Thank you for the invitation to appear in front of the committee today. I don't know whether I'll succeed at entertaining the group, but I hope this will be informative. I'll also be glad to answer your questions.
You will know, I think, but I'll underline, that the federal government's pensions are a major component of the compensation of its employees, including members of Parliament. Ensuring that we have meaningful measures of the value of that compensation matters. It matters for getting the compensation right, paying federal employees properly for the work they do, and giving taxpayers value for their money. Meaningful measurement of those promises also matters when it comes to ensuring that we're funding them properly and allocating their costs fairly over time.
We don't have to look very far away or very far back in time to see how important it can be to get these things right, or conversely, to see the problems if you don't. In the United States in the last few years, we've heard a number of cautionary stories. Members of the committee will know of municipalities in California that have gone bankrupt. Closer to the Canadian border, we had Detroit. Puerto Rico made the headlines recently for similar reasons. All of these jurisdictions had great trouble actually coming up with the cash to pay their employee pensions, then discovering that the cost of these promises was much higher than they expected.
The common element in all those episodes was that the pension plans were underfunded. The main reason they were underfunded was that they discounted the payments that they had to make in the future, using discount rates that were much too high. They did that because it shrinks the liabilities on their balance sheet and it justifies charging contribution rates that are too low.
The managers liked it because it made everything look good. The elected representatives liked it because it helped keep taxes and market borrowing down. And the workers, or at least their representatives, liked it because it made their pensions look secure and left more money for current compensation.
Everybody likes it, until the Ponzi game of making payments not from returns on the investment but from incoming cash gets exposed. When that day comes and cash payments must be made but there isn't enough cash there to make them, nobody likes it.
The obvious question is this: Could that happen here in Canada? Happily, many pension plans in Canada's public sector are not like those that have caused trouble in the United States. They're not all equally healthy, but the shared risk plans in the broader public sector, in most provinces, have two key features. They use economically realistic, meaningful discount rates when they look at the future payments they have to make. They also have the flexibility for contributions and benefits to respond if the financial reports indicate that they should.
Unhappily, however, the federal government's pensions are not like that. They are pure defined benefit plans. They're relatively generous by the standards of other public sector plans in Canada, and private sector plans certainly. The financial reports we get on them use discount rates that are too high. Their liabilities on the balance sheet are too small. Their ongoing costs that we see in the federal government's statement of operations in the federal budget are too low. Those pensions are, in short, more valuable to their recipients than what the federal financial statements indicate, and they are correspondingly more costly to taxpayers.
I will mention, because you're members of Parliament, that the pension plans for federal members of Parliament are a particular problem. They are completely unfunded. You could be forgiven for not knowing that. You'd need to read the chief actuary's reports on them very carefully to discover that. The assets in these plans are simply bookkeeping items. The contributions that go into the plan actually buy no assets. The benefits that go out of them are funded by current revenue and market borrowing. The cost of the payments in the future will be higher than what you see in the financial statements.
That is not true of the big federal employee plans for the public service, the Canadian Forces and the RCMP. Those plans are partly funded. Contributions since 2000 have bought assets, but the pre-2000 obligations in those plans are completely unfunded. The value of all of the obligations, pre- and post-2000, are understated because of these excessive discount rates.
Why do I say the discount rates are excessive? The promises to pay these pensions are unconditional. They are like any other federal government debt that is an unconditional promise to pay. They are indexed to inflation, and that means there is a ready comparator for that kind of an obligation. They are like the federal government's real return bond.
If I were a federal public servant and someone offered to buy my pension from me, I would use the discount rate they yield on the federal government's real return bond in thinking about how much it's worth. If I were a taxpayer thinking about how much money I need to set aside, because one day I'm going to have to pay taxes to pay these pensions, I would look at the same thing. I'd look at the asset that matches the liability, and that 0.7% real return is the return that is applicable. That's the accumulation rate I could expect.
The problem is that the federal government's pension liabilities are discounted at much higher discount rates. I can go into that in response to questions. That used to be a common practice in many pension plans, but it's becoming less prevalent over time because of some of the problems that have emerged with pension plans.
If we use an economically meaningful discount rate, and if we think about the real return bond as the right benchmark to use in valuing the federal government's pensions, the federal government's pension obligation and its net debt are understated at the end of the last fiscal year by about $100 billion—$96 billion.
To put this in perspective on the way forward, recent reforms raised the share of participants in funding these plans—that applies to the MP plans too, thinking about the contribution rate—and it aims at a fifty-fifty split, more or less. But there's a problem with that formula because it's based on an ongoing cost that is held artificially low because of these high discount rates used to estimate the value of these plans.
Even as we get to 50% contributions by the employees, the true economically meaningful split of the cost will not be fifty-fifty. The taxpayer will still be left with the bulk of it, and when I say “the taxpayer” I mean much more the future taxpayer than the current taxpayer. We're storing up trouble for the future.
More economically meaningful reporting of these plans, benefit values and their cost to taxpayers, I think, would be a valuable step forward in helping the federal government think about its ongoing obligations and how to fund them.
I will add as a footnote, and then I'll close, that the Public Sector Accounting Board is currently consulting over key questions that relate to this, both the timing of recognition of changes in the value of a pension plan's assets and liabilities, and also the discount rates used. There may be changes in public sector accounting standards coming down the road that would encourage or mandate the federal government to move in this direction. Whether they do or not, I think it would make sense for the federal government to look at these things on an economically meaningful basis. I think if it did, there would be better funded pensions for federal employees, including members of Parliament, and it would also provide protection for taxpayers against risks that few of them know that they run, and against costs that they don't currently know they're shouldering.
Thank you for the opportunity to testify. I'd be glad to take your questions.
I want to pay tribute to past Canadian governments for having tackled some of these public sector pension issues the way they did. We not only had the reforms to the Canada and Quebec pension plans affecting the broader population, but in 2000 there were major changes made to the federal government's plans.
Since then, some of the contributions going into the plan have flowed into assets. Effectively there are now two accounts in these major plans. If you look at the actuarial reports you'll see that they're segmented out. You've got the pre-2000 obligations and then the post-2000 plans. The post-2000 plans have assets as well as liabilities. That's commendable.
You can go quite a bit further than that if you look at what has happened in the major provinces with the broader public sector plans. The Ontario Teachers' Pension Plan is one of the better known ones. It was one of the first. There are many shared-cost plans in Quebec, British Columbia and Alberta, and a different approach in some of the maritime provinces.
One of the key things in those plans is typically they've adopted quite conservative discount rates by the standards of public sector pensions, and certainly compared to what I was describing in the United States. Part of the motivation for that is just to be conservative. If you think of your pension obligation as to pay the pensions—if that's your primary aim—then it makes you think differently about the types of assets you'll hold. You'll typically focus more on bonds. You're not just trying to chase returns, because you've actually got to have the cash on hand.
In support of that, in some of these broader public sector plans you'll see more conservative discount rates. They focus much more on the funding ratio because, as I say, they're thinking much more in terms of wanting to pay those benefits when they come due.
In the federal government's case there has been a sense of...I won't say it's because we control the central bank, because that's a bit contentious. It's more of an assumption that the tax revenue will just always be there, and that there'll always be the resources there to pay the pensions. Perhaps it seemed less of a challenge to actually think about paying the pension promised from the plan itself.
As a result, at the federal level you still see these discount rates that are just based on history, on an assumption about return on assets. To me that makes no sense. If part of your plan is unfunded—and certainly part of the plan is totally unfunded and part of the rest of the plan is underfunded—there are no assets to earn those returns. You really ought to be thinking about the nature of the obligation. That's the right way to think about it.
You asked about different methods. I would just underline how innovative and successful Canada has been to date with these broader public sector plans. They're actually world-famous. The federal government could usefully imitate some of what we see at the provincial level.
MPs could certainly be forgiven—if it's my business to forgive anyone—for not knowing that these plans are unfunded, because they have the trappings of a funded plan. As you pointed out, you're paying contributions, and if you look at the financial statements for the plans, there appears to be an asset against the actuarial liability that's based on how long MPs are likely to live, how much income will be replaced and so on.
The awkward fact is that the MPs' plan is still like the pre-2000 plans for the public service, for the RCMP and for the Canadian Forces. Those contributions are not buying assets. They are simply going essentially into the government's current cash flow. The payment for the pensions is coming out of the government's current cash flow.
That's unfortunate. People like to talk these days, for good reason, about tone at the top. It's awkward that the federal members of Parliament do not participate in a pension plan that is appropriately funded. It also provides a key lesson in the problem you have when the financial statements do not report in a way that ordinary people—non-experts and non-actuaries—can understand when they are wondering whether their pension is properly backed or not, or if a taxpayer is looking at the federal government's finances and asking, “Am I on the hook for something here that I didn't know about?”
I'll elaborate briefly in case you want to follow this up. The chief actuary does reports on the federal MPs' pension plan. You'll see a line in it that says there is no separate fund held in these plans. The accounts are simply bookkeeping entries, and I regret to tell you there's no money in them.
I wouldn't say it's very well known. Pension accounting—and I'm delighted to be talking to your committee about this—isn't a topic that has been a big grabber in the past because valuing these payments that will occur a long time in the future is a genuine difficulty. It's why there's debate about it.
The place that I would refer you to for a similar type of analysis would be in the United States. There are some think tanks there, some academics, who have been paying attention to this problem at the subnational level, particularly in the United States. I mentioned them already, so I won't go on at length, but I will say that the problems there are worse than what you find in Canada because the discount rates are so high and many of the plans are extremely brittle. That's why you see these problems.
The debate that we're part of here is about valuing the liabilities. The people who have looked at the U.S. plans and said there's a problem and they're understating their liabilities, make the same case that we do. If you think about the value of this promise, including the one that we are making to our members of Parliament as they work, it's unconditional. There's no flexibility in that benefit should the funded status of the plan turn out to be less than was anticipated. In that respect they're unlike, say, the Ontario Teachers' Pension Plan or some of the shared-risk plans.
We also have this tendency to discount at assumed rates of interest. They're not as high in Canada as they are in some of these U.S. plans, but there's a real question as to why you would just pick a number like that when you have an obligation that is so clearly comparable to the promise that you're making in the federal government's other bonds.
Thank you very much, Mr. Chair. I'll do my best to stay on top of what seems like a complex journey here.
I am going to ask some basic questions, the answers to which I think Canadians and workers would be interested to hear.
When you talk about the nature of a defined pension plan, the first thing is the unconditional obligation or contract with the employer and employee. As I think we can all appreciate, for those who are in those plans, those kinds of pensions are valued very highly. I'm not going to get into the argument about whether they're good or bad.
In what you've brought forward, and in the fact that we're not using a rate that gives us a realistic projection into the future and we're therefore not basing it on what contributions need to be made for people right now, is there a way to have a defined pension plan that is more realistic in its rate of return or are you saying that defined pension plans are something we're not going to have in the future? Are they something that only happen in government because governments don't go bankrupt?
I'm just trying to figure out where that fits into your thoughts.
The key question we should be asking about pension plans of this kind is whether we want to make that absolutely unconditional guarantee that we'll pay. Of course, there are always circumstances—the end of the world, for example—that would prevent a pension plan from delivering. However, excluding extreme possibilities, I think the right way to think about it is to ask what asset you would hold, such that if you suddenly needed to pay the obligations, you could do it and be able to put your hand on your heart and say to your plan participants, “We have you covered on this.”
In the broader public sector plans where there's a little bit of benefit flexibility, I think the joint governance probably helps to have this kind of conversation. Many of them, including some of the more recent ones on the block, like OPTrust in Ontario, for the public service there, the members of OPSEU, have explicitly said to their members that their job is to pay their pension benefit. The idea is partly to get people's attention off the rates of return on the assets because that's a bit of a sideshow. Everybody's pension plan is different. Employees may be older, younger or have different characteristics. You want to make sure that your assets are suitable to pay those obligations.
The sticking point with the pure defined benefit plan, the one where there's absolutely no flexibility, is that the type of asset you should hold to meet that promise is a very low-risk one, like the federal government's real return bond. Low-risk assets yield low returns. To buy enough of those assets to guarantee the pensions, you have to buy a lot of them. That makes the contribution rate high, and that has been the point at which people have bought. They've said that looks so expensive. They don't think about it as saving.
I'd say it's saving. If you want a guaranteed pension, save a lot. You would do the same in your private life. It looks like a cost, and people balk at the cost, and that's where you see this high discount rate creeping in to make it look affordable, but then what you're holding in the plan isn't actually going to be sufficient to meet it.
I don't have a problem with generous pension plans. I think you want to consider a balance between deferred and current compensation, but I would like to see Canadians in general able to save more. To do that, they need to contribute more. Sometimes, in order to contribute more, they have to be shown the cost of the pension and how much they should be paying. It's a bit shocking to see how much, but if returns are low, that's realistic. If you want that kind of pension, one with a real guarantee— close to certainty—of getting it, that's what you have to do. You have to contribute more.
We haven't done the same kind of analysis, because the nature of the promise in a shared-risk plan is different.
As you may know, with the Ontario Teachers' Pension Plan, there is conditional indexation. Also, one of the virtues of these jointly governed plans—and I don't say this of Ontario teachers particularly; there are many other examples—is the fact that you've got the two sides at the table which facilitates conversations if things beyond what the plan design contemplated originally were to arise. Simply being there at the table promotes a good conversation about how to manage the plan, so that it appears reasonable in terms of its current cost, and also provides a good replacement income for the participants.
The type of analysis that we've done with the federal government's pension plan is the sort of analysis that you do when you have this unconditional promise to pay. If you look at other types of federal debt.... If you look at some of the litigation in the United States where there have been battles over who gets priority, the bond holder or the pensioner....
As a first approximation, it makes sense to say these are promises like every other senior debt obligation of the government. We should think of them in that capacity. There's as much risk attached to a federal government pension, or the possibility that you'll see it if you qualify, as there would be if you were a holder of the federal government's bonds. It makes sense to put them in the same mental category.
Shared-risk plans, target benefit plans—there is different terminology, but they all reflect the idea that there's flexibility not just in the contribution rate but also in the benefit formula. It's proved to be quite a popular design in the broader public sector in Canada. In fact, it's quite well known around the world, partly because of the investments they make but also because it's a very intelligent plan design.
One of the difficulties with the pure defined-benefit model, whether it's in government or anywhere, is that it tempts the participants to mentally check the box of “I'm covered” or “It's good”. They're not quite as attentive as they might be. Perhaps their representatives aren't quite as attentive as they might be to the question of how the assets and the liabilities look when you put them side by side.
What you tend to find in these jointly governed plans is much more focus on the funded status of the plan. Are we 100% funded? The Hospitals of Ontario Pension Plan is a bit better than 100% funded, and they're very proud of that. They advertise it. When they talk to their participants, when they talk to the labour management, they're successfully focusing the conversation on the promise to pay the pension benefit.
I do think that's an attractive model. I would recommend that the federal government look at it. It would cause the contribution rates to go up because we would be thinking more seriously about the assets that match the liabilities, but I think that would be a good thing all around. In fact, I talked about tone at the top. I think it would be very good for the federal government, MPs and public servants alike, who make so many of the rules that affect the rest of the population, to play by some of the same rules that the rest of the population plays by.
Thank you so much, Chair.
I am very pleased to have the President and Chief Executive Officer of the C.D. Howe Institute, William Robson, here with us. I admire his work.
It is an honour and a pleasure to meet you, Mr. Robson.
I want to address something about the millennial people. You say that it's crazy what's happening.
I was young too, and when I was young,
interest rates were at 23% and youth unemployment was at 25%.
which is not exactly the case now, so each and every generation has to address some challenges.
Mr. Robson, I would like to pick up on two points you raised earlier, beginning with the MPs' pension fund.
I have been an MP for three years, but I have to admit that this matter was not of much interest to me as a new MP. Let's just say it wasn't the first thing that grabbed my attention when I first came here. It's news to me that our pension fund's liabilities are unfunded.
What do you recommend we do about this?
Excuse me for not replying in French. I would try your patience.
Taking that question first, I think the model of the 2000 reforms for the public service, the RCMP and the Canadian Forces is not a bad way of thinking about doing the transition.
In response to the earlier question, I talked about grandparenting people who've already been through the system. Realistically, that's what you do. However, starting afresh now, we ought to be thinking about the cost of this promise and we ought to be charging a contribution rate that is appropriate to fund that promise and actually funding it, buying assets that are external to the federal government that would be there against the day the payment needs to come due.
There's a line that I have attributed to Barbara Zvan of the Ontario Teachers' Pension Plan: “A plan will cost what it costs; the discount rate is about who pays.”
If you choose a high discount rate because you remember the days when interest rates were high and you think it's going to go back to that, but that doesn't occur and the interest rate stays low, the older people will not pay as much as they should and the younger people will carry the burden. If you pick a low interest rate, it's likely to be spread more fairly if we don't get back to those high interest rates.
It would be appropriate for the MPs' plan to start funding itself as was done with the rest of the major public service plans. I don't know the French term for it, but I talked already about “tone at the top”. It would be a very constructive step for MPs to do that, because then when they talk to their constituents who are trying to save for retirement and are finding it hard to save enough, given the low yields on investments, they would not just say, “I feel your pain”, they would actually feel their pain. It would be a valuable point of solidarity.
I mentioned already that in the broader public sector plans you'll typically find that the contribution rates are over 20%. Most Canadians who save in RRSPs or in defined contribution pension plans can only save 18%. Those limits are quite low. There is concern about the income distribution effects of raising those rates, but if you look at the public sector plans, they are saving more and I don't see why we wouldn't allow Canadians in general to do that.
There is an idea that is worth considering, that we would think in terms of a lifetime limit, so that a person who might have been low income but then succeeds later in life, or an immigrant who hasn't built up the savings room in an RRSP, for example, would be able to set something aside at a greater rate than what we now allow.
The other area I would recommend looking at is after people retire and start drawing down their savings. We have RRIF rules that oblige people to draw their savings down quite quickly. People in defined benefit plans don't worry about that because their annuity is supposed to cover them until they die, but for a person who's in a defined contribution plan or drawing out of an RRSP, those mandatory withdrawals mean that they're quite likely to run out of savings before you die, especially if the person is a woman, because women live longer.
I would look at both the amount people can save before they start drawing down and the rules that govern their drawing down once they are in retirement. If you're in a defined benefit plan, the federal government's defined benefit plan, these aren't concerns for you, but if you're a Canadian who's saving in an RRSP or a defined contribution pension plan, those are big issues.
I never liked being on a different side of an issue from the chief actuary, who I think does a very good job and whose reports I rely on for a lot of my work. I wish to show appropriate respect to the chief actuary and to the office of the chief actuary.
The disagreement between us is about the appropriate discount rate to use. In the public sector it is typical to use these discount rates that are relatively high, and the reference tends to be to historical returns on assets. I do not think that is an appropriate way to think about the future. Anyone who buys an investment has a warning and it's obligatory. The regulators oblige this warning that past performance is no guarantee of future results. The same is true in saving generally for retirement. We have seen returns that were much higher in the past, that is true. We've seen by now a long period of low returns. It's a mug's game to guess what kinds of returns there will be in the future. People who have a strong view on that can buy a bond, and it may go up or it may go down if they were right or wrong. It's their money. It's their choice to make.
In the case of a pension plan like this, there's a very clear alternative point of reference. I've said it already so I won't belabour the point. This is an unconditional guarantee of the federal government. It is like other federal government debt. When we do our evaluations we look at the chief actuary's work. We are not arguing with his assumptions about employment, inflation, the rate of increase of federal employees' salaries, none of that. All of the disagreement is about the discount rate. We use the sensitivity analysis that the chief actuary provides to try to make the adjustments. I think our adjustments are a bit conservative as we go all the way down to the real return bond rate. It's possible that if we had more access to the full range of data the chief actuary works with, our numbers would be worse, but we're conservative. The difference is in the discount rate, and when we try to adjust it to a lower discount rate, that's the number we get, the $96 billion.
First, I will just respond to one element of the previous question.
It is not a matter of opinion whether the MP pension plan is funded or not. It is a matter of fact that it is not funded. It's too bad that the reports give the impression that it is. The entire obligation in those plans is part of the public debt. There is no asset held against them as there is with the Public Sector Pension Investment Board, which does hold assets and those are real assets.
On the question of how high the cost would go: We do have estimates in our report of what the current service cost would be if you used these lower discount rates. The $96-billion figure is the stock. It's the amount that appears on the balance sheet. If you look at the annual accruing obligation, there are two elements to it. There's the ongoing cost of the work that the public servants are doing in return for which they deserve their compensation, and there's also the changes in the value of the plan. It tends to be quite erratic.
The very short answer to your question—I won't give you the precise number; we can follow up on that—is that it would go higher, though. The plan is notionally funded fifty-fifty right now, but that's on the basis of a current service cost that is too low because of this too high discount rate. If you were to use a realistic discount rate, the ongoing accrual of benefits would show as a higher amount, which is more valuable to the participants and more costly to the taxpayer. The appropriate amount for the people to be contributing would be higher than what the current fifty-fifty formula shows.
Mr. Chair, I feel like I'm in the House of Commons.
Thank you for the invitation to appear before you today. I'm pleased to be here for the first time before a House committee since being appointed Parliamentary Budget Officer, thank you, upon resolution of the Senate and the House of Commons. I started assuming my function duties on September 4, 2018.
I am here today with Jason Jacques, senior director of costing and budgetary analysis.
As you know, when the Parliament of Canada Act was amended last year, the Parliamentary Budget Officer was recognized as an officer of Parliament. The September 2017 order in council brought that change into effect and confirmed the expanded mandate, which now includes the costing of parties' election platforms. In addition, the PBO is now responsible for providing analysis services to senators, MPs, and parliamentary committees.
In accordance with the PBO's legislative mandate to provide impartial, independent analysis to help parliamentarians fulfill their constitutional role, which consists of holding government accountable, my office will continue to prepare reports and analysis of the estimates of the government and the budget, in addition to other pertinent federal government documents relating to the nation's finances or economy. Following the tabling in Parliament later this fall, my office will publish a report on the 2018-19 supplementary estimates (A).
That will conclude my remarks, as I understand you may have questions for me and Mr. Jacques.
Thank you, Mr. Chair. We'd be happy to answer questions.
I'll try to keep this as brief as possible considering how much we're doing to prepare.
First of all, my predecessor asked the Speakers of the Senate and the House of Commons to increase the OPBO's budget by an amount believed sufficient at the time to handle the expanded mandate. That request was granted, so we will be getting substantially more analysts. We'll have about 42 employees, which includes administrative assistants, other support staff, analysts, and management, including me. We do have more resources now.
With respect to preparations themselves, we are developing a number of tools that will enable us to respond to requests more quickly and efficiently. For example, we are working on a model that will enable us to estimate, as well as we're able, how much the Canadian Armed Forces will grow. We are already laying the groundwork for requests we anticipate receiving. We have also developed models to estimate the costs associated with certain relatively simple fiscal measures.
We are developing the tools we'll need to address issues we expect to see in campaign platforms.
Congratulations on your appointment.
I feel very privileged to be here. I don't usually sit on this committee.
It's nice to be able to share with you something that I've been interested in, and I would welcome your general comments. I'm not asking you to make a big commitment.
I come from a riding that is quite diverse. The median income is about $39,000, so we have issues.
I'm wanting to find a way to engage people in the federal government. I'm from Saskatoon, so we're far away and people feel very disconnected.
I was very interested when Canada participated in the open budget survey for the very first time. I thought that was great. I found the information that I got from that survey very helpful, on the sort of three areas it dealt with, transparency, public participation, and the role of budget oversight—your role.
What I often find with government is that we do very well on transparency, which means we drown people with reports that aren't translated for them in a way that becomes meaningful. I've really focused on the public participation piece, which we didn't do very well, and no government did very well.
I'm wondering if that's information you've looked at, or if I could encourage you to look at that. The report is much bigger. I have just a couple of pages here.
I'm most interested in how citizens participate in the budget process, not only in having input into it, but then also being able to reflect back to the government whether they think they are meeting milestones and whatnot. One suggestion is to have a citizens budget, which is a way to translate what the government does into a more manageable piece of information that citizens can use.
Now I sound like I'm making a speech, but I'm really quite excited about this. I wonder if that's something you'd be interested in, and is that something you've thought of?
As you've come into the job, you're new, so your information and insight at the very beginning are important, because once we get into something, you start to maybe not see those things.
Could you comment on your role in relation to the public and their understanding of the budget? I know about your service to us as parliamentarians, but I would like to see a focus on citizens and their involvement in your office and the budget.
That's an interesting question.
I asked my predecessor that question about the role of the PBO. I asked him how parliamentarians felt when he, Jean-Denis, appeared in the media. Did they dislike that? He told me spontaneously that parliamentarians tend to like it, because it gives credibility to an institution. It also helps to demystify government operations, budgets and the state of the economy.
The open budget, a citizens budget, and participation of the public in the budget process is not something, to be honest, that I've given a lot of thought to, because it's still early in my mandate. I'd be interested in hearing more about it.
From my experience, the budget process is very opaque. It's not transparent at all. I know that from having worked on the other side of the budget process. It's a black box that very few people understand, so helping to demystify that and having greater input from parliamentarians and the public is something that's probably worth considering.
Whether that would be slowing down the process, making it easier for decision-makers or not, that's a different issue; however, it's certainly worth looking into that.
Indeed one of my top worries is what the requests will be and the number and nature of the requests with respect to electoral platform costing. We've had preliminary discussions with representatives of the political parties represented in the House. Indications are that a good proportion of them will be requiring our services when it comes to electoral platform costing.
That being said, whether they'll have a dozen requests or 12 dozen requests still remains to be seen. However, I feel we are properly resourced. We have built up the resources and the capacity, and are still in the process of doing that. We're also developing MOUs, memoranda of understanding, with the public service so we can request their assistance in a confidential manner, so they won't know who the requesting political parties are and they will help us during the electoral costing proposal. That's the number one priority for me, ensuring that we are ready for that.
Number two is being able and well resourced to respond to requests from parliamentarians between now and the election. That should be number one, in fact, because that's here and now. So, that's the top priority for me, being able to respond adequately to requests from members, senators and committees.
Number three is having an institution, the PBO, that is sustainable over the longer term. Once we get past election 2019, whenever that is—October 19, if everything goes according to plan—the priority is that we are able to stay and become a world-class fiscal responsibility office.
Thank you very much, Mr. Chair.
Welcome to your House of Commons, Mr. Giroux and Mr. Jacques.
Mr. Giroux, please accept our hearty congratulations. You have been on the job for barely three months. You were appointed by the government, and I believe the position is a good match for your talent and experience. I wish you a successful seven years.
I would like to take this opportunity to thank your predecessor, Mr. Fréchette, with whom we had the pleasure of working over the past five years, three years in my case. I always appreciated his open and positive approach to managing the public purse and how he perceived his job as parliamentary budget officer, which is not an easy job as we all know. I wouldn't exactly call you a watchdog. Your job is to provide accurate information about public finances, which can be upsetting to the government and delightful to the opposition, be they Liberal or Conservative.
I would like to touch on what Ms. Mendès said just now about the government's economic update and the state of public finances just prior to a federal election. I would like you to comment on that, and then I will share a few observations.
You said you are open to the idea. Is that something you would actually like to see? Now that we have fixed election dates, we would know exactly when to expect your report.
If you agree with that, what are your thoughts on the timeline?
The young man doesn't want to ask questions.
Voices: Oh, oh!
Ms. Yasmin Ratansi: Thank you, Mr. Giroux, for being here. I'm glad to see that your expertise as an economist and on the federal budget and government expenditure system is going to be very useful for us here.
You allayed Ms. Mendès' fears about the MPs' pension contribution.
The interesting thing is there are so many different methodologies. There are so many permutations and combinations that I found it quite alarming that this man could compare us to Detroit and that he could mix up our governance in the financial institution systems with the United States. We have a very strong governance structure. We did not allow subprime mortgages. We have our banks on a different.... Anyway, that's besides the point.
You talked about challenges to accessing data. The previous parliamentary budget officer had huge challenges with CRA when he was trying to assess the revenues lost by the government for those tax evasions, not the properly legitimate tax vehicles. I have to be careful what words I use; as an accountant I do have to be very careful what terminology I use.
You have been the chief data information officer for CRA. How will you ensure that you get that information without having to go to court? How will you ensure that the revenues that are duly required by the Government of Canada do come to Canada?
That's up to CRA. They have some very aggressive and efficient people at CRA. Some of our citizens experience that the hard way.
Voices: Oh, oh!
Mr. Yves Giroux: On the first part of your question, on how will I get information from the CRA, knowing how to ask the question and what to ask for is often key. CRA is by its very nature a risk averse institution. They have the privacy of Canadians' tax information at the top of their concerns. Anything that could be remotely seen as infringing the privacy legislation, they take with great caution.
That means even what we call “residual disclosure” in the parlance of economists and data geeks. For example, even if they remove the name, address, postal code and social insurance number, there is a possibility that somebody could link one tax record to a particular individual based on the characteristics of that tax record. Tax records include lots of information.
They are very worried about residual disclosure. That's why they will want to aggregate as much as possible the data that they send. But there are ways to ask questions and to ask for data that do not risk residual disclosure. In my former capacity, I worked with the previous PBO to ensure that he was able to get access to the information that he needed by directing him to what was feasible within the confines of the law. The request for information was totally legitimate, but the level of detail was probably too fine for the comfort of the CRA.
By aggregating the tax records that he was looking for, that's how it was possible to come to an agreement that was satisfactory for both parties.