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Parliamentary Budget Officer Yves Giroux waits to appear before the Senate Committee on National Finance, in Ottawa, on Oct. 25, 2022.Adrian Wyld/The Canadian Press

The cost of the federal public service grew well above trend during the pandemic and could rise by billions more due to looming contract negotiations at a time of high inflation, says Parliamentary Budget Officer Yves Giroux in a new report.

The PBO released a report Tuesday that takes a close look at the federal government’s spending on staff and operations over the two fiscal years that ended March 31, 2022. During that period, the report says, spending on personnel increased 30.9 per cent, from $46.3-billion to $60.7-billion. (Part of that was owing to one-time spending such as top-ups to pension obligations.) That represents average annual growth of 14.4 per cent, compared with 3.4 per cent per year over 2007-08 to 2019-20.

It also found that the public service grew by 31,227 full-time workers during that time, an 8.2-per-cent increase. Compensation per full-time employee, which includes salary, pensions and bonuses, grew 6.6 per cent, from $117,497 to $125,300.

The government is currently in negotiations with 26 of 28 bargaining groups across the public service. The report notes that the largest of those, the Public Service Alliance of Canada, is seeking a 4.5-per-cent annual increase over the 2021-23 period. If the government were to agree to that increase, followed by increases tied to inflation in future years, it would mean an additional $16.2-billion in spending over the 2023-24 to 2027-28 period.

The report acknowledges that much of the expansion in the public service was related to the pandemic, such as increased hiring at the Canada Revenue Agency to process applications for emergency benefits.

However, there is no guarantee that spending growth will revert to prepandemic trends now that the worst of the crisis is over.

One of the lingering effects of the pandemic is high inflation, which is heavily influencing wage demands by public-sector unions.

During the March 28 federal budget lockup briefing for journalists, The Globe and Mail asked a senior government official whether Finance Minister Chrystia Freeland’s bottom line forecasts account for the need to reach new collective agreements with government workers.

The official said a set of assumptions about increases in employee compensation was baked into the fiscal framework. However, the official said that if the negotiations lead to a different outcome, the government will need to account for that later.

The Globe is not identifying the official as the briefing was conducted under the condition that they not be named.

In a section of the PBO report that looks more closely at the increased spending over the past two years, it says salaries drove much of the growth in compensation. However, there were other contributing factors, including spending on overtime and bonuses per worker, which grew by 7.4 per cent.

“The RCMP was a significant contributor to this expansion, citing an increase in operational tempo as a source,” the report states.

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