debt loads for Canada Student Loans. The average debt load on graduation for Canada Student Loans was just over $13,000 in 2009-10. Most students have both a Canada Student Loan and a loan provided by their provincial or territorial government. I am not giving you the total figure for both, just the Canada Student Loans.
The Chair: Senator Oliver, I forgot to mention when I introduced him, is a former chair of this committee. It is good to have him visiting us. You can see how succinctly he puts his questions, and aggressively at times. We appreciate your attendance.
Senator Callbeck has one follow-up question. We are out of time, but we will put her question on the record.
Senator Callbeck: My question is on the old age allowance that some people can get at age 60 and others cannot. My understanding is that if a person is married to someone who is already getting the old age pension, then that person can apply. If they meet the means test they will get the allowance, and widowers or widows can apply. However, divorced and single people cannot apply. Is that right? If it is, has any estimate been done on the cost to include these single and divorced people? Single women have a high rate of poverty. It does not make sense to me that this is the way this legislation is written, if I understand it properly.
Mr. Paquette: When the OAS was set up, there was a benefit that was calculated for that, which is called the Allowance. It is basically how you describe it. It is for people between ages 60 and 64, so not yet eligible for the full pension. The idea at the time it was set up, many years ago, was that it was particularly for couples where there was only one person as the breadwinner who reached age 65, with no other revenues and a single pension. The allowances were set up to cover these types of situations.
As you know, when you are eligible for GIS, and this is part of that, it is the family revenue that is taken into account. The benefits that are provided to the couple are adjusted, according to the revenues, and also the maximum benefit for each member is slightly lower than the benefit for a single person under the GIS.
That was to support these couples, with one of them reaching age 65, and usually in situations where that person was the main income earner.
Senator Callbeck: We have a situation where some people can apply at age 60 and get it, yet divorced and single people cannot. That is an area where there is tremendous poverty. Have you done any estimates as to what would be the cost to include these people?
Mr. Paquette: If you are talking about including people under age 65 who are single, we are not talking about OAS anymore. We are getting into another range of the population. This is really an adjustment of the Old Age Security benefits. The trigger is the person who reaches age 65. That is the trigger. If you are talking about singles who are under age 65, then we are outside of the pension system.
Senator Callbeck: I do not understand why. If you have someone who is 63 and married, they can apply and get this, provided that their spouse is getting the old age pension.
Mr. Paquette: The GIS.
Senator Callbeck: They are getting some benefits at age 60, yet single and divorced women are not. Widows and widowers are also able to apply, are they not?
Mr. Paquette: In the case of a widow, for example, if her husband started to receive GIS, so past age 65, this is the allowance for survivors, yes. It is the same logic as the other one.
Senator Callbeck: Yes, she can get it, yet the divorced woman cannot.
The Chair: Senator Callbeck, you are making some good points, but unfortunately we are out of time. Perhaps you could correspond with Mr. Paquette.
Mr. Tsang would like the final word.
Mr. Tsang: I would like to take 10 seconds to respond to Senator Murray's previous question on supplementary estimates, because I have the information now.
The Chair: That would be helpful.
Mr. Tsang: For Supplementary Estimates (A), HRSDC requested $81.845 million. You can find that reference on page 34 of Supplementary Estimates (A).
Similarly, for Supplementary Estimates (B), the amount for our department is $76.106 million. You can find that reference on page 40 of Supplementary Estimates (B).
Senator Murray: We are getting on to about a quarter of a billion dollars.
Mr. Tsang: Yes.
The Chair: Thank you very much, representatives of HRSDC, Mr. Tsang, Ms. McDade, Mr. Paquette and Mr. Green, we appreciate your being here to help us with some of these issues. We are trying to get a report out with respect to Supplementary Estimates (C), so that when the supply bill comes, based on this, we will be able to pass it through. We would appreciate receiving the answers to our outstanding questions as quickly as possible.
We will adjourn shortly, but tomorrow we expect to have referred to us the Main Estimates for next year. We might even see HRSDC in there. I am sure we will, as a matter of fact. We will make a decision on which groups, agencies or departments we will bring in later on.
Thank you again for being here.
(The committee adjourned.)