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When the Conservatives tabled their spending plan last week, Treasury Board President Tony Clement cited a $4.9-billion reduction in certain kinds of spending as evidence of their belt-tightening. But without this year's budget, how much stock should we put in these estimates?
If history is any indicator, not a whole lot. Over the past five years, organizations have blown past these original estimates 61 per cent of the time, according to data collected from spending plans and corresponding totals released the following year.
A historical analysis shows these early plans habitually underestimate actual spending, with most organizations spending more by year-end than original projections would hope.
In 2011, 80 organizations spent more than the estimates predicted they would, totalling almost $5.4-billion in additional spending between them. While complete figures from 2012 are not yet available, the most recent estimates show 74 organizations have higher figures than original estimates predicted, totalling $7.8-billion in additional funding. Only 10 organizations last year had lower figures than their original estimates, while 52 organizations didn’t increase their estimates at all.
On a yearly basis, organizations that exceed their estimates did so by an average of $10-billion.
Here we've included just organizations that exceeded their main estimates.
The difference between original estimates and final spending can be credited to shifting priorities and unexpected costs throughout the year. Organizations can request “top-up” funding (called supplementary estimates) three times each year. Generally, supplementary estimates are designed to cover unforeseen costs, such as flood relief or an unexpected military mission. However, many departments plan their yearly budgeting knowing they will include additional requests for cash in the supplementary estimates. This practice makes it much harder for the public and parliamentarians to understand how much spending each department really has in mind at the start of the year.
The National Parole Board, for example, requested two top-ups above its original $49-million estimate in 2011. They boosted their estimate to $52-million and then to $55.9-million. Its final expenditure was slightly lower than that, at $52-million.
The same trajectory can be seen for many other organizations, where its last estimate is higher than its final cost.
This chart includes only organizations that requested additional funding in 2011. The main estimates are the first indication of how much money organizations plan to spend. They can request up to three top-ups throughout the year through supplementary estimates. The final amount is released the following year in the Public Accounts.
Why are the estimates so out of step with actual spending? One reason could be the timing of their release. The estimates are drafted and released before the budget. By law, the estimates must be tabled on or before March 1, while the budget can be tabled at any time.
This inconsistency has come under fire this week from two former finance bureaucrats who say the timing of the release means parliamentarians must vote on billions of spending before all the facts are available. The critics, Scott Clark and Peter DeVries, said the budget should be released mid-February so the estimates can better reflect spending priorities for the year. As it stands, the estimates are out of date only a few weeks after they’re released.
For now, the public and parliament should consider these early estimates as just that — estimates. The real cost won't be clear at least until the budget is released. And any verdict on savings should be saved until the second or third supplementary estimates are released.
Stuart A. Thompson is a Globe and Mail multimedia editor based in Toronto. Follow him on Twitter.