Proceedings of the Standing Senate Committee on
National Finance

Issue 41 - Evidence - May 29, 2013 (Afternoon meeting)

OTTAWA, Wednesday, May 29, 2013

The Standing Senate Committee on National Finance met in public this day, at 2 p.m., to study the subject-matter of Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures, introduced in the House of Commons on April 29, 2013.

Senator Joseph A. Day (Chair) in the chair.


The Chair: Honourable senators, this afternoon, we are continuing our study of the subject-matter of Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures, introduced in the House of Commons on April 29, 2013.


Honourable senators will know that we received permission yesterday from the Senate to meet out of our normal time, and that is what we are doing at this time to try to move ahead with this legislation. We expect that we will be meeting next week in the afternoons as well. We will try to have meetings here so that we are not far from the Senate Chamber in the event that we have to return.

This is our sixth meeting on the subject matter of Bill C-60. We will begin today where we left off yesterday in that warm room. We decided that we would not push things further yesterday. Where we left off was at Part 3, Division 17, clauses 228 to 232 in the English version, which can be found at pages 108 to 111 of the bill.

We welcome back Mr. David Belovich, Senior Director, Strategic Non-Core Public Administration Compensation Management with the Treasury Board Secretariat. I cannot imagine the size of that title on your door.

Before I start, I would like to welcome and announce that Senator Wells has joined us as a permanent member of this committee. We welcome you and thank you for agreeing to join us.

Senator Wells: Thank you.

The Chair: Mr. Belovich, can you give us a very brief precis of where we were when we left off and what Division 17 is hoping to achieve?

David Belovich, Senior Director, Strategic Non-Core Public Administration Compensation Management, Treasury Board of Canada Secretariat: With pleasure, chair.

By way of introductory comments yesterday, I had mentioned that within the context of the government's stated intent to work more closely with Crown corporations to improve their financial viability around compensation levels, particularly with an intent to more closely align the pension schemes at the Crown corporations with those across the broader public service, the government is proposing to make some amendments to the Financial Administration Act.

Broadly speaking, the first of these would be to enable the Governor-in-Council to direct a Crown corporation to have its negotiating mandate approved by the Treasury Board. If Treasury Board had provided a collective bargaining mandate to a specific Crown corporation, then that Crown corporation would subsequently require the authority of the Treasury Board to enter into a collective agreement with regard to the contract negotiated within that approved mandate.

Concurrently, the changes proposed would also provide the Governor-in-Council with the authority to direct the Treasury Board to be the approving authority for a Crown corporation with regard to any changes to the terms and conditions of employment for non-unionized employees within that Crown corporation.

The Chair: Are there any parallel situations that exist now where Treasury Board can have the same oversight and direction with respect to entities that are in any way related to the federal government?

Mr. Belovich: There is, in fact. The model is very similar to the mandating protocols that have been in place for the separate agencies over the past 50 years or so, since the late 1960s. Pursuant to a cabinet decision in 1967, we have a collective bargaining protocol that applies to the 26 separate agencies listed at section 5 of the Financial Administration Act.

Essentially, as contemplated here in that particular situation as a function of other pieces of legislation, most of the separate agencies are required to get collective bargaining mandates specifically from the President of the Treasury Board and most of them are also required to get Governor-in-Council approval to enter into an collective agreement.

The Chair: Could you give us an example of separate agencies?

Mr. Belovich: Sure. Some of the better known ones would be the Canadian Food Inspection Agency or the National Energy Board, CSIS, the Communications Security Establishment; Parks Canada agency is a separate agency as well.

The Chair: Thank you. That is helpful.

Colleagues, yesterday I had a list that we did not get through before we ran out of time. We still have that list here and I will call on honourable senators. If your question has been answered or you do not wish to participate, just pass. Senator Callbeck from Prince Edward Island was first on my list.

Senator Callbeck: Just so I am clear in my own mind, under this legislation, the Crown corporation will have to negotiate the mandate or it will have to be approved by Treasury Board. Once they get a collective agreement, it has to be agreed to by Treasury Board, right?

Mr. Belovich: That is correct.

Senator Callbeck: That is going to be the situation. Explain to me exactly what it is right now. You said, I think, that most of them had to have a collective agreement.

Mr. Belovich: Currently, if my memory serves me correctly, there are 48 Crown corporations. The Crown corporations that have represented or unionized employees will negotiate their own collective agreements, and these proposed changes in this legislation do not amend the actual conduct of collective bargaining within the Crowns. The collective bargaining mandates that are applicable to the individual Crown corporations' current situation are provided by the board of management or the board of directors that are established to oversee the activities of that Crown corporation.

Yesterday I had mentioned briefly, in passing, what this would do. On a case-by-case basis, when the government felt that extraordinary efforts were required, I guess you could say, the Treasury Board would be directed for that particular round of collective bargaining or for that particular collective bargaining unit situation to substitute itself as the approving authority for the collective bargaining mandate for that Crown corporation.

Senator Callbeck: For those two things that this new legislation is going to bring in, which Crown corporations will be exempt from getting that mandate? Are there any?

Mr. Belovich: No Crown corporations that currently exist, none of the 48, are specifically exempted in the legislation. I do not know. I could not presume to guess which ones the government may identify or, if any, when, but certainly they are all subject to these provisions on a case-by-case basis through order-in-council, potentially.

Senator Callbeck: On a case-by-case basis?

Mr. Belovich: On a case-by-case basis.

Senator Callbeck: Some may get exempted?

Mr. Belovich: Not so much exempted, but for argument's sake, assuming these provisions stand, 10 seconds after coming into force, none of the Crown corporations would at that instant in time be subject to a collective bargaining mandate from the Treasury Board because no order-in-council would have been processed at that point. However, the government could subsequently identify the XYZ Corporation as a corporation into which it wished to insert the Treasury Board authority under these provisions. An OIC would have to be drafted, the Governor-in-Council would have to approve it and then Treasury Board Secretariat, where I work, would have to work with the identified directed Crown corporation to determine what it would recommend by way of its intended collective bargaining mandate. That would then be analyzed within Treasury Board Secretariat. We would then, having worked with the Crown corporation extensively, work with them to put together a Treasury Board submission that would then be considered by the Treasury Board ministers with regard to whether or not that proposed mandate would be approved and authorized for the Crown corporation to execute it.

Senator Callbeck: Something else that is in this legislation is that an employee from Treasury Board has to attend all of the collective bargaining.

Mr. Belovich: May be directed to attend by the Treasury Board.

Senator Callbeck: May be?

Mr. Belovich: Yes.


Senator Bellemare: I have a question about some of the wording in Bill C-60. Certain clauses specifically refer to the Canada Council for the Arts, the CBC, the Bank of Canada and Telefilm Canada. In every case, it is stipulated that ``except for sections 89.8 to 89.92'', these organizations are exempt from the provisions in Divisions I to IV.

Could you please explain what that means? Will those organizations be given special status? Why is the bill phrased that way? It is very hard to understand. It gives the impression that they are not subject to the new provisions. But that is not what you are saying. They are actually subject to them, like everyone else. Could you please elaborate a bit more on that phrasing, specifically?


Mr. Belovich: I certainly can. I was smiling because I was going to make a comment about lawyers having drafted it, but that would be inappropriate so I will not.

It is phrased like this because those particular Crown corporations currently are exempted from chunks of the Financial Administration Act. To effect the direction of the government that these proposed provisions or changes to the Financial Administration Act be applicable to all Crown corporations potentially, the lawyers suggested that, in subclauses 228(1), (2) and (3), we needed to make consequential amendments to the various pieces of legislation to ensure that these Crown corporations were also subject to these new mandating provisions, if you will. It is simply an alignment of the changes with extant legislation.


Senator Bellemare: The second concern I have about this bill is the fact that certain organizations, such as the Canada Pension Plan Investment Board, the Bank of Canada and even the CBC, require a very specific and highly specialized workforce. Will the Treasury Board's mandate take the unique features of those organizations into account? Or is the objective actually to bring the conditions of employment in line with those of the public service? Are you able to answer that?

Is there an intention to somewhat respect those unique features? The Canada Pension Plan Investment Board, for instance, clearly has an entire pool of workers who specialize in the financial market and their rate of pay may not be the same as that of employees who work at the Department of Finance. Will those unique situations be taken into account?


Mr. Belovich: The answer to both parts is yes, and I will explain. I am not trying to be flippant when I say that.

In my day-to-day duties, I work closely with the separate agencies for their collective bargaining mandating and negotiating, so I understand the mechanisms of the process. We have not done this yet for the Crown corporations, but we certainly have been party to enough meetings and discussions that the folks that will be leading this within the Treasury Board Secretariat are very much going to take the lead from how we currently conduct business with separate agencies.

The short answer is that we readily acknowledge as a central agency that we do not understand the intricacies of every other employer out there and their operations. The fact that they are set up as separate and distinct employers in the first place means that they are doing stuff that is manifestly different from how things are normally done within the core public administration. That does not mean there is not a requirement for independence and accountability. There is not necessarily a disconnect there, so to speak. However, certainly what we do with separate agencies — and my understanding is that this will be a similar process pursued with Crown corporations identified — is we need to sit down with a Crown corporation. We have to understand what their operational requirements and priorities are. All the Crown corporations currently do corporate plans annually anyway that are approved by the Treasury Board, so there is a degree of understanding of the operational requirements and uniqueness of the various Crown corporations that will certainly help to inform us on moving forward on this particular process for any particular Crown corporation.

The answer is, is there an appetite to normalize? I do not think I have ever heard anyone say that everybody should have exactly the same as everyone else. However, it is a very large public service and an extremely expensive public service, billions and billions of dollars. I understand the government is very much attentive to the fact that if there are going to be differences, they must be demonstrably necessary to exercise the operations of a particular Crown corporation, not simply because one particular Crown corporation went one particular direction during one particular set of negotiations.


Senator Bellemare: Are we to understand that the mandate will be general, perhaps a guideline, and nothing too specific?


Mr. Belovich: No, the mandates are extremely specific. We would call it the pattern, and it is out on the street and in the public domain on websites and whatnot. Through the last round of collective bargaining, for example, the government determined that it, to use the translated term, was going to normalize the severance pay regime so it was more aligned with what existed in the private sector. That was part of the mandating that was provided, and that is well understood. The bargaining agents know that.

The government settled with the Public Service Alliance of Canada early on with the 1.5, 1.5 and 1.5 per cent for the three years relative to that particular round. Those details were specifically in the mandate.

As much as possible, the mandate will identify the expectations. That does not mean there cannot be flexibility in the mandate. That does not mean that the mandate cannot say, for example, that in this particular situation for this particular restructure we will not tell you exactly how to do it at what level, but we will tell you that you cannot spend more than $2 million total and that if you do need to spend more than that, you have to come back and ask.

Broadly speaking, it is about aligning and rationalizing compensation. Specifically, as the government has identified in a number of fora, the intent here focuses particularly on the pension schemes, to make them viable and affordable and ensure that they are going concerns.

Back to my earlier comment, flexibility, absolutely, and specificity, as much as required, to meet the government's intent.


Senator Bellemare: Thank you very much for such a clear answer.


Senator Black: Thank you very much for being here. Like my friend and colleague Senator Bellemare, I find your answers clear and succinct. I appreciate that.

Mr. Belovich: That you very much. You are very kind.

Senator Black: I want to ensure that I have a clear understanding. I have the overview that, from this moment forward, negotiating mandates will go forward to the Crown corporations; is that correct?

Mr. Belovich: Could, may, depending on every case.

Senator Black: Absolutely.

Help me. How do I interpret subclause 228(3)? This is replacing subsection 85(1.1). How should I read that?

Mr. Belovich: Further to your colleague's question, is this about the Canada Council for the Arts, the Canadian Broadcasting Corporation, et cetera?

Senator Black: The problem is that when my colleague started, I was having interpretation problems. If you answered that, I missed it. That is what I want to understand.

Mr. Belovich: Essentially, at the front end of the act, the lawyers do what the lawyers need to do. They scrubbed down all the Crown corporation acts. They looked at what we were planning on doing. They determined that aspects of the Financial Administration Act do not currently apply to certain Crown corporations in certain circumstances as a function of a certain piece of legislation. They had to come up with language that said the government's intent by way of drafting instructions is that these new mandating things for unionized and non-unionized may be applied to all Crown corporations. Accordingly, tweak the legislation to ensure we can reach out and touch them.

Senator Black: Good. That is not an exemption but in fact an inclusion?

Mr. Belovich: Correct; absolutely.

Senator Black: That is very helpful.

I would like to talk to you for a moment about — and this is my language, not yours — the regulation of non- unionized employees' salaries, excluding, as I understand from yesterday, order-in-council appointments; correct?

Mr. Belovich: Correct.

Senator Black: I am now the CEO of CBC. Going forward, the intent would be to have input on the salary range applicable to the President of the CBC.

Mr. Belovich: Not so much the president as a GIC appointment. However, if the President of the CBC, for example, decided that for all of his or her unrepresented and non-unionized employees a 5 per cent pay increase was in order, the government may in fact insert itself and say we are not sure we can entirely afford that or, quite frankly, that you can afford that. That is strictly hypothetical. You used CBC, so I mentioned it.

Senator Black: The process would be that the government would have a right of approval.

Mr. Belovich: In that particular case, yes. Should the Governor-in-Council direct the Treasury Board to be the approving authority for a particular Crown corporation for unrepresented or non-unionized employees, then essentially the Crown corporation would be obliged to submit to the Treasury Board Secretariat for analysis of what it or the deputy head of that Crown corporation intended to do for the non-unionized employees.

Senator Black: The process, if I understand you correctly, is that the government would have to signal to the corporation in question that you want to have input, however you define that, in respect of salary range. Is that how that works, or do I, as the corporation, submit to you my proposed list of names and salaries and that is what you approve? That is what I want to understand.

Mr. Belovich: That is what I would anticipate. With my background, I would expect it to be unusual that Treasury Board would be given the authority for unionized and not for non-unionized concurrently because the two are intimately linked. In the case of the non-unionized, one would anticipate that the process would be something like the Governor-in-Council directs that the XYZ Corporation shall have, apart from other things, any improvements or changes to terms and conditions of employment for unrepresented or non-unionized employees approved by the Treasury Board. We would then reach out and say, ``What are you looking at? Talk to us. We will tell you what is within the realm of possibility. Ideally what you submit to us is something Treasury Board can say yes to. If not, this could be a long back and forth discussion.''

Senator Black: That is your expectation of how the process would work?

Mr. Belovich: That is my expectation.

Senator Black: Would it cover independent contractors in these organizations?

Mr. Belovich: The focus here is solely on the setting of compensation that would otherwise be established by the employer and not contracting relations. It is employer/employee relationship-type stuff.

Senator Black: What if I am an on-air personality with CBC but am not an employee? I am a highly paid lacrosse commentator. Would you or the government have any ability to control what is paid to me?

Mr. Belovich: Through these proposed changes, I cannot see how that can be affected. Whatever else is out there, I am not an expert on contracting.

Senator Black: Just with this.

Mr. Belovich: This is solely an employee/employer relationship in terms of compensation.

Senator Gerstein: Mr. Belovich, thank you for appearing here. My first question is not directly related to Bill C-60 but comes from the opening comment from our chair. I am fascinated by your title: Senior Director, Strategic Non- Core Public Administration Compensation Management. That begs the question, is there a senior director of core public administration? I have no idea what either of them might be.

My second question, and I will give it to you now, does relate to Part 3, Division 17. Reference was made that Treasury Board might have an employee present at these hearings. I am surprised, and if you could clarify, that ``employee'' has such a wide range. I am assuming it must be under the jurisdiction of the secretary of the Treasury Board, but under the secretary, officer? Why is it such a broad description of who might be the observer?

Mr. Belovich: We actually thought it was narrower from what it started out with. The short answer is yes, there is a director and senior director of core public administration. The core public administration comprises those individuals and those entities for which Treasury Board is the employer. The non-core public administration comprises the separate agencies. In my portfolio, I also look after the compensation of benefits for the Canadian Forces and for the Royal Canadian Mounted Police.

Senator Gerstein: Thank you for that clarification.

Mr. Belovich: In terms of the identity of the individual, we started out thinking it could be someone ``under the jurisdiction of'' and the lawyers said, ``No, we want an employee.'' The individual is there to represent the interests of the Treasury Board if Treasury Board is so directed to exercise specific authority by the Governor-in-Council. At the end of the day, the individual has to be accountable under the code of ethics, et cetera, for the Treasury Board Secretariat. It could be any person who is an employee. The reality is that it would need to be someone, obviously, from my line of work; that is, someone who has been involved in collective bargaining and labour relations for enough time that the person sitting there quietly not intervening, not participating and functioning only as eyes and ears with the focus of the Treasury Board's finance hat as opposed to employee hat; someone who understands what is happening and can perhaps flag in their head that if something is going sideways through the Governor-in-Council direction, it needs to be reported back perhaps to the secretary.

Senator Gerstein: I use the term ``in reality'' what it means. In reality, how big a range is that?

Mr. Belovich: How many people are there?

Senator Gerstein: I am not thinking how many people as distinct from how many levels of management could that conceivably be within your organization?

Mr. Belovich: Oh, several.

Senator Gerstein: Several. Not many?

Mr. Belovich: We have AS2s and 3s doing administrative support work.

Senator Gerstein: That is what you would picture would be the type of individual that might be involved in this?

Mr. Belovich: The type of individual I would expect to be at this would be someone that we would call an EX minus 1; that is, a senior administrator who has been doing this for several years in a leadership role and someone who had functioned as a negotiator previously, that kind of idea. It would certainly be someone with a specialty in labour relations and compensation management.

Senator L. Smith: How many levels are there?

Mr. Belovich: I do not know how many levels there off the top of my head. There are lots. I could not list it. Depending on the group, whether you are an AS, an administrative support person; or an economist, or a computer science, they vary depending on —

Senator L. Smith: On average, if you had to make a generalization?

Mr. Belovich: Where I work, it is a PE, essentially an analyst compensation-type person. They start at two and go up to six. Then you kick into the EX side of the house and they start at 1 and go up to 5.

Senator L. Smith: Those are the levels within that level?

Mr. Belovich: Those are the levels within. There would be 2, 3, 4, 5, 6 and then 1, 2, 3, 4, 5.

Senator L. Smith: In general, how many classifications would there be of different types of employees?

Mr. Belovich: I could not tell you off the top of my head. There is another senior director who looks after the same group, but I do not have her portfolio memorized, unfortunately.

Senator L. Smith: Thank you.

The Chair: I think this is helpful. You indicated that an EX starts at 1 and goes up to 4, but you also mentioned earlier in relation to a question from Senator Gerstein that there is an EX minus 1 in there. How many minus categories do you have?

Mr. Belovich: The EX minus 1 is colloquial, in this particular case, for the level 6 person. It is the person immediately subordinate to the entry of the executive cadre.


Senator Chaput: I want to make sure I have understood correctly. The act is being amended to allow the Governor- in-Council to direct a Crown corporation to have its negotiating mandate approved. In other words, a Crown corporation can be told that it has to have the Treasury Board's approval before signing a collective agreement; it can also be told to obtain approval before setting the terms and conditions of employment of non-unionized employees. Is that right?

Mr. Belovich: Yes.

Senator Chaput: These provisions apply to 48 Crown corporations. The decision as to whether or not the organization will be subject to those conditions will be made on a case-by-case basis, is that correct?

Mr. Belovich: Yes.

Senator Chaput: Is that decision made on a case-by-case basis? Who makes the decision, recommendation or suggestion as to whether the provisions should apply or not? Are there criteria?


Mr. Belovich: There are none that I am aware of, currently. I would anticipate that, ultimately, there will be a senior level in the government that would identify which Crown corporation. In terms of an ongoing process, the Treasury Board of Canada Secretariat works closely with all the Crown corporations constantly. There is a corporate plan, as I mentioned previously.

I would anticipate that were the bureaucrats responsible for a specific Crown corporation's corporate plan to identify concerns with regard to compensation, with regard to financial viability, more broadly with regard to certain compensation decisions, that could be flagged up the chain of command to the secretary. The secretary may signal it to other deputy ministers, and it might get the attention of the government at some point. One would then anticipate that someone on high would reach down and say, ``I think we will trigger these particular new provisions for this particular Crown corporation for this period of time.''


Senator Chaput: According to what you just said, those organizations were evaluated. If the evaluation revealed any weaknesses or shortcomings in the organization, could it then be subject to the provisions in question?


Mr. Belovich: Based on my understanding, I would just refine that excellent summation ever so slightly to say that the analysis is ongoing and it has been forever and ever; it is a function of what will pop out of that. This is simply a new tool in the government's tool box to be able to say that this particular Crown corporation has perhaps worried us for a while, for whatever reason, and we would like to go in and take a look around and have a discussion with them on where they are going.


Senator Chaput: At that point, would there be a discussion with the organization before it is required to go through those steps?


Mr. Belovich: Absolutely. As someone who has been working with the separate agencies for a number of years now, I could not fathom being able to reach out unilaterally to the Parks Canada Agency and say, ``Here is what you are going to do this time. I do not care what is really happening with you or what your problems really are.'' That is not the way business is conducted.

We have to understand what matters to them, what makes them tick and what is unique about them. Again, they would not have been set up as a separate agency. In this case, these Crown corporations would not have been set up as Crowns if they could have just been integrated into departments.

We cannot unilaterally swoop in and pretend that we are high and mighty and tell them how to live; it will not work. There is a bit of pull and push there.


Senator Chaput: It will require more work. Will you need more staff?


Mr. Belovich: The decision has been made that we will not be requiring more human resources, so we will absorb this as part and parcel of our normal function. That is my understanding at this time. If the government decides in its wisdom to identify a corporation or two, I do not expect it will break any organizations.

If, for some unfathomable reason, all 48 Crown corporations would be subsumed by this new approach suddenly, then certainly there would have to be discussions about incremental resource requirements. However, if this is not to happen frequently and is not to happen for extensive durations, then I cannot imagine that we would need — if anything — more than a resource or two to help us get through the tough parts.

Senator L. Smith: How are you presently set up resource-wise to cover your mandate? What do you have in terms of resources?

Mr. Belovich: We are pretty lean and mean. I have a staff of 12 people to look after 28 employers. My counterpart has a similar construct except that he also employs all of the core public administration negotiators, so he has more people, but these are people who are out with the bargaining agents at tables constantly.

Senator L. Smith: Your people do what, as a role?

Mr. Belovich: I have a junior and senior analyst, for example, with the Royal Canadian Mounted Police and two with the Canadian Forces. They are responsible for understanding the entire policy suite for personnel benefits and compensation for each of those organizations. They are responsible for facilitating Treasury Board submissions for pay increases, new benefits, new policies — the Fort McMurray allowance, for example, is the one we did last year — and the cadet recruitment allowance for Depot that was recently renewed for a period of time by the Treasury Board ministers. We work closely with the RCMP for those sorts of things. With the Canadian Forces, it is the same sorts of things. We have heard in the media about hardship and risk allowances in Afghanistan. That is part of my portfolio, so we work closely with the Canadian Forces to ensure those processes are refined and responsive to Canadian Forces' needs.

Senator L. Smith: Are those people on-site with those particular organizations?

Mr. Belovich: Those people are around the corner from my office at 400 Cooper. As required, we jump on a bus or in a cab and head over to meet people from time to time to ensure we keep our finger on what is making them tick.

The Chair: Would you also include oversight of the reaction to the Supreme Court decision — or maybe it was the Federal Court of Appeal decision — in National Defence for the clawback situation on pensions? Is that part of your area?

Mr. Belovich: Not of mine, specifically. Treasury Board of Canada Secretariat has a separate sector that deals with pension benefit schemes, disability and whatnot. However, it is certainly within the same umbrella organizations — yes, under the secretary.

Senator Buth: Can you provide specific examples of Crown corporations where you are aware that this legislation might have prevented financial issues relative to terms and conditions of employment?

Mr. Belovich: I do not have any examples for you, which may have been why they selected me to come here. I am not with the group in Treasury Board that actually works on corporate plans. We are the negotiations types. I do not know specifically, hand on heart, of any particular Crown corporation that is under the microscope.

One would assume that if these provisions are being put in that they are being put in for a reason. However, I do not personally have any insight into a particular Crown corporation.

The Chair: Mr. Belovich, we thought you volunteered to be here. I am sure you will next time.

Senator McInnis: I sitting here, listening. When I read that this was coming in, I was surprised that it actually was not there in the past. It is important when you have this many Crowns that could go off on their own and negotiate contracts. It was a surprise to me.

When I was in government in Nova Scotia, I used to pretty much know the percentage of the budget in terms of salaries. What would it be in these Crowns?

Mr. Belovich: I do not have that figure.

Senator McInnis: Generally speaking, would it be 50 per cent or 60 per cent?

Mr. Belovich: I do not think it is that high —

Senator McInnis: It is not far from it.

Mr. Belovich: — but it is a lot of money.

Senator McInnis: Yes, it is. If governments will control spending, obviously these are huge budgets for these Crowns. If you are to control on behalf of the taxpayers of Canada, it strikes me that this is just great legislation. I would have thought that it would have been put in place some time ago.

It is not a witch hunt; it is nothing like that. It is just looking after, as the Treasury Board should, the estimates and the costs of government. This is a huge government, as you said, and there are billions and billions of dollars in salaries. These 18 Crowns, or whatever, are extremely important.

I congratulate the government for doing it, because I just would have thought it was there. I was surprised to see this legislation coming in. I think it is a wonderful thing, Mr. Chair.

The Chair: Thank you for that.

The Canada Labour Code applies to these various Crown corporations, does it not?

Mr. Belovich: Yes, it does, senator.

The Chair: Would this legislation replace part of the Canada Labour Code, or supplement it?

Mr. Belovich: It would not. We were given clear direction that we were not to supplant any of the authorities, rights and responsibilities within the Canada Labour Code. There is language within the changes being proposed that specifically say that directors are obliged to effect orders from the Treasury Board. It goes on to say that directors are indemnified if they act in good faith in concurrence with their duties under the Financial Administration Act.

It is all linked back to the Canada Labour Code. This is not about replacing that in any way, shape or form. If a bargaining agent in the process should determine that somehow this is unfair labour practice, they would be within their rights to exercise, under the Canada Labour Code, whatever provisions were there to pursue that. That is again to reinforce the intent to support the Canada Labour Code, which is why one of the other provisions here specifically says if an employee of the Treasury Board is directed to attend, then that employee has a right to be there. That is to anticipate those types of considerations and concerns.

The Chair: Thank you very much. I think you have explained these sections very well and succinctly. We appreciate your attention and for coming back a second time to help us get through it.

We will be going to Division 18 next. This section is Keeping Canada's Economy and Jobs Growing Act. We are amending that particular act. We will find out shortly, but it is just section 233. I think it is only one section.

We are very pleased to welcome Sébastien Badour, Principal Advisor, Policy and Communications, Policy and Planning, from Infrastructure Canada; Louise Atkins, Director of Planning, Monitoring and Reporting, from Aboriginal Affairs and Northern Development; and from the Department of Finance, we have Ross Ezzeddin, Director, Sector Policy Analysis, Economic Development and Corporate Finance.

Ross Ezzeddin, Director, Sector Policy Analysis, Economic Development and Corporate Finance, Department of Finance Canada: I am here in place of Ms. Lajoie.

The Chair: We are happy you are here. Will you be giving us a background on this particular division?

Mr. Ezzeddin: Yes.

The Chair: You have the floor.

Mr. Ezzeddin: As mentioned, this division consists only of clause 233 and it would amend the Keeping Canada's Economy and Jobs Growing Act of 2011 related to the Gas Tax Fund. As members of the committee are likely aware, the Gas Tax Fund is one of the mechanisms through which the government provides support for infrastructure. In this case it is stable, predictable funding specifically for municipal infrastructure.

The amendments contained in Bill C-60 are for two purposes. First, they would allow for increases to the sum that may be paid under the Keeping Canada's Economy and Jobs Growing Act for the purposes of the Gas Tax Fund. Economic Action Plan 2013 proposes to index the Gas Tax Fund at 2 per cent per year starting in 2014-15, with the increases to be applied in $100 million increments.

As it stands now, the current legislation defines the sum that can be paid under the Gas Tax Fund at $2 billion per year. The amendments would increase this sum by $100 million per year when an underlying calculation, which is defined as the initial sum of $2 billion increased annually by 2 per cent, reaches the next $100 million threshold.

Overall, these increases will provide an additional $1.8 billion in funding over the next 10 years. The brief material you have been provided gives a numerical example of how this works, but I can work you through that at the end of my presentation.

The second purpose of the amendments is to allow for sums to be paid under the statutory authority on the requisition of the Minister of Aboriginal Affairs and Northern Development. As was mentioned yesterday, the minister's legal title is still the Minister of Indian Affairs and Northern Development, so that is what is actually contained in the bill. Economic Action Plan 2013 proposes that funding will be allocated within the Gas Tax Fund to First Nations infrastructure based on First Nations population on reserve. This allocation will be delivered through the First Nation Infrastructure Fund, which is a program managed by Aboriginal Affairs and Northern Development Canada. The amount for First Nations infrastructure will be set in terms and conditions that will be approved by Treasury Board.

For a bit more detail in terms of how this mechanically works in the bill, clause 233 essentially creates subsections under section 161 of the Keeping Canada's Economy and Jobs Growing Act. Subsection 161(1) replaces the previous section 161 to allow for sums to be paid on the requisition of Minister of Aboriginal Affairs and Northern Development. It removes the reference to a permanent sum of no more than $2 billion per year and replaces it by a reference to a new subsection 161(2).

The new subsection provides for the sum that may be paid under the Gas Tax Fund to be increased by $100 million when the underlying calculation defined in the next subsection, 161(3), reaches the next $100 million threshold.

Finally, the new subsection 161(3) provides the formula for the underlying calculation to determine the amount that may be paid in subsection 161(2) and that is a formula that reads A x 1.02 to the power of B, where A is $2,000,000,000 and B is the number of years over which the increases compound starting in 2014-15.

The Chair: Does that formula provide for compounding after the $100 million is added after three years? According to my calculations, it will take three years before anything is added; is that correct?

Mr. Ezzeddin: That is correct.

The Chair: After the fourth year, it is $2 billion plus $100 million that has been put in there, and then there is 2 per cent of that that will start happening for the future?

Mr. Ezzeddin: The underlying calculation is not effected, so the underlying calculation after the third year is, I think, $2.122 billion. It is that amount that will continue to be indexed going forward.

The Chair: It is compounded.

Mr. Ezzeddin: Yes, that is correct. You do not start over each time; the increment is applied on top.

The Chair: That is important from the municipality's point of view to understand. There is a built-in growth factor for them as well.

Mr. Ezzeddin: That is correct.

Senator Callbeck: That $2 billion is coming from the Consolidated Revenue Fund rather than a special fund set aside that has the federal taxes, right?

Mr. Ezzeddin: That is correct, yes.

Senator Callbeck: Does the $2 billion have any relationship to the amount of money collected by the federal government through the taxes on gasoline, or is this the figure that was established?

Sébastien Badour, Principal Advisor, Policy and Communications, Policy and Planning, Infrastructure Canada: Roughly speaking, it is equivalent to revenues from 5 cents of the gas tax. The total of the gas tax is 10 cents, so $2 billion is the equivalent of 5 cents.

Senator Callbeck: Basically, the federal government is giving the municipalities 50 per cent.

Mr. Badour: It is a rough relationship. That was the relationship when it was introduced in 2005.

Senator Callbeck: It is based on per capita, right?

Mr. Badour: It is the current formula for this year and the government still has not decided on the formula starting next year. The current formula, the total amount nationally is $2 billion a year. P.E.I. and the territories each get $15 million and the rest is allocated among the other nine provinces and First Nations on a per capita basis. It is largely per capita, but there is a base amount for P.E.I. and the territories.

Senator Callbeck: That is good to hear.

It goes to the municipalities. I assume the cheque goes from the federal government to the province, and it allocates it to the municipalities. Does the municipality have to be a certain size in order to take advantage of this tax refund?

Mr. Badour: Typically in most jurisdictions pretty much every municipality gets a Gas Tax Fund allocation. The exact formula in each province or territory varies. In some provinces, some is allocated based on transit ridership and the rest is per capita. In other provinces there is a base amount irrespective of the size of the municipality, and the rest is a per capita amount. There are huge variations across the country, but pretty much every municipality gets an allocation.

Senator Callbeck: Is that up to the province or is it worked out with the federal government?

Mr. Badour: It is set out in the funding agreements that Canada signs with the provinces and territories.

Senator Black: I have a couple of basic questions so I can understand more fully what you have shared with us. Is this new money?

Mr. Ezzeddin: In what sense?

Senator Black: In terms of infrastructure, the application of funds for the gas tax. Is this something new that is being proposed here?

Mr. Ezzeddin: What is new is that starting in 2014-15 the amounts are amounts that were not part of the previous infrastructure plan and the indexation of the scheduled increases are also new.

Senator Black: Starting in 2014-15 it is a new $2 billion or 5 cents a litre as you indicated. Is that correct?

Mr. Ezzeddin: It was not part of the previous infrastructure plan or the current Building Canada Plan.

Mr. Badour: When the program was introduced in 2005, 10 cents gave you $4 billion. Since then, there has been a bit of movement. There was never a hard direct relationship; so like I said, it was a rough link. That was when the program was introduced in 2005.

Senator Black: The point that I want clarification on is that in 2014-15 this is new money, an extra $2 billion for infrastructure projects for the identified parties.

Mr. Ezzeddin: In 2013-14 municipalities are receiving $2 billion from the program in the current fiscal year. They will receive $2 billion again in 2014-15 and the first increase from that amount will be in 2016-17.

Senator Black: The answer to the question I am asking is: No, it is not new money; it is an existing program.

Mr. Ezzeddin: In terms of comparing the levels that is correct. This is an existing program.

Senator Black: If I were the Mayor of Saskatoon, would I anticipate an opportunity to access larger amounts of money from this funding for buses or sewers or other infrastructure needs?

Mr. Badour: The first step will be to determine how the national amount will be allocated amongst the provinces, territories and First Nations. The second step will be for Canada to negotiate with Saskatchewan an allocation formula for the Saskatchewan allocation.

Senator Black: Part of the mix is provinces as well municipalities. If I am the Province of Alberta and I want to build a high speed train between Calgary and Edmonton, I could talk to you about it.

Mr. Badour: This program is strictly for municipal and First Nations infrastructure. We do not cover provincial infrastructure, unless it is municipal-type assets that, on an exceptional basis, are delivered by a province. Those are exceptions. This is for municipal and First Nations infrastructure.

Senator Black: In the last part of 161(1), I read, ``to provinces, territories, municipalities, municipal associations . . . and First Nations . . . .'' I would have read that to be broader than just municipalities.

Mr. Badour: Those are the recipients. Under the current program, the initial recipients of the federal money tend to be the provinces and territories. They are essentially a flow-through for the funds to be allocated to the municipalities. The wording at the very end specifies that the purpose of the funding is for municipal, regional and First Nations infrastructure.

Senator Black: Good. That is helpful.

The Chair: I note the section that Senator Black was referring to states ``may be paid.'' Presumably if the federal government cannot arrange a distribution agreement with the province, then it will not be paid. Is that reason for the word ``may'' rather than ``shall?''

Mr. Badour: One reason, yes. Before we can flow the funds, we need funding agreements with the provinces and territories.

A second reason may be that historically when a province does not respect certain terms of a funding agreement, for example, we may withhold the funds in a given year until they rectify the problem. In that year, for example, we would be paying less than the amount provided under the legislation because we are holding back the funds until they fix the problem.

The Chair: Is there a matching requirement in the existing funding agreements?

Mr. Badour: No. Under the existing funding agreements, federal cost-sharing can go up to 100 per cent.

The Chair: Is it determined province by province?

Mr. Badour: No. It is done nationally. For projects from Newfoundland to British Columbia to Nunavut, the cost- sharing many provisions are the same.

The Chair: You indicated that you are in negotiations for the next round of funding. Is that right?

Mr. Badour: We will have to negotiate, but we will not be able to start the formal negotiations before the bill passes and Treasury Board approves the terms and conditions of the program.

Senator Buth: Is this the first time that First Nations are being included?

Mr. Badour: Since its inception the Gas Tax Fund has had a First Nations allocation.

Senator Buth: Why is the addition of the Minister of Indian Affairs in the bill?

Mr. Ezzeddin: At the time that the legislation was put in place two years ago, it was not clear what the mechanics would be to deliver that allocation. Now it is clear in the budget that it will be delivered by a program managed by the Minister of Aboriginal Affairs and Northern Development. He or she needs to be named in the bill in order to effect that management.

Senator Buth: You made a comment about how the dollars are divided, $15 million each to P.E.I. and the Northwest Territories, and the rest between the remaining provinces and territories. What about First Nations? How is that amount determined?

Mr. Badour: That is the current allocation formula. In terms of First Nations, we treat them like a province. We calculate using population data from AANDC to tally up the population, which is roughly 400,000. We base their per capita allocation on that population.

Senator Black: I want to confirm that the allocation for provinces is based on per capita. Is that how it will be done?

Mr. Badour: I cannot speak to the funding starting next year because the government has not made a decision on the allocation formula.

Senator Black: What was it historically?

Mr. Badour: Historically, P.E.I. and each of the territories receive a base amount. The rest of the funding is allocated among the rest of the provinces and First Nations on an equal per capita basis.

Senator Wells: Is the money destined for each municipality or will it be dependent on a provincial list for specific municipalities?

Mr. Badour: The funding agreements have an allocation formula. Historically, the formulas have been such that pretty much every municipality has an allocation.

Senator Wells: Are there incorporated municipalities?

Mr. Badour: Yes, there are incorporated municipalities, and we have been trying to cover unincorporated municipalities as well, sometimes through the province.

Senator Wells: Not every municipality may have projects ready. Can that money destined for a specific municipality be banked or does it have to be disbursed on a project-specific basis?

Mr. Badour: Under the current program, the funding can be banked.

Senator Callbeck: I have a quick question on the allocation. You said that it has not been determined for this year. You mentioned that last year Prince Edward Island was guaranteed $15 million. How often does this allocation formula change?

Mr. Badour: The allocation until this year is set. Starting in 2014-15, depending on when we negotiate agreements with the provinces, we would need to determine the allocation of the funding. In this case, we have not made a decision on the allocation formula or on the time frame of the agreements. However, the time frame of the new Building Canada Plan is 10 years; and this initiative is part of that plan.

Senator Chaput: Is it a 10-year agreement?

Mr. Badour: A final decision has not been made on that. I can say only that it is part of the new Building Canada Plan, which has a 10-year time frame.

Senator Chaput: How many years was the previous agreement based on?

Mr. Badour: It started in 2005. The initial agreement was from 2005-10 and was extended for another four years to 2014. There has been one agreement that was amended and extended. The agreement covered 2005-14.

Senator Chaput: Is all of the money to be spent in this five-year time frame of the agreement? If in the last year there is money left, do they keep it or is it taken back?

Mr. Badour: It would not be taken back.

Senator Black: I have a question that arose from something that Senator Callbeck raised. In terms of the infrastructure projects funded under this program, does the Government of Canada prioritize what types of infrastructure they want the money spent on?

Mr. Badour: The federal government sets eligible categories, such as public transit and local roads. We will be expanding them as per the economic action plan 2013. We only set the categories. Within those categories, municipalities can choose which projects to go forward with based on their priorities.

Senator Black: That is helpful. Are you able to share with us what those categories are?

Mr. Badour: Sure. They are in the budget, but I can provide that information.

The Chair: That concludes all senators who have indicated an interest in understanding Division 18. I thank each of the witnesses for being here. We appreciate your help in understanding this division.

Colleagues, that is the end of the bill. There is a schedule, but I do not think you want to go through the schedule of items that appear as I do not think it would be helpful to us.

The next step will be to talk about areas either outside or within government that have been or will be impacted by this proposed legislation. If there are any witnesses that you would like to hear from, please let the steering committee know as quickly as possible because we expect to get under way with witnesses soon with a view to trying to finish Bill C-60 by the end of next week, other than the report. That is what we are working towards. If we do not hear from you, then areas that we highlight will be determined by the steering committee. We will try to find appropriate witnesses for those areas that we decide to highlight.

Before I conclude the meeting, I would like to thank Ms. Heather Hickling— and we will not ask her any questions — who coordinated all the witnesses for the committee over the past two weeks. Ms. Hickling is Senior Advisor with Parliamentary Affairs at Finance Canada. We will see her again in the fall with the Budget Implementation Bill No. 2, I hope.

Thank you very much for your help. We appreciate it.

I will see colleagues this evening with respect to the report — and you have received a copy — on the Main Estimates, which form the basis for full supply that the government will want before Parliament adjourns for the summer. Please read it carefully. We would like to try to get through that document this evening.

We will hear from a group of witnesses this evening as well. Now is the time to get all of this done rather than in July. Thank you very much.

(The committee adjourned.)