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ARCHIVED - Expenditure Review of Federal Public Sector - Overview

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[1] The Public Service Human Resources Management Agency, whose President (like the Secretary of the Treasury Board) reports to the President of the Treasury Board, oversees the classification of positions in the core public service, as well as supporting an independent Advisory Committee on Senior Level Retention and Compensation.

[2] This average "total compensation" cost for the core public service slightly overstates the case since some benefit costs attributed to the core public service also cover employees of separate employers, for example. We have tried to apportion such costs by domain, but we likely did not succeed fully.

[3] This includes costs incurred for members serving overseas, often in difficult conditions.

[4] Most employees accumulate severance entitlement at the rate of one week's pay per year of service to a maximum of 30 years for unionized employees, and 28 for excluded employees.

[5] In setting Executive salaries, the policy is to match total compensation at the EX 1 level with remuneration paid to employees with equivalent responsibilities by other Canadian employers. The salary level is intended to match total federal compensation for the first level of public service executives to the total compensation earned elsewhere. From this level, 7% is reserved as re-earnable each year, provided an executive's performance meets expectations. For exceptional performance, up to an additional 3% can be paid. For higher executive levels, total compensation lags that paid for similarly difficult jobs in the broader Canadian labour market by an increasingly larger proportion as you rise in the federal hierarchy.

[6] It must be noted that in 2005, parliamentarians' salaries were de-coupled from the salaries for federally appointed judges.

[7] In this case, we limit the "federal public sector" to the core public service, the separate employers, the regular members of the Canadian Forces, and the regular and civilian members of the Royal Canadian Mounted police. We exclude the "other organizations" domain in this instance because our data is less complete for this domain than for the other four.

[8] According to the available data, the category "payroll deductions" was also an important contributor to the growth of total compensation. However, data in this area for 1997–98 appears to be incomplete in that no figures are available for the Canadian Forces or the RCMP.

[9] In looking at historical trends we are forced to analyse the core public service together with the separate employers. This is because the principal separate employers, notably the Canada Customs and Revenue Agency as it was known in 2002–03, were created in the late 1990s.

[10] Reserve members also declined, from over 33,000 in 1990–91 to 22,000 in 2001–02 and 2002–03.

[11] Such transfers are permitted provided a mark-up of 20% is paid to cover, in principal, corresponding benefit costs.

[12] It is important to note that in Canadian society as a whole, median family after-tax income in constant dollars exhibited a similar pattern of stability from the early 1980s through the late 1990s, followed by an increase of similar magnitude to that experienced by average federal public service real salaries. Although average individual before-tax salaries are quite different conceptually from family after-tax income, it surely cannot be coincidental that the pattern of change is so close.

[13] The calculation for parliamentarians' salaries converts the "non-taxable allowance" in place before 2002 to an equivalent taxable salary to permit a proper comparison.

[14] Note that these figures do not correspond with these figures in Appendix P since these figures relate strictly to the portion of contributions that pertains to current service. Also note that what is called an "actuarial surplus" was reported in the late 1990s regarding the Public Service Pension Plan. In 1999, the Government was authorized by legislation to reduce the surplus by debiting the Superannuation Accounts. The public service unions are contesting in court the legality of this legislation.

[15] In this sentence we refer to the portion of salary covered by the Canada and Quebec Pension Plans. In 2003, this was up to $39,900. Above this level, employee contributions were always 7.5% of salary. Because something like two thirds of the salary mass falls in this area, the reduced employee contribution rate for the Public Service Pension Plan had a material impact on employer contributions.

[16] Because this area comprises many elements managed by various parties, our expenditure figures are more than usually subject to error. Nevertheless, we report here on a consistent basis the best information we were able to assemble. In general, the older the data, the more it is problematic. For the health and dental plans in the regular public service, for example, we had to use 1993–94 figures in the 1990–91 total, since records on these expenditures for earlier years are not available. We may reasonably assume, however, that if anything the 1993–94 costs in this area were greater than the 1990–91 actuals would have been, so we are likely not overstating the changes over time.

[17] Except for what is known as level II and level III hospital coverage, which assists in paying for semi-private or private hospital rooms.

[18] PSHCP costs were $271 million in 1997 and $466 million in 2002. Thus the increase in drug costs accounted for over two thirds of the change.

[19] Starting in 2006, as the result of a recent Treasury Board decision, federal public servants will pay 0.3% of salary more each year until their share of current service pension costs reaches 40%.

[20] As of December 2003, this was split into two organizations: the Canada Revenue Agency, which has remained as a separate employer, and the Canada Border Services Agency, which has been reabsorbed into the core public service.

[21] Possible examples of organizations that would meet these criteria include: the Canada Border Services Agency, Service Canada, Foreign Affairs and International Trade, the refocused Public Works and Government Services, Correctional Service Canada, and Statistics Canada.

[22] We would expect such costs to total as much as $10 million or more to get things on a sound foundation, and several millions of dollars annually to operate the system.

[23] For objectivity, this should not be the firm that has conducted the total compensation surveys over the past decade.