FAO Testimony on Bill 172

Testimony on Bill 172 before the Standing Committee on General Government

Stephen LeClair
Financial Accountability Officer of Ontario

April 6, 2016
Committee Room 2, Queen’s Park

Good afternoon.

Thank you for allowing me to comment on Bill 172, An Act respecting greenhouse gas.

My name is Stephen LeClair. I am the Financial Accountability Officer of Ontario. For those who are not familiar with my role, I am an Officer of the Legislative Assembly of Ontario with a mandate to provide independent analysis to members of the Legislative Assembly on financial and economic matters of importance to the legislature.

The analysis I provide is meant to aid the members of the Legislative Assembly, in performance of their constitutional responsibility to hold the government to account and scrutinize its activities. The mandated responsibility to provide independent analysis to help you perform your vital scrutiny function is why I have asked to speak today.

The following comments will focus on section 68 of the proposed Act, which, as drafted, may hinder my ability to provide you and your fellow members with information on the fiscal impacts of the Act as well as analysis of initiatives the government may implement consistent with the requirements of section 68 and Schedule 1 of the Act.

Subsection 68(1) establishes an account in the Public Accounts called the “Greenhouse Gas Reduction Account”. This account will record various revenues, notably the proceeds of the auction or sale of emission allowances conducted under the Act.

Although the revenues will be recorded in the Account, they still form part of the province’s Consolidated Revenue Fund and will be revenues recorded on the income statement of the province, in the same way as tax revenue or transfers from the federal government.

Subsection 68(2) allows expenditures to be charged to the Greenhouse Gas Reduction Account for various purposes. Most importantly to pay for initiatives that are considered reasonably likely to reduce greenhouse gas emissions.

The amounts charged to the Account are paid out of the Consolidated Revenue Fund and, similar to revenues, expenses related to these charges are also part of the income statement of the province.

In Budget 2016, the Government estimated that, in fiscal year 2017-18 - the Greenhouse Gas Reduction Account would record $1.9 billion in revenue and $1.9 billion in expenses would be charged against the account.  
 

If there is a year where revenues do not match expenses, then there will be an impact on the previously estimated surplus or deficit of the province.

That being said, there could be a case where even if revenues do match expenses there could be an impact on the surplus or deficit of the province. This would occur if some of the expenses were not on new initiatives but were tied to previously planned expenses.

On March 3rd of this year, my Office released a Commentary on the Budget which, in determining the fiscal position of the Province, took the Government’s numbers as a given. However, the Commentary also noted it was unclear to what extent these new revenues will be directly tied to new program spending or can be used to fund existing spending commitments.  

It is also not clear how the $1.9 billion in revenue relates to the $1.9 billion in expenses listed in the budget. If some of the proceeds taken-in in a given year are spent on capital initiatives, which are allowed under Schedule 1, then $1.9 in expenses will impose greater cash requirements on government than the $1.9 in proceeds being taken in.

This could mean an increase in government debt, unless the projects are already included in the calculation of government borrowing requirements or are associated with already planned spending.

To determine whether or not this Act will be fiscally neutral, I will need to have access to information on initiatives which may be funded in accordance with Schedule 1 of the Act. I will also need information on the initiatives if I am asked by a member OR a committee to undertake any analysis of the financial benefits and costs of any of the initiatives.

However, the Act provides that expenditures for an initiative cannot be charged to the Greenhouse Gas Reduction Account unless the Minister reviews the initiative, guided by a number of factors laid out in subsection 68(3) of the Act and provides his or her evaluation of the initiative to the Treasury Board.

Since the Treasury Board is a committee of Cabinet, the Minister’s evaluations of the proposed greenhouse gas reduction initiatives will be considered “Cabinet records” for the purposes of the Freedom of Information and Protection of Privacy Act.

As Financial Accountability Officer, I have the power to access information held by ministries that I need to perform my mandate of providing the Legislative Assembly with economic and financial analysis. My power to access information is subject to an exception, which allows ministries to refuse my office access to Cabinet records, including Treasury Board submissions.

I am becoming increasingly concerned that ministries are claiming that too wide a range of government information falls under the Cabinet records exception. I plan to speak to this issue and the ways in which I believe it might be addressed in my annual report this coming July. I will look forward to speaking to you and your fellow members about my concerns surrounding Cabinet confidentiality when the House returns this autumn.

In the meantime, I would like to highlight one of my particular areas of concern, which is relevant to subsection 68(3) of the proposed Act. Even where ministries decide that a record is protected by Cabinet confidentiality, the Freedom of Information and Protection of Privacy Act requires them to disclose “as much of the record as can reasonably be severed” from the Cabinet confidential portions of the record.

Responses to Information Requests which I have submitted to date seem to indicate that the way in which Treasury Board, and Cabinet, submissions are structured often allows ministries to claim that it is impossible to sever any portions of the record and prevent its disclosure altogether. Should this be the case with the Minister’s evaluations of proposed greenhouse gas reduction initiatives prepared under subsection 68(3), I will likely be unable to access them.

Although it is true that subsections 68(6) and (7) of the Act require the Minister to report to the Legislative Assembly annually on initiatives funded out of the Greenhouse Gas Reduction Account, the text of those provisions suggests that the level of detail included in the annual report about each initiative will be much lower than what the Minister will submit to the Treasury Board about the initiative for the purposes of subsection 68(3).

I will need access to the additional details the Minister considers in his or her evaluation of the initiatives in order to perform analyses concerning those initiatives. Accordingly, I suggest that members consider the manner in which the Minister might structure his or her evaluation of the initiatives for the Treasury Board in order to maximize the disclosure of those details. Members may wish to consider explicitly incorporating the requirement that the submissions be so structured in subsection 68(3).

Members may also wish to consider whether the Minister should be required to publish his or her reviews of initiatives approved by the Treasury Board.

My office is undertaking a project on Cap and Trade and will be seeking clarity on some of the issues I have highlighted. At the moment though, I once again thank you for the opportunity to speak to this Bill and raise the concern I have with respect to the potential that the bill as currently drafted may affect my ability to provide information and analysis to members of the Legislative Assembly.