PBOWatch – Kevin Page to opposition parties: Little help, guys?

… posted on behalf of Colleague Wells, who received a copy of the following missive in his morning email. What does it all mean? That Parliament can’t get back to work soon enough, that’s what it means.

From: Page, Kevin
To: Ignatieff, Michael – M.P.; Duceppe, Gilles – député; Layton, Jack – M.P.
Cc: McCallum, John – M.P.; Brison, Scott – M.P.; Mulcair, Thomas – Député; Laforest, Jean-Yves – Député
Sent: Sat Jan 17 15:43:48 2009
Subject: Parliamentary Budget Officer / Directeur parlementaire du budget

(La version française suit)

Dear Leaders:

Issue:

There are significant challenges to the independence, resources and operations of the Parliamentary Budget Officer (PBO) with a resulting adverse impact on the capacity of parliamentarians to hold the government to account.

Background

As you may be aware, there have been multiple views on the mandate, operations and accountabilities of the PBO.  Earlier this week, the Parliamentary Librarian (PL) made three fundamental points in his interview with the Ottawa Citizen (published January 15, 2009) and his Opinion – Editorial in the Hill Times (published January 13, 2009) – his first public remarks on the role of the Parliamentary Budget Officer since the spring of 2008:

• 1. The PBO is accountable to the PL (not parliamentarians);
  2. The PBO is not independent (notwithstanding the statements of the Prime Minister both inside and outside the House of Commons) (Annex A); and
  3. The PL refuted the earlier written statement of the Speakers, when he indicated in the interview with the Ottawa Citizen, that the PBO has not in-fact overstepped its mandate.

The January 16 Ottawa Citizen Editorial (Annex B) provided a strongly worded response to the former article.

Since my GIC appointment in March of 2008, there have been differing interpretations of the mandate and role of the PBO.  At the time of my appointment, the Government of Canada (GC) made known its own interpretation of the mandate and role through the press release from Minister Van Loan (Annex C) and the statement by Senator Oliver in the Senate (Annex D).  The GC views on the independent and the public nature of the mandate were buttressed by comments by the Prime Minister during the last election campaign and in the House of Commons.

The working interpretation of the PBO mandate and operating model (see www.parl.gc.ca/pbo-dpb) was compiled in a presentation after consultation with Senators and MPs from all parties (Annex E); a process that included those individuals familiar with the parliamentary committee discussions that led to the creation of the PBO function through amendments to the Parliament of Canada Act (via the Federal Accountability Act (FedAA)).  The outcome of these consultations was to pursue an operating model focused on:

• • Fully transparent, objective, independent and non-partisan analysis
  • A goal to render budgets more transparent
  • Providing parliamentarians with access to financial and economic analysis in a relevant, timely and systematic manner

The views of consulted parliamentarians were largely consistent across party lines and, interestingly enough, very similar to recommendations for the practices of legislative budget functions prepared by the OECD for its member countries (Annex F).  It is also an approach supported by a number of prominent academics in the field of public policy, economics and public finance.

However, on October 28, 2008, the honourable Speakers of the Senate and the House of Commons sent a letter (Annex G) to the PL with a significantly different interpretation of the mandate and operating model of the PBO; one that challenged the independence and operating freedom of the function and placed virtually all aspects of the role under the control of the PL.  A subsequent memo from the Parliamentary Librarian to me (Annex H) further reduced the operating scope of the PBO and equated the position to that of the other executives in the LOP.

The Scope for Interpretation of the PBO’s Mandate and Independence

I would like to provide some additional documentation that may help to explain the gap between the views of the honourable Speakers and Parliamentary Librarian (PL) and the Senators and Members of Parliament (MP) who make up the client community for the Parliamentary Budget Officer (PBO).  It is my hope that this information will serve to reconcile views on the mandate and operating model for the PBO leading to a mechanism to resolve the challenges in the common interest of better serving parliamentarians and Canadians.

After receiving the letters from the Speakers and the PL challenging the working interpretation of consulted parliamentarians, I sought an external legal opinion from McCarthy Tétrault to ensure that I did not exceed my legislative mandate and to ensure that the operating model desired by parliamentarians and recommended by the OECD was also consistent with the legislation.  I further sought to better understand my accountabilities relative to those of the PL (i.e. the governance structure).  The legal opinion from McCarthy Tétrault is attached in Annex I.

In the opinion of McCarthy Tétrault, the PBO’s operating model (i.e., non-partisan, objective and fully transparent), is consistent with their interpretation of the Parliament of Canada Act.  They further note that, while clearly a part of the Library of Parliament (LOP), the PBO is distinct from other senior executives in the LOP in that he/she enjoys a measure of functional independence that includes the sole accountability to fulfill the legislated mandate, while operating within the administrative control of the LOP.  However, they note that the administrative control of the LOP should not impinge on the ability of the PBO to fulfill his/her mandate and, in fact, should be supportive of the process.

Reaction among parliamentarians to the Speakers’ letter was interesting.  I was consistently advised by parliamentarians representing all of political parties to continue with the original consensus interpretation of the mandate, operating model and governance arrangements, captured in the PBO consultation deck (Annex E).

The Impact of Reduced Independence

In my view, there is a significant difference between a measure of functional independence within the LOP and complete autonomy.  Within the construct of the current legislation, I have been seeking the former.  Sufficient latitude in administration is necessary to fulfill the legislated mandate for at least three key reasons:

• • The human resource (HR) flexibility to develop and maintain a highly skilled and specialized team of economic and financial analysts and managers; HR resources necessary to support parliamentarians in their fiduciary obligations to oversee over $240 billion in annual government planned expenditures; state of the nation’s finances; and, trends in the national economy, especially critical during these challenging economic and fiscal conditions.
  • As per best practices, to publish all research findings and communicate with parliamentary stakeholders via the web/internet; thereby assuring full transparency and non-partisanship in the PBO’s activities.
  • To ensure that the financial resources for the PBO function are sufficient and stable.  The budget reduction of 33% cannot sustain a PBO function that meets the expectations of parliamentarians for authoritative, independent and timely analysis.  With a new 2009 budget of $1.8 million (a $900,000 reduction), the PBO function is funded at a level well below its peers in comparable OECD countries with staffing levels (in brackets) below those in Mexico (27), Uganda (21) and South Korea (70).

It is fair to say that the PL and I both expected some start-up pains in establishing the Office of the PBO and reconciling the PBO’s legislated mandate with that of the LOP.  Also, the complexity in managing the relationship between the PBO function and the rest of the LOP was foretold by a number of observers, analysts and witnesses to parliamentary committees, during debate on the FedAA.  However, prior to the summer recess and in spite of their concerns to the contrary, I assured parliamentary committees that I had both the necessary resources to discharge my obligations and that I could be fully staffed (within the limits of my $2.7 million budget) and functional soon after their return in the fall.  This is no longer the case.

As a consequence of the continued turmoil, the core of my senior analytical staff is still on secondment from the executive branch; a real risk to independence from the government.  I have had to turn away assignments due to lack of resources and I am now at serious risk of losing the employees that I have; a very fragile situation since the pool of talent from the governments fiscal community is very small and increasingly reluctant to take on the risk of working in the PBO.  Further, I have had my budget reduced by 33% even though the funds had already been set aside in the fiscal framework.

Owing, in part, to the differing interpretations of the legislation, I have also had other administrative challenges that have significantly restricted my ability to fulfil the legislated mandate, the consequence being that parliamentarians will be reduced in their capacity to hold the government to account.  For example, we have been asked by Senators and MPs to scrutinize billions of potentially wasteful planned expenditures (including IT and defence capital projects), programs and projects with significant cost overruns, asset divestiture with significant exposure for the fiscal plan, the risk of on-going budgetary deficits, and the adequacy of current fiscal/financial transparency and accountability to Parliament and Canadians.

These are naturally controversial subjects but core to the demands of parliamentarians and core to PBO’s mandate as economic and financial advisors to Parliament.  Effective delivery of these projects through timely and authoritative analysis requires that the PBO function be provided both sufficient independence and protection from retribution.

This is not a small matter.  From the perspective of the external legal opinion on the functional independence of the PBO, my efforts to serve parliamentarians have been systematically undermined by the LOP:

• • Interference in contracting for specialized services
  • Restriction on reporting to parliamentarians and Canadians on a timely basis
  • Significant delays in staffing the PBO function, in spite of the urgency expressed by consulted parliamentarians
  • Unilateral reduction in the PBO budget by 33%

In discussions with the PL, it has been communicated to me that the role of the PBO is not to provide analysis and opinion to parliamentarians such that could be seen to challenge the government of the day.  This view may be consistent with the operating model of the LOP but, to me and other observers, is in stark contrast to the legislated mandate and the wishes of consulted parliamentarians.  Such an approach would also contrast sharply with the government’s 2006 campaign pledge for an independent parliamentary budget authority mandated to bring about truth in budgeting.

A Way Forward

In order for me to fulfill the legislated mandate I require a restoration of the PBO budget to $2.7 million for 2009 and on-going and greater clarity from parliamentarians on the independence and operating model of the PBO function.  It is my wish to respect the will of consulted parliamentarians in their interpretation of the legislated mandate and operating model of the PBO.  Should parliamentarians wish to re-consider and re-define the mandate and/or operating model of the PBO, I would be prepared to present my views on the subject.  It has been suggested to me by a number of parliamentarians that a suitable venue for such a dialogue may be one of the finance committees.

It has been and continues to be an honour and privilege for me and my small team to serve parliamentarians and Canadians.  As we now move beyond our start-up phase, we look forward to enhancing support to Senators and MPs by providing independent, non-partisan and objective analysis so that they may better hold the government to account in the management of public resources.

Respectfully yours,

Kevin Page
Parliamentary Budget Officer