Mr. Clark: Thank you very much, Mr. Chair. Thank you, all, for being here. I’m going to start with the Auditor General’s recommendation from February 2014 about the pension sustainability support process, in particular cost and stress testing. But first I’m going to ask: what is Alberta’s current unfunded pension liability? Just ballpark.
Mr. Hedley: I’ll get the exact number for you, but it’s roughly around $9 billion.
Mr. Clark: Okay. Is that an improvement over the past? I mean, are we trending to fully fund that at some point? Is there a schedule in place?
Ms. Rosen: Yes. It is improving. You may have noticed, Mr. Clark, that we actually have a line item in the budget called pension provisions, where we actually increased the liabilities. In the last few years that’s actually been a pension recovery as opposed to a pension provision, which actually means that our liabilities are reducing. In fact, in our results from ’17-18 we had budgeted for I believe $139 million recovery, and we actually came in at a $502 million recovery, so quite a significant increase in recovery. I do need to say, though, that a tremendous amount of that is due to the positive market investment climate.
Mr. Clark: That’s exactly what I was going to – you anticipated my next question. What is the impact of what looks like the end of the bull market as well as a rising interest rate environment on our ability to fund those pensions fully?
Ms Rosen: Actually, the active pension plans are all in and around that 98 to 100 or even more than 100 per cent funded. Where the provisions apply most significantly is to the pre-1992 pension liabilities that were taken on by government, in particular the teachers’ pension plan, because that was the largest. In terms of the investments that the pension plan boards are doing, they’re going to have to consider if the investment market changes whether or not they want to reflect that in any way in a change in their policy and perhaps reduce their reliance on equities. I think that that sort of goes to the other question that was asked about alignment. It’s not that you set a policy and then you just let it stay. You have to be cognizant of the environment and the investment climate. You have to monitor that on a regular basis and determine what fits with what you’re trying to achieve in terms of your returns.
Mr. Clark: Right. Thank you. I’m just going to move on, then, to other questions surrounding that rising interest rate environment, in particular debt servicing. Have you stress tested Alberta’s debt-servicing amounts based on higher interest rates? And what do you think the impact of that is likely to be?
Ms Rosen: Yes, we have. We pay very close attention to the Bank of Canada and what they’re signalling that they’re going to be doing. Not only do we stress test when we budget; we actually budget based on what we think the interest rate environment will be, not what the interest rate environment is when we’re actually developing the budget. So we do take into consideration what the Bank of Canada has signalled in terms of rate increases and what potential impact that might have for the environment that we’re in.
Mr. Clark: How about future credit-rating downgrades impacting debt-servicing costs. Have you factored that in?
Ms Rosen: I’m going to ask Mr. Epp to respond to the credit-rating issue. As an introduction in terms of the credit rating I absolutely will say that a downgrade can have an impact on the cost of our debt. More significant is our investor relations and how we actually market that debt to the international investment community. To bear that out, we actually did have a downgrade last year, and subsequent to that downgrade our cost of debt actually went down a little bit because of the good program that we have in place.
The Chair: Would you respond in writing to that question, Mr. Epp? Thank you.
Mr. Clark: Thank you, Mr. Chair. You know, I do want to pick up on that whole question about performance measures in the business planning cycle because I think it’s one of the most important things. It doesn’t get a lot of headlines, frankly, but I think it’s incredibly important in terms of how we as legislators do our job but also, I think, probably just as important how ministries actually execute their work. What I want to ask you about is just that process. Like, how does that actually sort of work from your perspective? I see from the Auditor General’s comments here dating back to 2012 – I know that recommendation is now ready to be reviewed, but it looks like it’s about connecting performance measures and variances. What I want to ask, though, is: to what degree do you provide input and feedback to ministries around the relevance of their particular performance indicators that we see in the annual reports and the budget?
Ms Rosen: Mr. Clark, of course, the performance results depend on what it is that you’re actually trying to measure, right? What we don’t determine, what we don’t provide, I would say, advice and guidance to ministries on is what their priorities are because they set their priorities, and therefore they say: these are the most important things to the ministry, so this is what we’re saying that our objectives are. But what we will provide them with assistance on, if they have a stated objective, is how you appropriately measure that in a way that would be meaningful to the broad-based public. Because you want to have a measure that actually resonates with the public and is not just sort of insider baseball, one that you understand but that doesn’t actually provide information more broadly.
Using different information, different techniques, we do benchmarking across the country with other governments because we all deliver the same suite of services. So we do, you know, look to see what others are reporting on and what kind of performance measurement they’re utilizing. Then we try and aim for consistency in reporting because performance measurement really only works well if you have the same kind of objectives year after year and if you report on them year after year.
Mr. Clark: Yeah. I mean, one of my favourite things to do is estimates and this stuff. Anyway, I find it fascinating, but frankly it’s very important.
I want to give you a specific example in looking at Health, and this is one that I’ve kind of asked the Minister of Health about a couple of times. One of their key strategies is: implement the Valuing Mental Health report. So there’s Treasury Board and Finance – you see that key strategy – and then we go into performance measures and performance indicators, and the only two performance measures they have at all related to mental health are hospital readmissions after 30 days and emergency visits due to substance use. Treasury Board and Finance are not mental health experts, but I would look at those two things and say: well, this is a report publicly available that has many recommendations, and this feels like an overnarrow measure of that. Is that the sort of feedback that you provide to ministries, or is that my job?
Ms Rosen: I would suggest to you that it’s probably both of our jobs. Yes, we do provide that kind of feedback, but we also ask questions because one of the challenges that we have with performance reporting is whether or not we have the data available. In particular, when you have a new initiative or a new plan, as you go along implementing that, have you actually considered what kind of performance metrics you are going to put in place, and are you in fact collecting the data that you would need in order to report on that accurately?
One of the other challenges that I would suggest to you that we have particularly in some of the social service areas like health or others is that the collection of the information can sometimes happen quite a ways after our annual report timelines are done, the collection and analytics associated. Would we have room for improvement? We have room for improvement in all of our performance measurements, but I do believe that what we have started to achieve is some consistency of approach across the GOA in how we actually look at performance measurement.
Mr. Clark: Good. Thank you.
Mr. Clark: Thank you. Further, I think, to the same recommend-ation around cash management: has any analysis been completed to evaluate the potential additional revenue that could be generated by consolidating cash management?