THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, March 7, 2017
The Standing Senate Committee on National Finance met this day at 9:30 a.m. to examine the Main Estimates for the fiscal year ending March 31, 2018.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Welcome to the Standing Senate Committee on National Finance. My name is Larry Smith, senator from Quebec and I chair the committee. Colleagues and members of the viewing public, the mandate of this committee is to examine matters relating to federal estimates, generally, as well as government finance.
First, let me introduce the other members of our committee. To my left is Senator Woo from British Columbia. To his left is Senator Pratte from Montreal. To his left, from Alberta is Senator Black. To my right, from Toronto is Senator Marwah. To his right, from Quebec, is Senator Forest. We also have former Auditor General from Newfoundland and Labrador, Senator Marshall.
[Translation]
This morning, we are beginning our study on the expenditures set out in the main estimates for the fiscal year ending March 31, 2018, with the exception of Library of Parliament Vote 1.
[English]
This meeting will go over the Main Estimates 2017-18. We welcome the officials from two major departments. From the Treasury Board Secretariat, we welcome Brian Pagan, Assistant Secretary, Expenditure Management Sector; Marcia Santiago, Executive Director, Expenditure Management Sector; and Grace Chenette, Executive Director, Corporate Services. From the Department of Finance Canada, we have Christopher Meyers, Chief Financial Officer, Corporate Services Branch; Bradley Recker, Director, Fiscal Policy Division, Economic and Fiscal Policy Branch; and Glenn Purves, General Director, Federal-Provincial Relations and Social Policy Branch.
Welcome. I understand that each department has an opening statement. Let us start with Mr. Pagan.
[Translation]
Brian Pagan, Assistant Secretary, Expenditures Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. I am pleased to be here today to give you an overview of the 2017-18 Main Estimates. If I may, I will begin with a brief presentation, following which we would be happy to answer your questions.
[English]
Page 3 of the deck contains a reminder to the committee of the purpose of Main Estimates. They represent the spending requirements for each department, agency and appropriations-dependent Crown corporations, of which there are 121, for the fiscal year beginning April 1. These amounts reflect funding decisions taken by government in the preceding years as they affect fiscal 2017-18. They do not yet incorporate any announcements or decisions taken by the government with respect to Budget 2017.
The information in the estimates is intended to help explain the authorities and the amounts required by the departments that will be presented to Parliament in the form of two different supply bills. The first bill, interim supply, will be introduced by the President of the Treasury Board later this month. That is intended to allow departments to begin the fiscal year, and it is to provide initial budgets to deliver programs and services effective April 1. Committees have until May 31 to study the estimates in detail. At that point, full supply will be introduced by the government in June, and that will cover all the authorities and amounts set out in these Main Estimates for the remainder of the fiscal year.
In addition to the contextual information around authorities and requirements that are voted by Parliament, the Main Estimates also provide the current forecast of statutory spending. This has already been approved by Parliament -- it is not voted on through the supply bills -- but it represents a very significant part of overall federal outlays.
Slide 5 of the deck is a reminder of the structure of the Main Estimates.
[Translation]
The main estimates document is structured in two parts. Part I provides an overview of federal spending. It also summarizes key elements of the main estimates, including the distribution of voted and statutory authorities, as well as budgetary and non-budgetary expenditures, and a breakdown by type of expenditure such as transfer payments, public debt charges, and operating and capital costs of government.
Part II of the main estimates provides the distribution of funding based on voted appropriations and program activities for each organization, the total amount planned in statutory spending, and explanations of changes made compared with the previous main estimates.
[English]
Let us turn to slide 7 where we see some of the numbers in these Main Estimates and a comparison to 2016-17. The budgetary Main Estimates for 2017-18 total $257.9 billion. This includes both voted and statutory items. Overall, budgetary Main Estimates have increased by $7.8 billion, or 3.1 per cent, over the 2016-17 Main Estimates.
This amount of $257.9 billion can be broken down as follows: Voted spending of $102.1 billion shows a planned increase of $12.3 billion compared to last year, and this reflects a ramp-up of spending for priorities primarily in the area of infrastructure that were announced in Budget 2016. In fact, over $7 billion of the $12.3 billion increase is related to infrastructure spending.
Statutory spending, totalling $155.8 billion, shows a year-over-year decrease. This is due to a shift of children's benefits to tax expenditures. As the committee will recall, on July 1, the new Canada Child Benefit took effect. This actually represented an increase in spending in this area; spending on children's benefits has increased from $18.4 billion to $22.9 billion. But the delivery vehicle is through the tax expenditure system, which is outside the orbit of the estimates. Therefore we're showing a decrease in statutory expenditures but an overall increase in this area for the child benefit.
Slide 8 breaks down these numbers by the type of payment. Approximately two thirds of overall expenditures of $257.9 billion are provided in the form of transfer payments. This amounts to $164.3 billion that is transferred to provinces, individuals and, in some cases, organizations. This includes both the grant and contribution programs administered by many departments as well as the major statutory payments such as elderly benefits and fiscal equalization. Transfer payments account for the majority of growth of spending in this area over the last five years.
Then, $72.1 billion, or 28 per cent of the overall Main Estimates amount, reflects operating and capital expenditures of departments, and $21.5 billion, or 8 per cent of the overall Main Estimates amount, is for interest charges on public debt. Those costs continue their downward trend due to lower interest rates.
I will quickly overview some of the major changes as they affect individual departments. On slide 10, we see some primary increases and decreases in the Main Estimates. The largest year-over-year increase is $3.1 billion for the Office of Infrastructure. Of this amount, almost $2.7 billion is transfer payments for public transit and green infrastructure. There is also an increase of $455 million related to the new Champlain Bridge Corridor Project.
The budget of Indigenous and Northern Affairs Canada increases by $2.6 billion related to a variety of activities, including over $800 million for social, green, community and federal infrastructure; $603 million for elementary and secondary education in First Nations; and over $500 million to negotiate, settle and implement comprehensive land claims.
Next on the list is Innovation, Science and Economic Development Canada. This increase in its budget of $1.3 billion is due primarily to the Post-Secondary Institutions Strategic Investment Fund. There is also $102.3 million for the Sustainable Development Technology Fund, including funding for the next generation of biofuels.
The final increase on the list is roughly $1.1 billion for Veterans Affairs Canada, which includes over $800 million of additional financial support for veterans as announced in Budget 2016, along with routine annual adjustments to programs and services for veterans to reflect inflation and cost of living.
With respect to decreases in these Main Estimates, there is a large decrease in statutory spending of Employment and Social Development Canada, as noted earlier, and this is related to the new Canada Child Benefit and the move to a tax expenditure rather than a statutory payment. As a consequence, the stat forecast in ESDC decreases by $7.7 billion.
Another example of a decrease is Statistics Canada. The department's lower funding level is due to the winding down of activities related to the 2016 census of population and census of agriculture.
The last decrease listed is for Natural Resources Canada and this is a forecast of statutory payments to the Newfoundland Offshore Petroleum Resource Revenue Fund, which is reducing by $334 million to be in line with the actual transfer of revenues received in 2015-16.
Mr. Chair, before concluding, I would like to say a few words on estimates reform and where we would like to go with the Main Estimates. As I mentioned earlier, what we are presenting to Parliament does not reflect initiatives that are currently being considered by the Department of Finance and will be announced in Budget 2017-18.
As you know, the President of the Treasury Board is very keen on aligning the budget and estimates process. As mentioned in the Fall Economic Statement 2016, the government proposes to implement reforms to the estimates process over the next several years to help make the process of reviewing government spending more open, transparent and accountable. Recent steps that have been taken toward this objective include tagging items to their budget decisions, so when new initiatives are identified in the estimates, we clearly identify which budget this is related to.
Last year, in 2015-16, we introduced a table in the first supplementary estimates of the year to reconcile the cash estimates to the accrual budget. We've also published an online annex in the final supplementary estimates of the year that identifies authorities that have been provided by Parliament but are no longer available, no longer required by departments. This is money that will not be spent. We are putting that information to Parliament so they are aware of changing program circumstances or considerations.
[Translation]
We look forward to consulting parliamentarians over the coming months to improve the budget process.
Mr. Chair, we have provided you with an overview of the main estimates and a summary comparison between the 2017-18 fiscal year and the previous year. We have also briefly gone over the recent changes to make estimates more transparent and relevant. I hope that this has been useful to the committee. We are ready to answer your questions.
Christopher Meyers, Chief Financial Officer, Corporate Services Branch, Department of Finance Canada: Good morning, Mr. Chair, members of the committee. As Chief Financial Officer, I am the lead executive responsible for financial reporting and disclosure of the 2017-18 main estimates for the Department of Finance. With me today are officials to assist in providing a more in-depth perspective on the rationale and/or policy that supports the numbers within these estimates documents.
These main estimates reflect departmental budgetary spending of $90.1 billion, composed of forecasted statutory expenditures of $90.1 billion and voted expenditures of $89.3 million.
The statutory items are displayed in the estimates for information purposes and will not be included in the appropriation bill.
[English]
The 2017-18 Main Estimates of $90.1 billion is $679.8 million higher compared to the 2016-17 Main Estimates of $89.5 billion and is due to an increase of $681.3 million in statutory items offset by a $1.5 million decrease in voted amounts.
Within the statutory forecast, the major contributing factors to the $681.3 million increase are as follows: A $1.1 billion increase in the Canada Health Transfer reflecting the minimum 3 per cent legislated growth rate for 2017-18; a $400.4 million increase in the Canada Social Transfer reflecting the 3 per cent legislated annual increase; a $373.2 million increase in fiscal equalization to reflect the 2.09 per cent gross domestic product-based escalator being applied to the 2017 level; a $145.5 million increase in territorial financing as a result of new and updated data used to calculate territorial expenditure requirements and revenue capacities entering the formula for Territorial Formula Financing; a $528 million decrease in other interest costs due to a decrease in the average Government of Canada long-term bond rate, which is used to calculate interest on public sector pension obligations pertaining to service pre-April 1, 2000; and a $764 million decrease in interest on unmatured debt to reflect private sector economists' expectations from the 2016 Fall Economic Statement.
The decrease of $1.5 million in vote 1 program expenditures is mainly due to a decrease in funding for time limited Budget 2015 initiatives totalling $1 million and Budget 2016 reductions at the departmental level to professional services, advertising and travel totalling $0.5 million.
This concludes my overview of the Main Estimates for the Department of Finance and we'd pleased to address any questions that the committee may have.
The Chair: Thank you, Mr. Meyers.
We have a list, starting with Senator Pratte.
Senator Pratte: Welcome once again to the committee. My question is for Mr. Meyers and is about the public debt charges and the impact of low interest rates. You mention that the savings come from lower interest rates, consistent with the forecasts by private sector economists, consistent with the 2016 Fall Economic Statement.
There are now expectations that interest rates will probably increase slightly. The fed has signalled that interest rates will increase slightly. Will that have any expected impact at all? I know you are working with long-term interest rates, of course, but could that have any impact at all?
Mr. Meyers: Public debt is sensitive to interest rates generally, so if interest rates go up, the interest expense goes up. If they go down, the interest expense goes down. Projections with respect to Budget 2017 are being worked on right now, and the impact of any adjustments to interest rate forecasts in that document would come through in a subsequent supplementary estimates package.
Senator Pratte: Which is why this is based on the 2016 fall update?
Mr. Meyers: That's right. This is the last economic update that the Department of Finance prepared.
Mr. Pagan: May I make the point clear? We work very closely with our colleagues in Finance. We will always use the latest publicly available information with respect to our forecasts, so at this point, it's a question of timing. The most recent document from the Department of Finance was the Fall Economic Statement and our forecasts are based on that information. As they update their information with respect to Budget 2017, it will be presented to Parliament by the Minister of Finance and then subsequently all of our forecasts will be updated in our supplementary estimates to take account of the Budget 2017 numbers.
Senator Pratte: Let's talk in theory, then. I'm interested in the impact on public sector pension obligations. If rates do increase, how will that impact the cost of public sector obligations or the calculation of obligations?
Mr. Pagan: Well, as Mr. Meyers indicates, it would have an impact. The numbers presented here with respect to interest on the debt reflect both our obligations for unretired debt as well as a number other obligations of the government, including public service pensions. It's a relatively smaller component, obviously, than the overall federal debt, but it would be part of the calculation to come up with the overall debt forecast number.
Senator Pratte: So we would, in the Supplementary Estimates, have a better idea of how you see the impact of possibly increased rates?
Mr. Pagan: That's correct. In fact, just to be clear, you would see that in the budget.
Senator Pratte: Yes. Of course.
Senator Marshall: I would like to carry along with that line of questioning because, in other Supplementary Estimates, (A), (B), (C), maybe all of them, when we're looking at interest on the public debt, there has always been a decrease. Every time we see sups, we see decreases, but the impression I'm getting from the estimates now is that those days are over. It looks like we are on the upswing. Is that correct?
Mr. Meyers: That's right. Like I said earlier, the Main Estimates for 2017-18 reflect the 2016 fall economic update. When we were here in November, I believe, on the Supplementary Estimates (B), that was the first point at which Budget 2016 assumptions had made their way into the estimates documents, and, if I'm not mistaken, at that point, they actually reflected a slight increase in interest rates, based on projections in Budget 2016.
Senator Marshall: So we would expect now, instead of seeing decreases as we move into our sups next year, that that would probably increase.
Mr. Meyers: It would be a function of what the Budget 2017 projections are with respect to the interest expenses.
Senator Marshall: Okay. Can you tell us something about the foreign debt? How much of our debt is foreign debt, and how much is payable in foreign currencies? I expect it would be mostly U.S. dollars. I know that you release an annual debt report, which I usually read, but could you give us an overview of our foreign debt and the value of the Canadian dollar, where we are going?
Mr. Meyers: In Canadian-dollar terms -- and I'm going on December 31, 2016 values so this would be data that would've been published in the Fiscal Monitor -- the value of direct-issue market debt in foreign currencies was $23 billion approximately, and that is the Canadian-dollar translated value.
Senator Marshall: To service that debt, is that usually more expensive than servicing Canadian debt? Could you give us some idea? Is that more expensive, as the dollar goes down, if you have to pay, for example, in foreign currency -- I would think mostly U.S. dollars -- than Canadian debt?
Mr. Meyers: I don't have the average effective rates on the foreign debt with me today, but it might more useful for me to describe to you why we have foreign debt.
Senator Marshall: Very briefly, because I have some other questions.
Mr. Meyers: Basically, it's used to fund the exchange fund account of Canada.
Senator Marshall: Yes, okay. We were told that last year.
Mr. Meyers: That's right. So the $23 billion that I referred to plus cross-currency swaps fund the exchange fund account and the foreign exchange assets of the Government of Canada.
Senator Marshall: Okay.
I notice that the health transfer and the social transfer are in at 3 per cent. For the health transfer, in the agreements that had been reached with the provinces that now have new agreements, I thought that it was 3.5 per cent?
Glenn Purves, General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance Canada: Senator, you're correct. So, for the CST, it's legislated at 3 per cent. For the Canada Health Transfer, it's the greater of the three-year moving average of nominal GDP growth or 3 per cent, in which case, for this coming year, it's going to be 3 per cent because the three-year moving average of nominal GDP growth is less than 3 per cent.
Senator Marshall: Why are the media reporting 3.5 per cent?
Mr. Purves: I'm not sure. Effectively, what the government did in December of 2016 was offer to the provinces an opportunity to engage in health funding arrangements for home care as well as mental health. That would be up to about $11 billion. So the media may be taking part of that and trying to extrapolate an effective rate.
Senator Marshall: Okay. Thank you. I have one more question for the Finance people. As to the changes that were made to mortgages for the stress tests that were made during the past year, does the Department of Finance monitor that to determine the impact on the economy? I'm just thinking, for example, I'm from Newfoundland and Labrador, and that has had an impact on our home-building sector. Does the Department of Finance monitor? Do they track to see what impact those changes are having on the economy?
Leah Anderson, Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance Canada: We absolutely are. Currently, it's still early days to see what the impacts are.
Senator Marshall: How long would it take before you measure the impacts? I had asked the question last year with regard to charitable donations and was told that it would take up to three years. Actually, they said it would take three years, not up to, to determine the impact of any changes for charitable donations. How long would it take to measure the impact with regard to the new mortgages rules?
Ms. Anderson: We feel by the summer, so within the next few months, as we get more data.
Senator Marshall: Would that be done by province or nationally? How would you do it? Is there any plan as to how it would be approached?
Ms. Anderson: We do sort of a national assessment of the impacts, and we'll look at provincial impacts as appropriate.
Senator Marshall: You will do provincial impacts as well. Okay, thank you. Do I have any more time?
The Chair: Could you tell us what your job is? We're going to stay with you for a second.
Senator Marshall: Okay.
Ms. Anderson: I'm the Assistant Deputy Minister of the Financial Sector Policy Branch at Finance Canada.
The Chair: Okay, so the whole issue of mortgages; the question that the senator asked you, is directly related to your expertise.
Ms. Anderson: Correct.
Senator Marshall: In Newfoundland and Labrador, we are experiencing a lot of fiscal issues, and the home builders, people involved in that industry, feel that the new mortgage rules are having a devastating impact on that industry. So that's why I was asking the question as to whether the government measures the impact and, depending on what the impact is, whether the rules will be changed. So you would say that, by the summer, you would have assessment done on those changes?
Ms. Anderson: That's correct.
Senator Marshall: I have a question for Treasury Board also. The public service insurance is under vote 20. That's increased to $2.4 billion. The reason I'm asking is because, when we were doing Supplementary Estimates (C), last week, we were looking at an item for the RCMP. I think this one is along the same lines. Perhaps Mr. Pagan or Ms. Santiago could just explain what that item is so that we could get a good handle on it? It's $2.4 billion.
Mr. Pagan: Grace Chenette, our Deputy CFO, will address that question.
Grace Chenette, Executive Director, Corporate Services, Treasury Board of Canada Secretariat: The public service insurance vote covers benefits, insurance programs for public servants, RCMP and Canadian Forces members. It includes health care benefits, dental disability and life insurance. It also includes legislative obligations, such as payroll taxes for certain provinces.
There is a component, this year, for the Service Income Security Insurance Plan, which provides long-term disability plans for the Canadian Armed Forces. It has experienced a negative financial impact in the last few years due to a few different factors. Included in these Main Estimates is $59.6 million to cover the employers' share of the premium rate increase to maintain the plan at sustainable financial health.
Senator Marshall: Initially, I thought that it would be the matching portion that would be in the budget, but it's not only. As a result of our discussions on the RCMP last week, it's not just matching premiums; it's also that the government may be required to go in and top up for any deficit that has been experienced. Would any of that be in this line item, the public service insurance? It's not all matching funds, is it? It's some block funding for something.
Ms. Chenette: In fiscal years 2014 and 2015-16, which you actually see in the line, Parliament would have approved a top-up of about $435 million to cover off the shortfalls in the plan.
Senator Marshall: This $435 million?
Ms. Chenette: Then it decreases, because it was a one-time item. The premium rate increases to keep the plan at a sustained level.
Senator Marshall: Okay. And that's in accordance with an agreement with whom?
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: It's further to a recommendation of the Chief Actuary on maintaining plan health. Two years prior, we had done about a $200 million reserve top-up to SISIP, but without the premium increase, so it worked for a while, and then the value of the reserve diminished again because of the demand and the interest rate.
Senator Marshall: So it's not an agreement with the union or anything?
Ms. Santiago: No. This one is just a refinement of that first top-up where we're doing both a top-up -- the $435 million from a couple of supplementary estimates ago -- and then this is the premium rate increase that's being added to keep the reserve at the level that is needed.
Senator Marshall: Do I have time for one more question?
The Chair: Could we catch you on the second round? We have a long list of people. Is that okay?
Senator Marshall: Yes, that's fine.
Senator Marwah: I'm not sure who to address this question to, but with the $7.8 billion increase in expenditures, where does that leave the deficit? What is the total deficit in the end, and what's the trend for the deficit going forward for the next five years? Expenditures by themselves really don't leave you with much. Do we have an offset on the revenue side or not? Do we have a decrease in the revenues? Where does that leave the bottom line?
Bradley Recker, Director, Fiscal Policy Division , Economic and Fiscal Policy Branch, Department of Finance Canada: The bottom line, in the most recent forecast that we have from the department, is a $25 billion deficit in 2016-17. In 2017-18, the deficit projection --
Senator Marwah: Does this $7.8 billion add to that $25 billion?
Mr. Recker: It's part of it, sorry. In 2017-18, we're at a $28.7 billion deficit, so it would be part of that.
Senator Marwah: And what is the trend of that going forward? Is it coming down at some point?
Mr. Recker: It's coming down over the forecast horizon by 2021. Our most recent forecast has it at about $15 billion, so it's about 0.6 per cent of GDP out by 2021.
Senator Marwah: And here is my second question, if I may: I understand the rationale for the $7 billion increase in infrastructure. What does it take total infrastructure spending up to? What number is that, and do we have some idea of where it's going to be spent amongst sectors or initiatives? Where is it going?
The Chair: We will have the infrastructure folks here in the second round.
Senator Marwah: Okay, fine, I'll wait for that.
The Chair: Can we move forward? Are there any answers that you would like to give at this particular moment?
[Translation]
Senator Forest: Is the pension plan for Canadian public service employees a defined benefit plan?
Mr. Pagan: As everyone knows, there are currently a number of problems with the Phoenix pay system. A Public Services and Procurement Canada team is working very hard to improve the situation. Right now, there are still issues with the system.
Senator Forest: My question was not about the Phoenix system, which is in fact experiencing a lot of problems. I was rather talking about the Canadian public servants’ pension plan. Is it a defined benefit plan? Is it a plan where benefits are guaranteed and are not related to performance?
[English]
The Chair: Do you both understand the question?
Mr. Pagan: We do, but we're not really in a position to respond to that question.
[Translation]
Senator Forest: That aspect has a significant impact on fund capitalization for the plan. I would have liked to know what the level of capitalization is for the fund. Is it considered to be an annual obligation or is it capitalized on a margin basis?
[English]
Mr. Recker: The federal service pension plan, as I understand it, is fully funded post-2001. The assets that are handed to the arms' length public service or the PSSIB are adequate to fund future payouts by the plan. It's a defined benefit plan. With respect to pre-2000, that just exists as an unfunded liability on our book. Does that answer your question?
[Translation]
Senator Forest: We can extrapolate. I think it should be a defined benefit plan, as that puts significant pressure on obligations. Given the current bond market returns, there is an impact. I wanted to check what the level of capitalization was. Perhaps you can send us a written answer on whether it is a defined benefit plan or not.
As for health transfers, a number of bilateral agreements have been signed. However, three provinces have not yet signed — Quebec, Ontario and Alberta. In your forecasts, did you keep a reserve based on the 3-per-cent commitment or do you have another reserve? Is a reserve set aside for upcoming agreements with Quebec, Ontario and Alberta?
[English]
Mr. Meyers: I'll just answer that with respect to the estimates document and then I'll let Glenn pick up from there in terms of going forward. The 2017-18 estimates as you see them today reflect the Canada Health Transfer in its current form, which is growing at the legislated growth rate of 3 per cent. That's the minimum growth rate.
[Translation]
Mr. Purves: Thank you very much for the question. Allow me to answer in English.
[English]
You're correct. To date, health funding arrangements have been concluded with six provinces and three territories, and as reflected in all the press releases, for each of these arrangements the respective governments are continuing to work on the process to identify some further issues. The first is the performance indicators; the second is the mechanisms for annual reporting to citizens; and the third is detailed plans on how the funds will flow and be spent over and above the existing transfers that we have.
For the purpose of this Main Estimates, they're not included in here because they have yet to finalize those funding mechanisms. Once they are finalized, the supply estimates will be updated to reflect those agreements going forward.
[Translation]
Senator Forest: From what I understand, the 3-per-cent projection is not included in the original budget. Will the votes be added in supplementary estimates?
[English]
Mr. Purves: The 3 per cent projection for the Main Estimates for the Canada Health Transfer does not include these health funding arrangements. When these funding mechanisms are put in place, the supply estimates will be updated to reflect the funding that's agreed to for mental health and home care funding. I hope that answers your question.
[Translation]
Senator Forest: I don’t think that is prudent. Back in the day, I managed a small budget. However, when we anticipated an expense, we would take it into account in our budget. I am not used to these large figures, but that may be a good way to do things.
[English]
Senator Woo: Thank you for your presentations. I have a question on slide eight of the Treasury Board deck concerning the change in various major categories of the Main Estimates between 2013-14 and 2017-18, particularly on the largest role, of course, the transfer payments, which have grown the most between 13 and 18. Could you give us a breakdown of the composition of transfer payments? You mentioned they go to provinces, individuals and organizations.
Mr. Pagan: For those in the audience who do not have the presentation on hand, the senator is referring to the Main Estimates total of $257.9 billion and, of that amount, transfer payments between 2013-14 and 2017-18 have grown from $140.3 billion to $164.3 billion. If I understand the question correctly, senator, you're inquiring about the drivers of that growth and then the actual composition of the transfer payments.
Senator Woo: Correct.
Mr. Pagan: In the Main Estimates document, which I have in front of me, and on page 1-5 of the English version, we actually have a listing of the transfer payments by category.
We have transfers to other levels of government, which total $70.1 billion. In here, we see the Canada Health Transfer, equalization, the Gas Tax Fund, et cetera. Again, that totals $70.1 billion.
Then we have transfers to persons: the elderly benefits, Canada Pension Plan, Old Age Security and Guaranteed Income Supplement. That's $51.16 billion. The children's benefits that I mentioned total $22.9 billion, and then Employment Insurance is at $21.8.
These are the primary elements, and there's much more detail online and at the respective departments as well.
The primary driver over 2013-14 to 2017-18 has been the formulas and the guaranteed floors to the provinces, primarily in the Canada Health Transfer space.
Senator Woo: You had mentioned that a third category of transfers goes to organizations, but this would seem to be immaterial relative to the overall number.
Ms. Santiago: Maybe I could just clarify it a little bit. The page that Mr. Pagan is referring to is on major transfers. Those are entirely statutory payments that are paid under the authority of separate legislation. Included in that table are Employment Insurance benefits and a part of children's benefits that are not actually part of the total transfer payments in the Main Estimates. In the case of Employment Insurance benefits, it's because the EI Operating Account is not an organization that is reflected in the appropriation. On children's benefits, there's an aspect of that that's delivered through the tax system.
So to understand what's in the transfer payments and the estimates, you have to back out about $20 or so billion out of that $165 billion total. That's the biggest part of the statutory transfer payments that are reflected in the estimates.
Having backed that stuff out, you have to include all of the other transfer payments. On the statutory side, there are all of the revenue payments for the offshore accounts, for example, that NRCan has in respect of Newfoundland and Nova Scotia. There's also a large portion of voted transfer payments, and the biggest organizations that are involved in that would be Indigenous and Northern Affairs Canada, for example, in the order of $7 billion for public services that are delivered on-reserve to First Nation communities.
There are also large voted transfer payment programs for infrastructure, and further to Budget 2016, there's the Post-Secondary Institutions Strategic Investment Fund that's included for ISEDC in these Main Estimates.
That's roughly how it breaks down at a high level for transfer payments.
Mr. Pagan: To further edify what Marcia has just said, when we turn to Part 2 of the document and look at each organization in their own right, we will see the grants and contributions listed in the estimates. These are a form of transfer payment. For instance, at the Global Affairs Canada, on pages 2-104 and 2-105, we have a listing that is more than two pages of the different grants and contributions to international organizations -- the Commonwealth Foundation, for instance, and United Nations peacekeeping, et cetera. All of these are listed individually.
Senator Woo: I will clarify just a bit more. Strictly speaking, table 1-5 and deck slide 8 are not comparable because, as was explained, some items in 1-5 are not captured in slide 8 and vice versa.
On the question of the composition of the transfer payments in slide 8, the bulk would be to persons, and then to provinces. Transfers to other organizations are not insubstantial. Can you give me a sense of what that number is, without looking through all of the section 2?
Ms. Santiago: I'd have to look that up. Sorry.
Senator Woo: The most important question is not the bean counting part. What is the volatility? That's really my main question. If these are the three major components of transfer payments, and this is the fastest-growing item from the last five years, on the provinces' side, these are mandated -- there's some predictability there, but it looks to me just from one year's data that the biggest volatility is on the transfers to persons. Is that a fair conclusion? I don't have data going back five years.
Mr. Pagan: First of all, you're correct in the sense that this is an area that is subject to all kinds of calculations. Where we have agreements with the provinces, the forecasts are driven by economic and demographic data. You can predict demographics, but there's a year-over-year variation as a consequence of that.
With respect to transfer to persons, yes, we are aging as a society, our costs are increasing in this regard and we are seeing a trend line. We don't have on hand the actual number of transfers by the individual departments, but it's well north of $15 billion.
In this area, I wouldn't characterize it as volatile, but it is entirely discretionary. Our statutory obligations are statutory obligations: They are legislation -- laws of the land -- and the costs will vary, but the obligation doesn't go away. With respect to individual grants and contributions by departments, these are voted annually. This is why I drew your attention to Global Affairs Canada. There's a good deal of programming there -- more than $3 billion -- that is core to the department, but it is discretionary in the sense that each year Parliament approves these individual grants and contributions.
Recently, and this is a driver in this space, this government has made a priority of investing in infrastructure, and a primary mode of delivering that is transfers to the provinces. These are, in a form, discretionary payments. Likewise at INAC, there are some annual discretionary payments.
Senator Woo: That's very helpful. Thank you.
[Translation]
Senator Mockler: My question is for the Finance Canada representatives. I am sure that you are aware of the order of reference before the Standing Senate Committee on National Finance on population aging. The Department of Finance is planning an increase of $373.2 million for fiscal equalization. When it comes to fiscal equalization, Canada’s Prime Minister and provincial premiers have considered the fact that Canada’s aging population may be a determining factor that could influence future budgets.
That said, given the increase of $373.2 million, what is the total amount planned for the 2017-18 fiscal equalization? You must have an idea.
[English]
Mr. Meyers: I can go through the various transfer payment programs and cite which increases there are year over year.
With respect to fiscal equalization, there is a $373 million increase in 2017-18. With respect to the Canada Health Transfer, there is a $1 billion increase, approximately. That is the minimum 3 per cent legislated growth rate in the Canada Health Transfer. With respect to the Canada Social Transfer, there is a $400.4 million increase, again in line with the statutory provisions governing that program.
Senator Mockler: So what is the total projected equalization for 2017-18? With the figures that we're considering now, there's no doubt that we are looking at 2017-18.
Mr. Purves: Senator, just so I understand your question, you're effectively asking, under the fiscal Equalization Program, what will be the total amount of that program in 2017-18?
Senator Mockler: That's right.
Mr. Purves: And the answer is $18.3 billion, rising from $17.9 billion in 2016-17.
Senator Mockler: Like I said in the other official language, when we look at other related matters in trying to determine what will be going to provinces, do you believe that the fiscal equalization calculation should reflect this important factor? When we look at what's happening to Canada, a tale of two countries, we're an aging population east of the Ottawa River and a younger, much younger population west of the Ottawa River. Should the calculation for equalization consider the aging population in our provinces and territories?
Mr. Purves: Thank you, senator. I understand that the committee just started to look at the issue of aging. For committee members' benefit, the Equalization Program is typically renewed on a five-year basis. Under the legislation, the Minister of Finance has no authority to provide any equalization payments as of April 1, 2019. So effectively there's a renewal that is hard coded in the legislation.
Naturally, as you approach these renewal dates, there are engagements with provinces, back and forth between officials as well as ministers, on the 2019 renewal, as we're calling it. Of course, it would be premature for me to comment at this juncture on what we are seeing in terms of that because we are engaging on those discussions right now. However, it does take into account a whole host of issues. One of those issues is, in fact, considerations on demographics, but there's a host of other issues.
As you know, the fiscal Equalization Program is very much about ensuring that the provinces and territories are able to provide relative services based on relative taxation and revenue generation. Fiscal capacity is another big issue that they're looking at as well. Effectively, it's the ability of a province to be able to generate revenues and so forth.
Again, demographics are part of it, but there's a host of other issues that tend to be looked at as we go through these renewals.
Senator Mockler: With the experience that you have, would you be now giving a comment on whether aging is a factor?
Mr. Purves: It's premature. We just started looking at these, so for me to offer that up would be a speculation.
Senator Mockler: Thank you.
The Chair: We all feel young.
Senator Cools: As always, I welcome these gentlemen and ladies to our committee. I've been listening to you with considerable care, and I was reflecting on the fact that some years back, members of this committee used to be very concerned -- I'm speaking of senators like Senator John Stewart, the big players, and Senator Allan MacEachen -- about the possibility that supplementary estimates would become routine and usual, which means that they are not supplementary estimates. We used to raise those questions quite a bit.
I was sitting here reflecting on this, and my eyes fell to your 2016-17 sups where you say the purpose of supplementary estimates is to present to Parliament information on the Government of Canada's spending requirements, which were either not sufficiently developed in time for inclusion in the Main Estimates or have subsequently been refined to account for developments, in particular, programs and services.
I take this to mean that Treasury Board, and perhaps Finance as well, now see supplements as an alternate presentation of expenditures to the houses rather than as an occasional one. The occasional ones were supposed to be things that were overlooked, weren't available or possible.
Could we foresee a time where we can get back to that systemic role of the appropriate role of supplementary estimates, or is that a thing of the bygone past?
The Chair: Mr. Pagan, you look interested in that question.
Mr. Pagan: I'm very interested in that question, senator. Thank you for that observation.
Senator Cools: Good. It makes my heart glow.
Mr. Pagan: In my opening remarks, I mentioned the challenges of timing with respect to coordinating the budget and the Main Estimates and the fact that these Main Estimates do not include anything that is being considered now by the government in Budget 2017. As I believe you're aware, the President of the Treasury Board is really seized of this issue.
Senator Cools: I'm aware.
Mr. Pagan: He believes very passionately in the role of Parliament to hold the government to account, and that requires that we present up-to-date and accurate information to Parliament.
The problem is really of our own making. The current standing orders of the house require that we table the Main Estimates on or before March 1, and therefore we have no option but to present to you the information as it exists now, knowing full well that this will change and that the government will identify new priorities in a forthcoming budget. That is the reason that we have supplementary estimates.
That being said, the requirement for sups is more than just a question of budget and estimates timing. The complexity of government has grown. The way in which we operate across different platforms with different jurisdictions, internationally, sometimes requires that there be a considered pause between announcing an initiative and moving forward with its implementation.
Last year, with Budget 2016, we brought almost 70 per cent of the budget to Parliament in the form of Supplementary Estimates (A), and that was quite an accomplishment. But there remained other budget initiatives that departments needed some time to reflect on and develop the program terms and conditions, and so in subsequent supplementary estimates -- sups (B) in the fall and sups (C) tabled in February -- we brought additional Budget 2016 measures. I think that will always be a feature of our system simply because of the complexity of the programs that we're dealing with and the range of partners, et cetera.
Your primary point about an overreliance on sups --
Senator Cools: You use this as an insurance practice.
Mr. Pagan: It's a very important part of the way in which we bring information to Parliament on a timely basis. We believe that there can be improvements in this area, and the president is very keen on having a Main Estimates that does a better job, quite frankly, of reflecting budget priorities. So that's an area we are very serious about making progress on in the weeks and months ahead.
Senator Cools: I'm pleased to hear this. That means there's hope, Chair. Chair and colleagues, I also think this is something that we should have a discussion about among ourselves, at some time, because this has been raised as a problem, I would say now, through several generations of senators. I know I am few generations myself.
The Chair: It's a nice to see a member of the younger generation making that comment.
Senator Marshall: My question is a supplementary to Senator Cools' inquiry. Where is the project at now, Mr. Pagan? There was a project underway with regard to revising the estimates and changing the four pillars, et cetera, and we had initially hoped that we would get it underway during the current fiscal year or the next fiscal year. Could you just give us an update? In preparing even for these meetings, to research the Department of Finance, you have to go through the Estimates, you have to go to the website and you have to go to actuarial reports. I'm hoping that the project, when it's completed, will at least consolidate some of that information into something more compact. Could you just give us an update on where the project is now?
Mr. Pagan: The project is ongoing. The government reiterated its objectives in this space most recently in the fall economic statement. The President of the Treasury Board and officials engaged with the House of Commons Government Operations and Estimates Committee in November and December to look at the different issues.
For those who are not aware, the reform agenda that has been advanced by the president -- there was a discussion paper presented to Parliament in October -- comprises four pillars. The first is to address the timing, what we just discussed in terms of the Main Estimates coming before the budget. We would like to rectify that and have Main Estimates either at the same time or after the budget so that they can reflect the budget.
Then we have a pillar related to accounting. In fact, it's more than accounting. It's accounting and scope. We have mentioned already that these Main Estimates present the voted requirements, $102 billion. They also provide information on the statutory requirements that are covered under separate legislation. They do not account for some of the accrual concepts that our colleagues at Finance use to develop the budget. We believe there are good and valid reasons for that, but we need to study this issue with the respective committees.
The third pillar is with respect to the control, the basis of control. We have talked about operating votes and grants and contribution votes. We have had this control structure for many, many years, since the 1960s. There was a 2012 study from Parliament that advanced an alternate vision, and that was to make the base of control by program or purpose. That is something that we are actively looking at. We have a new policy on results at the Treasury Board Secretariat that will be implemented by all departments by the fall of 2017, and we believe that that might form the basis of a purpose-based view of departments.
Mr. Chair, if I can indulge you, the Treasury Board Secretariat, in fact, is one of the first departments out of the gate with respect to this new policy. If we turn to page 2-266, you will see the new departmental results framework that has been articulated by the Treasury Board. Our responsibilities encompass our role as the employer for the public service, responsible for expenditure oversight, policy and administrative leadership, and regulatory oversight. So the idea would be to take these new responsibilities and to ventilate the spending requirements by these core areas as opposed to the input areas of operating capital and grants and contributions. So that's the proposal that we will work through with the respective committees.
The fourth and final pillar is better reporting. In particular, these documents will always have their place, but to complement them with access to online information is a key part of the minister's agenda.
Senator Marshall: Are there any revised dates for implementation? I know the results policy. I have it here, and I realize that, in the fall of 2017, people have to convert over, but, for the revised estimates, have you --
Mr. Pagan: The House committee has committed to resuming their study of these proposals in the month of March. There's no timeline for when this will end, but we'll re-engage with the House committee in March, and, hopefully, work with them very closely through the spring so that they'll be in a position to make a recommendation to the House in terms of changes in this area.
Senator Marshall: Then we should be able to determine a date.
The Chair: Just a quick follow up: crystal ball, zero to a hundred, how far along are we in the process, if you had just an educated guess?
Mr. Pagan: Ultimately, Mr. Chair, these are decisions that will be taken by committees. I think that we are in a very good place now in terms of alignment of interest. We have a president who is very keen on this. There is a mandate commitment to make progress in this area. We have worked with entities like the Parliamentary Budget Office and parliamentary committees to raise awareness of some of the challenges. We have looked actively at other jurisdictions and some of the good practices that we see in other areas. I think all of that will come together and, I believe, support needed improvements in this area. I'm very optimistic about that.
The Chair: So you won't give us 25 per cent of the way there at this particular time. We're on the cusp.
Mr. Pagan: The glass is definitely half full here.
Senator Mockler: I just want to bring up the biofuels increase of $102.3 million from the Department of Industry. My question on $102.3 million for biofuels is if could give us a list. I don't know if you have it here, but could you provide us with a list and what the objectives were of that program? Are we going to meet that program objective?
The last is: What is your comment, when I look at the Department of Industry, an increase of $1.3 billion versus a decrease of Natural Resources of $253 million? Have we rejigged those funds or what?
Mr. Pagan: On your first question, we'll have to get that detail for you from the department, and we'll respond in writing.
On the second, the relative increase at Industry versus decrease at Natural Resources, the increase is largely attributable to the Budget 2016 commitment for post-secondary infrastructure and matching contributions with provinces to invest in universities and innovation space. The decrease at Natural Resources, I believe, is related to a forecast of statutory payments to the Newfoundland Offshore Petroleum Resource Revenue Fund. So we've collected a certain amount of money, and, as a consequence of decreasing energy prices, it's less than previous years.
The Chair: If there are no other comments, we'd like to thank the witnesses who have come in this morning from Treasury Board and Finance.
To continue our study of the Main Estimates 2017-18, we are now pleased to welcome officials from Infrastructure Canada: Darlene Boileau, Assistant Deputy Minister, Corporate Services and Chief Financial Officer; and Marc Fortin, Assistant Deputy Minister, Program Operations.
[Translation]
We are also hearing from Veterans Affairs Canada representatives.
[English]
They are Maureen Sinnott, Director General, Finance; and Faith McIntyre, Director General, Policy and Research Division.
[Translation]
We will begin with Infrastructure Canada. Ms. Boileau, go ahead.
Darlene Boileau, Assistant Deputy Minister, Corporate Services and Chief Financial Officer, Infrastructure Canada: Thank you, Mr. Chair.
[English]
Thank you for inviting Infrastructure Canada to speak before you today. As you've noted, I'm here with my colleague, Marc Fortin, ADM of Program Operations Branch.
[Translation]
We have been invited here today to speak to you about Infrastructure Canada’s main estimates, which were tabled in the House of Commons on February 23, 2017.
[English]
Very briefly, I would like to outline the department's work before discussing the requested authorities.
Last fall, the Government of Canada presented the Fall Economic Statement, which detailed how the government would be investing more than $180 billion in five key priority areas: public transit, social infrastructure, green infrastructure, trade and transportation infrastructure and infrastructure for rural and Northern communities.
[Translation]
Infrastructure Canada began approving projects funded from the Government of Canada’s long-term infrastructure plan after the tabling of Budget 2016. The budget launched two new funds — the Public Transit Infrastructure Fund and the Clean Water and Wastewater Fund. Infrastructure Canada worked closely with the provinces and territories to sign all of the bilateral agreements, which allowed the department to begin approving projects right away.
[English]
Projects supported through these funds receive up to 50 per cent funding from the Government of Canada.
It's also important to note that Infrastructure Canada's funds match the pace at which individual projects are being built, meaning project costs are incurred by the provinces and territories or municipalities and reimbursed once they submit expense claims to Infrastructure Canada.
If approved projects are delayed or funds are not spent as forecast, Infrastructure Canada ensures that project funding is available to complete the work in future years through the planned re-profiling of the funds. The money is never lost. The money is always available to recipients for the projects.
Infrastructure Canada's total authorities for the 2017-18 fiscal year are $7 billion. Last fiscal year, the department's total authorities were just under $3.9 billion. This represents a net increase of $3.1 billion.
The reason for the increase in the department's authorities is due to four main themes:
[Translation]
First, the department has an increase of $16.9 million in operating expenditures, which are mainly related to Infrastructure Canada’s operating requirements to implement Phase 1 of the Investing in Canada Plan. Additional funds are also requested for a contractual agreement with the National Research Council for the review of and update to Canada’s codes, guides, and specifications for climate-resilient infrastructure.
[English]
Second, the department is requesting an increase of $455 million in capital, mainly related to the first capital milestone payment for the New Champlain Bridge Corridor project.
Third, there is an increase of nearly $2.7 billion in contribution funding for the Public Transit Infrastructure Fund and the Clean Water and Wastewater Fund. This represents 50 per cent of the total amount of funding under these programs as was originally profiled in Budget 2016.
Finally, the department is seeking an increase of $200,000 under the statutory authority, which is related to an increase in the employee benefits plan.
[Translation]
Infrastructure Canada has an important role to play as the Government of Canada puts its long-term infrastructure plan into action. The department is pleased to be involved in delivering on the Government of Canada’s commitment to supporting investments in public infrastructure.
[English]
Thank you for inviting us to speak with you today about the important work Infrastructure Canada is doing on behalf of Canadians. We would be happy to answer any questions you may have.
Maureen Sinnott, Director General, Finance, Veterans Affairs Canada: Good morning, Mr. Chair, Deputy Chair and senators. Thank you for inviting us. It is a pleasure to be here with you, and I look forward to discussing Veteran Affairs 2017-18 Main Estimates submission.
[Translation]
My name is Maureen Sinnott, and I am the Director General of the Finance Division at Veterans Affairs Canada. I am here today with Faith McIntyre, who is the Director General of the Policy and Research Division.
[English]
Mr. Chair and committee members, through his mandate letter, our minister is charged with providing veterans with the respect, support, care and economic opportunities they deserve. This includes providing them with new career opportunities once they leave the military, making it easier for them to access services and doing more to support their families.
[Translation]
I am pleased to say that Veterans Affairs Canada’s 2017-18 Main Estimates reflect the steps taken to date to ensure that Canadian veterans and their families are treated with care, compassion and respect.
I will now summarize the contents of our main estimates submission.
[English]
First, it's important to understand that Veterans Affairs Canada's budget fluctuates each year due to the demand-driven nature of our programs and services. Veterans Affairs Canada updates its client and expenditure forecast each year to ensure that all veterans who come forward receive the benefits to which they are entitled.
Veterans Affairs Canada's total Main Estimates submission for 2017-18 is $4.7 billion. This is an increase of $1.1 billion, or 29 per cent, in comparison to the 2016-17 Main Estimates. The largest part of this increase is attributable to a $1 billion increase in the department's grants and contributions programs that includes increases to Veterans Affairs Canada's disability awards, and earnings lost and supplementary retirement programs.
Specifically, Veterans Affairs disability awards program is increasing by $796 million over last year's Main Estimates. This is primarily due to initiatives announced in Budget 2016 to ensure the long-term financial security of ill and injured veterans, which includes increasing the disability award to a maximum of $360,000, indexed to inflation. Additionally, a top-up payment will be made to anyone who has ever received an award, which means that everyone benefits from this.
A portion of this additional funding is also for program growth, as the department continues to see increase in demand for the program.
The earnings loss and Supplementary Retirement Benefit program is also increasing by $291 million over last year's Main Estimates. This, too, was in fulfillment of a Budget 2016 commitment to increase the Earnings Loss Benefit to 90 per cent of a veteran's pre-release salary and make changes to the Permanent Impairment Allowance to ensure veterans are more appropriately compensated for the impact of a service-related impairment on their career. Increased demand from the Canadian Armed Forces veterans is also contributing to the requirement for additional funding. This program ensures that those undergoing rehabilitation have the financial support they need during recovery.
[Translation]
Conversely, some of the department’s programs do not require as much funding as they have in previous years. For instance, funding for disability pensions is decreasing by $81 million in comparison to last year’s main estimates. This is due to the fact that the number of war service veterans and their families is declining.
[English]
As you know, commemoration of all who have served is an important part of Veterans Affairs' mandate to ensure that we as a nation never forget the dedication and sacrifice of those who've served. Veterans Affairs Canada Remembers Program endeavours to keep alive the achievements and sacrifices made by those who've served in times of war, military conflict and peace, and to promote an understanding of the significance of these efforts to Canadian life today.
As a result, these estimates include funding to commemorate the one hundredth anniversary of the Battle of Vimy Ridge on April 9, 2017. Veterans Affairs Canada will lead an official Government of Canada delegation to France to attend ceremonies and events during the week of April 5 to 12, 2017. As part of commemorative events marking the one hundredth anniversary of the Battle of Vimy Ridge, a new visitors education centre, constructed with the support of the Vimy Foundation, will open in April 2017 at the Canadian National Vimy Memorial in France.
A final important funding increase in these estimates fulfills yet another Budget 2016 commitment to expand eligibility for the Last Post Fund. By increasing the estate exemption from roughly 12,000 to 35,000 and factoring in an annual cost-of-living adjustment going forward, more families of low-income earners will be eligible for this program.
Mr. Chair, as in past years, over 90 per cent of the department's budget in these Main Estimates continues to represent payments to veterans, their families and other program recipients.
[Translation]
During 2017-18, the department will continue to focus on the well-being of veterans and their families, promote service excellence, and recognize veterans’ service and sacrifices.
[English]
In closing, I would like to state that the physical, mental and financial well-being of our veterans is one of our overreaching goals. With the help of the funding in the 2017-18 Main Estimates, Veterans Affairs Canada will be able to fulfill the government's promises.
Thank you, Mr. Chair. Ms. McIntyre and I will be happy to answer questions you and other committee members may have on our Main Estimates.
[Translation]
Senator Pratte: My questions are for Infrastructure Canada and concern the Champlain Bridge. If I understand correctly, the first payment of $455 million is included in this year’s votes. Can you remind me how exactly that will work? The total cost of the project is about $4 billion. The actual construction will cost approximately $2 billion. That amount of $455 million is part of the capital expenditures category.
How will the payments work? Will only capital expenditures be involved? The $4-billion amount is not only for construction, but also for the bridge’s maintenance.
Marc Fortin, Assistant Deputy Minister, Program Operations, Infrastructure Canada: Yes, that amount is the first payment under a P3 model. Objectives were set in the contract that must be fulfilled when that payment is made.
To answer your question on how things will work, I would say that other payments will be made at specific times in the project’s timeline. Payments are made exactly based on that. The consortium must demonstrate that it has met the objectives.
Senator Pratte: Over the construction period?
Mr. Fortin: Yes. There is a post-construction period, as well.
Senator Pratte: Will those always be capital expenditures?
Mr. Fortin: In most cases, yes. I could give you other information on some more residual items. However, in most cases, we are in fact talking about capital expenditures.
Senator Pratte: The project’s timeline extends to —
Mr. Fortin: To 2019.
Senator Pratte: To 2019?
Mr. Fortin: Yes, with the bridge potentially opening in December 2018. An extra year must be planned to finish some of the work, specifically related to public transportation.
Senator Pratte: For the federal government, most of the spending of approximately $4 billion will occur by 2019.
Mr. Fortin: Most of it.
Senator Pratte: So we can expect to see amounts greater than $400 million in the votes of upcoming budgets.
Mr. Fortin: Exactly.
Senator Pratte: Unless a major issue occurs in the PPP.
Mr. Fortin: Yes, exactly. To complement this, I would like to add that certain amounts may not be identified at this time. I am thinking of unforeseen circumstances such as dealing with environmental issues by laying the groundwork. Unforeseen expenses are also in place, and you could see them appear in budgets.
Senator Pratte: Are they in addition to the $4 billion or are they already planned?
Mr. Fortin: No, they are included in that amount. Earlier, you gave an example related to capital expenditures, and I am giving you an example of other things that may not really be part of that context.
The Chair: Once the initial work is finished for that amount and you have shown that everything is completed for that portion, who is responsible for paying for it? Is it the Government of Canada? If so, which department makes the payment and how much time is given to Parliament? I don’t know whether you know this, but we are also studying the easy resolution concept. That is a problem across Canada.
Mr. Fortin: The contracts include set objectives and the consortium will have to demonstrate that they have been met. To answer your question on who will pay, the federal government will. As this is a public-private partnership, the Champlain Bridge’s administration will be transferred.
The Chair: As for your participation, did you set the terms of the contract, including payment guarantees?
Mr. Fortin: We did, senator.
I would like to add something else. We anticipate that the Champlain Bridge will open in 2018, but as I was saying earlier, more work will have to be done afterwards on aspects like public transportation. In addition, other aspects, such as access points on the South Shore and the North Shore, will require adjustments beyond 2018.
[English]
Senator Woo: I have a question for Infrastructure Canada, and I want to pick up on the comment that ADM Boileau made in her opening remarks about funds matching the pace at which individual projects are built. What is the accounting procedure for projects that have been approved, not yet completed? How do they show up in the accounts? This committee, as you know, has made some comments about unallocated funds. Can you help us understand the relationship of unspent funds, unallocated funds and funds that are in progress?
Ms. Boileau: As you know, these are payments that are done through grants and contributions, so we establish our funding for cost based on the recipients, the provinces and territories, telling us how much they will claim, how much they will be coming to seek based on the project completion, where they are at.
We plan for the year based on information we receive from the provinces, territories and municipalities. If there are delays due to weather, slower construction seasons or capacity in the area, those funds are then reprofiled, and I think my colleague would have talked to you about that last week when she was here. We plan for that reprofiling. Those funds are identified and are basically frozen and set aside for projects where we have made those commitments and the approvals have been received.
Senator Woo: To follow up, if projects drag on too long or for one reason or another encounter difficulties that do not satisfy the original requirements, is there a process or a mechanism by which the federal government can withdraw its commitment? Is there any recourse? What is the recourse for projects that don't ultimately fulfill their intended purpose?
Mr. Fortin: To complement my colleague's response to that, we do have an oversight capacity on the implementation of the project. The minute that we sign an agreement with some jurisdiction, whether it is provinces or municipalities, we put together an oversight committee that looks at the implementation of the agreement. Everything is bound by the agreement.
In terms of recourse, we go by claims and we do have monitoring of the claims to make sure the money goes where it's supposed to go. It happened in the past where we went back for an oversight visit on-site and we realized that some components were not doing they were supposed to do, and we asked for a refund.
Senator Woo: As a final follow-up on this oversight group, is it one group of people within the department? Is it many different groups? Is it just departmental officials?
Mr. Fortin: The oversight committee is made up of people from the department, but also from provinces, municipalities and whoever is the proponent at that time.
Senator Woo: Thank you.
Mr. Fortin: The department has also retained a capacity to launch any audit at any time on any project.
[Translation]
Senator Forest: My questions pertain to infrastructure under the 2017-18 budget. Some funds from the 2007 program are still available, including $354 million in contributions for the infrastructure component and $43 million in contributions for the Canada Works Fund, the communities component. That program ended several years ago. What are the projects and the residual amounts for these projects?
Mr. Fortin: There can be a range of projects, some of which may have required a longer planning period. There might also have been changes in the project design itself. I noted that, in some cases, city councils decided to redesign the project after the changes. In that case, we have to re-evaluate the project. I could give you examples of the reasons for that. It can seem lengthy and, in some cases, there are significant delays, but the programs continue until we have received all the claims. A project may be delivered, but the evaluation and verification phases occur at the claims stage. That does not mean that the project is not being developed; it can be completed, but we are still receiving claims.
Senator Forest: That was surprising, but I understand there can be new designs. That means that payment does not occur until the accepted project has been delivered.
Mr. Fortin: Exactly.
Senator Forest: I have another question about the national priorities in budget 2017-18, which increase from $174 million to $3 billion. Is that for all large-scale, federally owned infrastructure?
Ms. Boileau: I’m sorry; could you repeat the question please?
Senator Forest: The 2016-17 Main Estimates provided $174 million for investments in national infrastructure priorities. This has now increased by 1,800%, to $3 billion.
Ms. Boileau: That is correct.
Senator Forest: That is for all departments, including port and airport facilities, as well as highways?
Ms. Boileau: It is for all infrastructure programs. This envelope includes the two new funds I mentioned in my opening remarks, the Public Transit Infrastructure Fund, and the Clean Water and Wastewater Fund. These funds, for which there has been an increase this year, are part of that envelope. Close to $2 billion is allocated within the $3 billion envelope for investments in national infrastructure.
Senator Forest: But that is not necessarily part of federally owned infrastructure.
Ms. Boileau: No.
Senator Forest: Why did you change the name of the gas tax to "permanent and flexible infrastructure funding"?
Mr. Fortin: The goal is not to change the name but to describe and reflect what we are hearing in the community; that is what we wanted to achieve with the gas tax, namely, stability.
Senator Forest: So it is in the interest of harmonization then.
Mr. Fortin: Exactly.
[English]
Senator Marshall: Most of my questions are for Veterans Affairs, but I'll start off with a couple for Infrastructure Canada. The first one relates to the significance of the budget. When we were studying Supplementary Estimates (C) last week, we saw where the department had reprofiled $800 million to the next year. Can the department get the momentum now? There's a lot of money in your budget for infrastructure. Can you get the momentum to deliver that program?
Mr. Fortin: That's a good question, senator. We looked recently at the trend of past programs, and the question was raised to us, on occasion, that it seems to be taking time to pick it up in terms of the spending itself.
For example, I can use the provincial-territorial infrastructure component that was put in place, the NBCF, in 2014-15, where, that first year, we spent $11 million, then, in 2015-16, 41 and, in 2016-17, 195, and the projection is going up and up and up.
The best answer is, really, that we see, in the various programs, that the first year and a half is really the design, to ensure that we do the right communication and education about the program with our partners. It takes a bit of time.
Senator Marshall: Okay. There is so much money involved that the government is expecting the infrastructure program to increase our GDP, so there is a lot of pressure on your department to deliver. I just want to make that point.
The second question I had is on the new policy on results because the Finance Committee has spoken about an accountability regime, and I know that the government released a new policy on results. It's to be implemented by, I think, November of this year. I don't know the title, but there's a results person over in PCO also that's focused on that. Are you expected to have this implemented by November 1?
Mr. Fortin: Yes.
Senator Marshall: It will be, will it?
Mr. Fortin: We even started in phase 1 that was launched with the last budget in 2016 with the new transit programs and the wastewater. It was pretty modest at the beginning, but we asked our proponents to start to report on some indicators on those programs. We are still at the beginning of collecting that information, but we are expecting that the next year will be more. For phase 2, definitely, we are going to embed into the agreement the capacity to receive more data and more reporting on that.
Senator Marshall: And the information is available? Because I would have thought that one of the problems would be the absence of systems to collect the information, but you're saying there is sufficient information available?
Mr. Fortin: Yes. You are talking about a system to collect the information. It's interesting because we have started that discussion with our colleagues at the provincial and municipal levels, and some are pretty advanced in that and some are less advanced. That's why we also announced some money for the FCM that will put an asset management capacity for those who require a little bit more in terms of resources to put some system in place and to report some information.
Senator Marshall: Thank you very much.
Okay, my questions for Veterans Affairs: First question, I notice that, in the notes to the Main Estimates, there's a reference to war-service veterans. Who are war-service veterans? Are they just for the Second World War or the Korean War?
Faith McIntyre, Director General, Policy and Research Division, Veterans Affairs Canada: We have various populations that are eligible for Veterans Affairs Canada through our Department of Veterans Affairs Act. The war-service group would be, if you will, the more traditional veteran population, First World War, Second World War, Korean War, and also would include merchant navy veterans as well.
Senator Marshall: So would Afghanistan, for example, be in there?
Ms. McIntyre: No, ma'am.
Senator Marshall: I'm kind of surprised about that, but I've gotten the explanation I was looking for.
How many employees are there in the department? I'm trying to get a handle on the ratio of frontline staff to the number of clients. How many staff are there in total?
Ms. Sinnott: As of March 2016, we had 2,272 employees.
Senator Marshall: And how many of those are frontline, delivering actual services?
Ms. Sinnott: I may have to come back to you on how many are frontline, but the majority would be in our area offices across the country.
Senator Marshall: The majority would be frontline staff? Okay. That would be good. Okay, if I could get that number, that would be --
Ms. Sinnott: We will come back with that.
The Chair: If you could get it to us just to be precise in terms of who are your actual service operators versus people who are in research.
Senator Marshall: I'm just wondering. Most people are in administration, okay.
My last question: Does the department use Shared Services Canada for the payments that you make to veterans? Is that processed through Shared Services Canada, or do you have your own systems?
Ms. Sinnott: We do adjudicate all benefits and claims within the department and make the determination of level of disability or level of earnings loss or payments, and then the cheques do go out through another department, not directly from Veterans Affairs.
Senator Marshall: Would that be Shared Services Canada? It is. Can I ask you what your experience is with Shared Services Canada? We have heard lots of experiences, so I'm sure you won't be telling tales out of school.
Ms. Sinnott: Well, our cheques are released by PSPC, and we don't have any problem really with the cheques being released.
Senator Marshall: You have had a good experience. When did you transition over to Shared Services Canada?
Ms. Sinnott: Well, they are released from public service. When we transferred, I'd have to come back.
Senator Marshall: It's been several years?
Ms. Sinnott: But we haven't had any difficulty in releasing disability award cheques, disability pension cheques or veterans allowance cheques and so on.
Senator Marshall: Okay. I do have two more questions.
The Chair: Quick.
Senator Marshall: How long does it take? What's the average length of time it takes to process an application, or does it depend on what's being applied for?
Ms. Sinnott: Yes, it does, in part, depend on what's being applied for and whether or not you are making, let's say, an application for two or three or four different disabilities on the same application because many of them would try to treat them as fast as possible. If you're making claims for, let's say, hearing loss, those are done a lot faster than, let's say, claims for lower back injuries or other disabilities.
it depends on the type of claim and the information that is submitted and provided with the claim because, as you would well understand, if you simply fill out an application form and send it in and say, "I'd like to apply for a disability award for X," then you do need supporting information and so on provided with it. We need time, if you haven't been able to provide all the information, to go back out and try to gather the information.
Senator Marshall: Take, for example, somebody who is applying for benefits as a result of a back injury. What's the average length of time to process that application?
Ms. Sinnott: I can come back to you on that. I don't have that at my fingertips.
The Chair: If you could, that would be great.
Senator Marshall: One last question. The appeals are done by a separate appeals board, aren't they?
Ms. McIntyre: I can certainly respond to that. It depends, again, on the type of benefit. We do have, within the department, a first and second level of appeal. My area, as an example, does second levels of appeal for treatment benefits and rehabilitation. The first and second levels of appeals are distinct in different branches of the department.
However, there is also the independent tribunal, the Veterans Review and Appeal Board, that, again, under the act, is mandated to also consider certain types of reviews, and that's all spelled out in the legislation in terms of what can go where and then how, ultimately, a veteran can be supported as well throughout that.
We have a bureau of pension advocates as well, a group of lawyers who will, again, depending on the review being requested, support the veterans and their families through that process.
Senator Marshall: So the appeals that are done within -- put the separate appeals board separate -- just within the department, how long does it take to process an appeal within the department?
Ms. McIntyre: There are service standards that are published on our website. I apologize, but I do not know them off by heart. We can certainly provide those to you.
Senator Marshall: If they are on your website, that's fine.
Ms. McIntyre: We are within our turnaround times, and we certainly make it a priority in order to be able to determine the first and/or second, depending on the situation, the appeal. But those are published on our website.
Senator Marshall: Who establishes the turnaround times?
Ms. McIntyre: There are service standards. There's a working group, a committee, that works jointly in pulling those together. I believe, too, that we work through our central agency colleagues to ensure consistency across departments for that type of similar, if you will, review.
Senator Marshall: Okay. Thank you.
Senator Andreychuk: You've had to increase funds for veterans tied to medical issues. We hear a lot about that today. Was that a reallocation of funds, or did you provide more for opening the offices that had been closed?
My concern is that the veterans need the money and they need the services. I want to know how much of it is going to administration, because the offices were opened, and it was all part of a certain recent political discourse -- let's put it that way -- whereas with many services now, you can go online to apply, et cetera.
Going back to the old storefront kind of concept, which seems not to be the way that the rest of the world is going, do we need the administration? Are the funds being directed to actual help for the veterans, or the administration? Do you have any way of looking at that?
Ms. Sinnott: First, if I may, in recent years we have always been able to say that at least 90 per cent of our budget actually goes out in benefits and services to veterans.
Senator Andreychuk: It hasn't changed?
Ms. Sinnott: Actually, it has changed for next year. We're up to 93 per cent of our $4.7 billion that will be going out the door in veterans' benefits, so administration, offices and back office systems and things like I do -- finance -- are a smaller percentage of our budget.
If I could address the office openings, we did spend $3.9 million last year in opening offices and $3.6 million for new hires who went into those offices to staff and support them. Next fiscal year, which we're discussing now, in 2017-18, we will end up spending $6.9 million in opening the remaining offices that are not open yet and for the ongoing operation of the new offices that we did open last year, and $10.6 million on an ongoing basis for the new hires that are staffing those offices.
If I can, I will also spend a second on your question on applying online. We have MyVAC Account, where veterans can sign up for MyVAC Account and they will be able to apply for various benefits online. Those who are interested in signing up for MyVAC Account and are able to apply that way are more than welcome to do so. People can also phone and speak with an agent at Veterans Affairs.
But for those who really want to come into an office, we have the network of offices across the country and the network of OSI clinics and so on all across the country, so a veteran can show up, meet with a case manager, speak with individuals and have their needs met that way. Our case managers will also actually go out on the road and visit veterans and their families. We're almost all things to all people, depending on how you wish to do business with us.
Senator Andreychuk: You've given us the breakdown. You've given us what it has cost to reopen the offices last year and this year.
Ms. Sinnott: Last year and this year, yes.
Senator Andreychuk: In the last two years, what has been the increase for actual help to the veteran? I'm asking about the service the veteran gets -- not the pre-service of applying and visitations, but actual costs for whatever they need, like therapy, consultants, psychologists and doctors. Do you have a number on that?
Ms. Sinnott: I'd have to put that all together and come back. I mean, if I looked at what we were doing this year versus last year, we have increased by over $1 billion, and that money is for benefits to veterans. That $1 billion is going out the door to veterans, not to other offices.
Senator Andreychuk: I could take the figures you gave for opening the offices, but if I could have the other one on the other administration so that you're giving me the figure for actual services, that would be helpful.
The Chair: Could you get that to our clerk, please?
Ms. Sinnott: Yes.
The Chair: That would be super. Thank you.
Senator Marwah: This is for Infrastructure Canada and Ms. Boileau. Thank you for your presentation. I found your comments very helpful.
I have two questions. Infrastructure spending has a huge impact on the economic growth side. I really am quite supportive in terms of the government's plans to invest in this business because the impacts are long-term and fairly substantial. I'm just curious how you establish priorities. Do you it do it on the basis of economic impact to the country or on the basis of provincial allocation of funds?
And the second, related question is: How much transparency is there in the basis on which you approve projects?
Mr. Fortin: Senator, to answer your question in terms of priorities, the way we work is to have the provinces themselves establish the priorities. They prioritize projects. The job of the department afterwards is to ensure that it meets the terms and conditions of the program to ensure that they are following the criteria.
In terms of transparency, we have embedded in the department a review panel with external members, so it's not only people from the department, that is validating the assessment that is done by the analysts within the department.
It's a three-step type of thing: First, provinces prioritize projects that they submit to the department, the department assesses the eligibility of the project that is provided by the province, and then it goes to a review panel to validate that process to ensure it meets the criteria of the program. After that, it goes for ministerial approval.
Ms. Boileau: Can I just add to what my colleague was saying? As well, we also publish on our websites all the projects that have been approved. We have, on the Infrastructure website, a map of Canada and you can clearly see all the projects that have been approved in every community and province. All of the information -- the amounts and the timelines, under what programs they fall and the allocations from a provincial and territorial perspective -- is available to Canadians.
Senator Marwah: Okay. This is a follow-up question: I understand the political realities of approving projects across the country, and I support that, but who adjudicates whether project five in province A has a greater economic impact than project 1 in province B? How do you decide that and who adjudicates that? You say every province doesn't see what other provinces are doing, but you do. Who decides on how you really allocate things?
Mr. Fortin: As Ms. Boileau just said, the amounts of allocations per province and territory are wide open on the web, so they see the total allocation for, let's say, the wastewater program.
Senator Marwah: So you start with a regional or provincial allocation and then you go from there?
Mr. Fortin: Absolutely, yes.
Senator Marwah: All right.
[Translation]
Senator Mockler: If you look at the previous vote for 2017, for the Office of Infrastructure of Canada, it is about $1 billion, but it fell by $243,173,000. How do you explain this decrease, when infrastructure development is being encouraged, especially large-scale infrastructure projects, in the 2017-18 period?
Ms. Boileau: Can you tell me where you are looking? There is so much information; that would be very helpful.
Senator Mockler: I am on page II-189, under the heading "large-scale infrastructure investments". There is a decrease from $1.269 billion to $1.026 billion. Can you explain the difference? Why is there a decrease when the government’s objective is to encourage large-scale infrastructure projects?
Ms. Boileau: I am looking for the specific program you are referring to. Which version of the document do you have?
Senator Mockler: Do you have the Main Estimates book?
Ms. Boileau: Yes, I have it.
Senator Mockler: On page II-189, it is the third line: infrastructure investment.
Ms. Boileau: The decrease from $1.269 billion to $1.026 billion.
Senator Mockler: Yes, that’s it.
Ms. Boileau: In this case, what you see at the top of page II-189 is the breakdown of contribution programs according to certain departmental objectives. We have five main objectives. Under the heading "large-scale infrastructure investments", certain programs that are coming to an end would be included in this objective, programs that probably date back to 2007 or 2010. So there is a decrease because some projects are ending while others, the first one especially, investments in national infrastructure priorities, have increased. It is because of the specific programs under this objective.
Senator Mockler: Mr. Chair, in view of time constraints, perhaps the witness could send us the information.
Ms. Boileau: By all means, I can give you a breakdown.
Senator Mockler: A breakdown of projects across the country. Thank you very much.
The Chair: If there are no further questions, it is 11:30.
Thank you very much to the witnesses for being here.
[English]
Thank you very much for your time, witnesses.
(The committee adjourned.)