The Spending and Government Efficiency Commission (the “SAGE Commission”)

The Spending and Government Efficiency Commission (the “SAGE Commission”)

The SAGE Commission

The Spending and Government Efficiency Commission (the “SAGE Commission”), an election platform item for the One Bermuda Alliance (“OBA”), was created in the first quarter of 2013 following on from Bermuda’s national election last year in which the OBA emerged as the new governing party. The OBA had indicated during their election campaign that if they were successful, one of their early objectives would be to establish the SAGE Commission with a view to making the Bermuda Government more efficient, cost effective and transparent in light of the economic challenges currently being faced.

The SAGE Commission Act 2013

On 28 March 2013, the SAGE Commission Act 2013 (the “Act’) (71 KB PDF) became operative thereby establishing the SAGE Commission. The Act outlined the objective of the SAGE Commission at Section 3(2):

“The objective of the SAGE Commission is to advise Government on the most efficient and cost-effective government organisational structure and governing processes in accordance with the functions set out in section 5.”

The function of the SAGE Commission at Section 5 of the Act is to:

“…evaluate and analyse the operations of Government in line with international best practice to determine the best means of structuring Government, streamlining Government processes, improving delivery of services and introducing cost saving measures and greater transparency”.

The SAGE Commission was asked to review, assess and propose changes to a number of areas of Government with regards to the adequacy of structures in place, operations and processes. It was also tasked to review, assess and propose a redesign of the organisational structure of Government with a view to streamlining or consolidating agencies, authorities or other bodies. There were other specifics asked of the SAGE Commission as well as a blank statement that it should “do all such things the Commission may deem necessary to achieve the objectives of the Act”. The SAGE Commission was clearly given a wide scope.

The Members

The Act called for there to be six members appointed by the Minister of Finance and these members are:

• Brian Duperreault (Chairman),
• Kim White,
• Kenneth Dill,
• Peter Hardy,
• Cathy Duffy,
• Don MacKenzie.

A number of other matters are outlined in the Act including the appointment of committees and delegation of powers, the requirement that the SAGE Commission be provided with information or documents in order to complete its objectives, secrecy with respect to all matters that come into the knowledge of those employed or appointed by the SAGE Commission except for the purposes of carrying out functions in the Act and the offence of intentionally making a false statement to the SAGE Commission.

The Committees & Working Groups

The SAGE Commission established four committees and two working groups to review specific aspects of reform and these were:

• Streamline Committee (Chair — Dame Jennifer Smith),
• Privatisation and Outsourcing Committee (Chair — Henry Smith),
• Measurement and Metrics Committee (Chair — Tom Conyers),
• Performance Committee (Chair — Martha Dismont),
• Pensions Working Group (Chair — John Burville), and
• Economic Analysis Working Group (Chair — Nathan Kowalski).

Meetings Held

As part of the many steps taken by the members of the SAGE Commission to review and assess matters within Government, a series of meetings were held with members of the Government, the civil service, trade unions and others. In addition, a number of public meetings were held to give the opportunity for those interested to voice their views. Written submissions were requested and received from various members of the community as well.

The Report

The Act provided that the SAGE Commission was to produce its final report within 6 months, which was from 15 April 2013 when the members were appointed. The report was therefore due on 15 October 2013, but the SAGE Commission was given an extension of two weeks by the Minister pursuant to his power contained in section 3(4) of the Act. The Chairman of the SAGE Commission produced the 140-page SAGE Commission Report (the “Report”) (7 MB PDF) on 31 October 2013.

• Update: SAGE Report’s Appendices Released to the Public 6 December 2013

Two Key Findings

There were numerous findings of the SAGE Commission, far too many to cover in this article. Overall, the Report is very damning of the state of Bermuda’s economy and its Government. Numerous recommendations are made, a number of which indicate that time is of the essence.

Two of the key areas reviewed and analysed relate to the state of the civil service and the state of pension schemes. We will examine each of these areas specifically and the recommendations made.

The Civil Service

The Report is a stark criticism of the Civil Service of Bermuda. Specifically, the Report concluded:

“The Commission has identified that the Civil and Public Service does not have sufficient leadership skills and capabilities at the right management levels, nor are the necessary skills and capabilities present in an appropriate number of individuals, to meet the challenges that Bermuda is facing today”.

The Civil Service is criticised as lacking best performance management systems or failing to utilise those that are in place and at higher levels, such as Permanent Secretary and Head of Department level, there is little performance management or awareness of the severity of the issues facing Government. The Public Service Commission was also criticized as not, in practice, delivering on its role to ensure that good governance pervades the Civil and Public Service.

Broadly, the recommendations in this area include:

• Establishment of two separate roles of Secretary to the Cabinet and Head of the Civil Service with the roles being at the same level of seniority, with the Secretary to the Cabinet dealing with matters such as the Central Policy Unit while the Head of the Civil Service position will be responsible for managing the operations of the Civil and Public Service, including completing performance appraisals for the Financial Secretary and the Permanent Secretaries.
• Reconstitute the Public Service Commission as an independent body with oversight of appointments and dismissals, performance appraisals and overall succession planning of the Civil and Public Service.

Pensions

The SAGE Commissions puts front and centre the fact that Government pension schemes are in a dire state. Those for Government employees and Parliamentarians are close to $1billion underfunded. In addition, the contributory pension scheme (social insurance scheme), on which all Bermudians rely for retirement income, was said to be underfunded by $2billion as of 1 August 2011. Perhaps the most telling statement in the Report as it relates to Pensions is, “The stark reality is that promises made regarding pensions will have to be broken”. The SAGE Commission found that without immediate changes made to the way in which the pension schemes are funded and the benefit provided, the outcome could be disastrous.

The recommendations in this regard include:

• Bermuda Contributory Pension Fund
  • Increase contributions at 3% more than benefits increase, and
  • Develop a strategy for the immediate implementation of a graduated increase in the retirement age to 68, with an increase to 70 likely to be necessary in the future.
• Ministers and Members of Legislature Pension Fund
  • Change the scheme from a defined benefit to defined contributions by modifying the benefits and topping up the assets with the $15million remaining shortfall.
• Public Services Superannuation Fund
  • Modify the benefits (in a graduated manner) and continue the scheme but with the intention of shifting to a defined contribution (an immediate shift would be too costly).
  • Changes to benefits should include the use of the last 5 years’ salary to calculate benefits, no cost of living adjustments, an increase in the retirement from 60 to 65 (and from 55 to 60 for special groups) and implement retirement factors for other retirement ages (if early retirement is taken this means a reduced pension and reduced benefits).

What’s Next & Reactions

The appendix which accompanies the Report is reportedly more than 10,000 pages and has not yet been released to the public. It is currently being reviewed by Government to ensure that no confidential or sensitive information used by the SAGE Commission is released. A spokesman for the Ministry of Finance has indicated that once the review is complete, the appendix will be released to the public.

• Update: SAGE Report’s Appendices Released to the Public 6 December 2013

The Report was tabled in the House of Assembly on 15 November 2013. Since then, there have been a number of public reactions to the Report. Perhaps most notable have been the reactions of the Island’s union workers, some of whom have likened the recommendations to “a declaration of war”. The Progressive Labour Party, the Opposition party, has commenced a series of town-hall meetings in the lead up to the Report being debated in the House of Assembly. So far at the town-hall meetings the union workers have been responding with resistance to some of the privatisation recommendations made with works seeing privatisation as “union-busting and monopoly-creating”.

Donald Scott, the Secretary to the Cabinet until he retired at the end of November 2013, released a statement before his retirement responding to the SAGE Commission’s Report. Although he praised the SAGE Commission for its hard work and applauded them for some of their findings, he also said, “…the overall quality of the Report is diminished in some areas by errors of fact and the reliance on anecdotal stories in a number of important areas”.

No doubt these and other strong reactions will continue in the coming days and weeks, including when the Report is debated in the House of Assembly on 13 December 2013.

What will certainly be interesting and indeed very important for Bermuda’s future will be how the findings of the SAGE Commission’s Report are utilised and/or implemented in 2014 and beyond.